What it really takes to achieve a successful digital transformation

It is fundamentally important to be aware of “the difference that makes the difference” – this is a psychological maxim. Identifying what makes the critical difference, or what is the crucial factor for success, is precisely what is occupying so many organizations in connection with the ubiquitous digital transformation. By now, the need to engage with the external challenges on a deeper level has been taken on board by management teams – according to the Boston Consulting Group, over 85% of companies reported that they are currently undergoing a transformation process. Depending on the industry and where the pressure for change is coming from, this presents a widely varied range of pathways and approaches for companies facing the risks and opportunities afforded by the onset of digitalization. This is also reflected in the proliferation of consultants offering various methods and models, all claiming to offer companies they “right” way to deal with the change.

However, most of these approaches fail to deliver – less than 30% of all change projects actually achieve their proclaimed goals. Why is this? As a rule, corporate transformations are predominantly concerned with structural and organizational change – adapting processes, guidelines, systems and technology, for example. However, what the top managers all too often forget, and which is just as important, is the internal transformation of the attitudes, thoughts and feelings of the people affected by the change – because these are the people who are going to bring the chosen strategy to life and make it an everyday reality.

In order to be truly relevant, a change also needs to take place in the hearts and minds of the people involved – starting with the managers who are leading it. As a manager, you need to start by asking yourself a few questions:

How do I deal with important changes in my personal life? For example, how successful have I been over the last few years in adhering to my personal behavioral resolutions (such as doing more exercise, spending more time with my family, setting aside time for my hobbies and interests, having a more healthy diet, reducing my stress levels, etc.)?

 Just considering this question brings us to the crux of the issue: if we don’t really understand our own psychological response to change, and if we find it so hard to make behavioral changes in our own personal lives, how do we go about implementing changes in the workplace that people can truly identify with and make into a reality? Because the truth is that changing the values and attitudes of employees in line with the desired new behaviors can’t simply be imposed from above, as some managers believe is the case.

Key elements for a successful (digital) transformation

 What approach, then, should we take to ensure that change, or transformation, is embedded psychologically on an individual level? The first step is to have a clear and convincing answer to the question: “Why are we doing this?” Studies have shown that when employees have a sense that their work is meaningful, they engage with it more, resulting in higher levels of motivation, increased job satisfaction and reduced stress – and, at the end of the day, a more fulfilled life. Therefore, it is perfectly legitimate to propose that it is in the interests of both employees and managers to create a working environment in which the employees experience a (greater) sense of purpose. And this is especially true in change situations. The following points are of vital importance when it comes to achieving a successful and meaningful transformation:

Management: acting as change ambassadors and role models

When you are planning your transformation, this means that the CEO and executive team must be able to explain clearly and convincingly why the change is necessary, and generate an inspiring and meaningful vision of the future. Similarly, it is vital for the success of a change project that everyone on the management team has the same understanding of the purpose and meaning of the change, and is able to convey a consistent and coherent shared narrative. In accordance with the principle of leading from the front, managers need to act as role models and be the first to internalize the expected change of perspective. And an important part of the narrative involves identifying which aspects of the transformation process have already been clearly decided, and which aspects have yet to be developed. This comes across as authentic, and offers the people affected the chance to take part in shaping their future – which can also boost their level of commitment. Just think, would the legendary speech delivered by Martin Luther King in Washington in 1963 have been so inspiring if, instead of “I have a dream”, he’d said “Listen up, this is  what we’re going to do”?

Doing justice to the personal, psychological aspects of change

Most transformation projects focus predominantly on the objective, outwardly tangible aspects, such as the projects, goals, resources, experts and processes that need to be planned and coordinated in a logical manner (the “it”). And, it goes without saying, managers and employees do need to fully explore these objective issues: which skill shifts are needed in the organization? What will the new business model look like, and how can the transition to new systems, products and services be successfully implemented? In general, the change competencies needed for these aspects can be developed without too much difficulty, either internally or with the help of an external expert. In contrast, managers are much less aware of and place much less focus on the internal, personal aspects of the transformation that play out on the individual (“I”) and collective (“we”) levels. This relates to the necessary internal shift, and to the questions: how can I as in individual, within the context of the change, enhance my skills in terms of taking responsibility, making choices, regulating my emotions and finding more meaning in my work, and how can we collectively (myself and my colleagues) be more aware of our impact and experience greater trust, a common direction and a sense of purpose?

A customized program

The design of a specific transformation program should take into account the psychological sensitivities of the employees, and should answer questions such as this: how well do the teams cope with change, learning and innovation? Who are the opinion leaders, and how can we get them inspired about the new direction? A mix of analysis, initial interventions, round talks, communication and leading by example, tailored specifically to the situation, is needed in order to embark on the planned transformation journey. This can involve a number of tried and proven elements from agile management and innovation management.

The important dimensions of a (digital) transformation

We can identify the following aspects as important dimensions of holistic change:

• Internal (perception and alignment)
• External(implementation)
• Individual
• Collective

These can be graphically depicted and combined in the following matrix:

Using this overview, we can identify clear approaches for planning and implementing a successful holistic corporate transformation process. For example:

• In order for the change to succeed, the “Outside-In” adjustments to organizational processes need to be combined with appropriate psychological and cultural “Inside-Out” measures (squares 2 & 3 <-> squares 1 & 4).
• At the individual level, first of all you need to foster a shift in the internal mindset that supports change, an attitude that individuals can use to guide their own (outward) behavior. In this regard, managers need to act as role models and put their own values into practice in their everyday interactions (squares 1 & 2).
• On the collective level, management team first needs to work with the employees to develop a shared vision and purpose. The next step is to clearly establish the strategy and the behaviors that are required in order to make the vision a reality. Useful tools here are playful exercises combined with targeted skills training, such as giving feedback, managing conflicts and establishing commitment (square 4).

This overview also serves to give us a deeper understanding of the concept of transformation, enabling us to clearly distinguish it from the term change.  Change is what happens externally (the “It” dimension), while transformation is an internal, irrevocable shift of core perspectives and understandings – this takes place in the “I” and “We” dimensions.

The fact is that many organizations focus predominantly on the external, visible issues, not only when dealing with change but also more generally – and as a result, they criminally neglect the internal dimension. This is frequently seen in corporate mission statements, which all too often are defined exclusively in terms of obtaining maximum profit for the shareholders. This technocratic view of a company’s purpose completely neglects the human, psychological aspects of corporate management – to the company’s cost. Let me illustrate this with a metaphor: just imagine you are going on a trip with some friends in a minibus. Your driver and guide is only interested in whether there’s enough petrol in the tank, where the next petrol station is, and how to optimize fuel efficiency. There’s no doubt that you would find the conversations on this topic, and in fact the trip as a whole, much less inspiring and meaningful than if your guide talked about the beauty of the landscape you were travelling through, gave you a sense of the upcoming attractions, and engaged with your mood and your needs.

If we apply this idea to digital transformation, it means this: if your management team is able to convey a clear and meaningful vision of the future that inspires and invites employees to engage with the transformation, and if you have a well-balanced program that incorporates not only organizational aspects but also the  psychological dimension and is designed to address the specific cultural situation of the employees, this will enormously increase your chances of success in making your company fit for the digital world.

Dr. Thomas Gartenmann

Transformations-Programme für Menschen in Organisationen zu entwerfen und zu begleiten ist meine Leidenschaft. Seit über 30 Jahren unterstütze ich Führungspersönlichkeiten und MitarbeiterInnen dabei, ihr persönliches Potential und das Ihrer Unternehmen zu entfalten. Es begeistert und erfüllt mich jeden Tag aufs Neue, mit psychologischen Einsichten und Methoden zum Erfolg von Menschen und Organisationen beizutragen. Als Managing Partner der aergon ag – inside-out leadership, mit einem Team von 12 PsychologInnen transformieren wir Kulturen nachhaltig.