95% Transformation and only 5% Digital – True Digital Transformation Definition
Digital Transformation is about People and Culture ant not all about tools and technology - Here is the true definition you need to know
Technology first? People first? Digital Transformation is about transforming the company, culture and finally also the people. Technology is a small part of the digital transformation journey, but not the solution itself.
At a time when (digital) innovation is the key to success, companies are being thrust into the maelstrom of digital transformation. But unfortunately, this technolgical innovation is always mis-sold and in the process, the essence of transformation is often misjudged. While it is tempting to jump headfirst into the lure of technology and see it all as a revolution, whether it is AI, Blockchain, IoT or other technologies, true digital transformation is less about the technology and more about a holistic transformation of the company, the culture, the strategies and most importantly the people.
While technology is an essential part of this transformation. But it should be seen more as a “trigger” and more as an enabler rather than a panacea and certainly not the solution. This misinterpretation has led numerous companies down the wrong path and entangled them in a web of unsuccessful digital transformation projects from which they have difficulty emerging. Software has been purchased, hardware has been installed, and all this in a company that has neither the knowledge nor the organization to deal with this software or hardware.
Digital Transformation is about people
As in every company topic, human is the center of the process. When we look at a company, we can split it into People, Processes, IT, and Strategy. In each one of these 4 pillars, we have humans in the role of user, leader, creator, or shaper. So, when we speak about Digital Transformation, we especially have to look into the topic of how these influencers, the humans in the process, need to adapt to the new world of technology and exponential change.
Several studies are outlining how little digital transformation projects succeed in companies. Most of the outline that 80-85% of the projects in Digital Transformation fail and often you also read that the missing culture and a wrong people management was the result of this failure.
Technology first? People first?
There are basically two ways on the market how companies approach Digital Transformation. The “Technology First” and the “People First” approach I call them.
Technology First is the most commonly seen paradigm of how companies see their own Digital Transformation. They see software or technology, they get attracted by the features and they try to implement this into their organization. This technology-first approach has a simple problem … it is a top-down approach where people are looking for features instead of solutions. Especially in employee engagement, this is a bad approach as you are not co-creating a solution that helps your customer solve a problem and your employee in supporting this customer.
People First comes from the opposite angle. It is about making people think about possible solutions and enabling them to rethink your processes, organization, etc. The most important parts are the education of the workers and also the freedom for them to express what they think and experience. This is a cultural approach where you are working on shifting the culture to adapt to new technologies and puts the software in the background.
Culture for change
In the People First approach, you are tackling your culture. Many of the corporate cultures are built around century-old processes and guidelines but they don’t help a company to outgrow its own roots. So, when talking about cultural change you also have to break with the old and create a new atmosphere where people can break out of their daily routine. This is a change in the whole system of your organization. A shift from “Managing a company” to “Leading a company into the future” is hard to achieve and is also a topic on its own but this is where the work happens in Digital Transformation and this is where you are spending most of the 95% in changing your company.
Digital Transformation – Rethink your organization
There are many triggers for Digital transformation. These can be that a new technology appears, a customer need is identified or it should be also implemented regularly. Design Thinking and Brainstorming techniques are used to fuel this process and to use the power of the people in your company.
Especially successful is the people first aspect when you are talking not only to management but when everybody in your company is involved when you integrate your customer and customer feedback, and when you first talk about creating a solution before limiting yourself to the search for software and technical solutions. Really try to think outside the known and “out-of-the-box” what the best possible outcome could be for a customer. When you found your solution which brings an ADDED-VALUE to the customer, then it is time to think about the “Digital” in Digital Transformation.
One good example is a digital ecosystem which leverages different technologies to fulfill different customer needs within 1 single platform.
The “Digital” in Digital Transformation
As already mentioned, the digital part is most of the time a small part of the whole Digital Transformation effort of a company. First, it is a trigger for new possibilities and then it is an enabler for your solutions. So, when looking at your Digital Transformation journey you first need to understand what is happening around you, then start thinking of what can be done to deliver added-value to your customer and in the end, you are ready with a list of specs to look for the right technology to enable your solution.
Changing the Company Organization
So far it looks quite easy from an outside perspective. You have a trigger, you have a process to look for the right solution and you have then the right technologies to enable the solution. But as mentioned before you need more than this process to have a successful transformation. Changing your culture as mentioned before, breaking silos as Digital Transformation is cross-functional, and also aligning your strategy and organization structure is the real problem. When you have found your solution and you want to adopt you need to break down old structures.
There is no way that a new system can be handled with old structures.
This said there is also a big need for realigning your organization. You need to look at the customer experience and also the customer journey and align this process with your organization. Maybe a good example is a shift a lot of manufacturing companies need to make. They have a process and optimization mindset which is very structured. When entering a service and software oriented business, as many manufacturing companies need to do, it takes a different approach. The customer journey is different, it is a faster pace in sales and service, and the technology changes faster than it usually does in manufacturing. So a culture change from “optimizing” to “innovating” and an organizational shift from “process engineering” to “innovating and agile” is also reflected in the company structure.
True digital transformation involves much more than just introducing some “new kind of” technology. It is a complex process that requires a fundamental shift in corporate culture, where strategies need to be reinvented, and where the focus (and main problem of the transaformation) is on people, not tools. The path to successful digital transformation essentially requires the following:
- Actively engaging employees and customers to identify new opportunities
- Seeing technology as a facilitator (“Enabler”) rather than a solution – as a powerful trigger of change rather than the change itself
- Changing organizational culture to thrive in a dynamic business world of changing customer needs and technological advances
- Adapting existing processes and organizational structures to meet the demands of the future, rather than clinging to outdated paradigms
But the challenges should not deter, because with the right management mindset, clear goals and visions, and the right strategies, companies can overcome their traditional limitations and harness the transformative power of digitization and new technologies without the risk of being overtaken by others.