Digital Transformation - Three Actions for more Positive Outcomes
The other day I ended up with a bit of time in between a couple of calls and had a chance to finally read an article published by McKinsey about the number of people needed for transformation projects. This article caught my eye because it is commonly accepted that ¾ of strategies fail to deliver on their promised results and timelines. Therefore, it was intriguing to see possible options to address this. The overall conclusion of the article was that transformations involving at least 7 percent of employees in the organization are twice as likely to have positive total returns to shareholders than those that involve a smaller share of the staff.. This made me think about how to be more successful with digital transformations, mainly because there were a couple of elements missing from the otherwise great McKinsey article that can make digitalization more successful in the future.
The last two years of Covid-driven digital changes now have organizations considering what the next step in their digitalization transformation will be. The first will be to make digital part of the overall organization's strategy and not separate from the business strategy. In parallel, it would be paramount for organizations to focus on improving the outcome or the success rate of the digitalization initiatives. For this to happen, there needs to be more focus on executing the organization's strategy and the digital initiatives of that strategy. This will involve a more architected approach to strategy execution, including using a software platform to connect all involved employees, a proper understanding of the organization's digital maturity, and mapping the digital organizational competencies required to succeed.
But back to the well-researched McKinsey article. It contains several critical conclusions, of which I believe three are particularly pertinent to the digital transformation part of an organization’s strategy.
“Make innovation and execution everyone’s job." The article's finding is that the more people involved in the transformation and the clearer their responsibility for innovation and execution of the elements of the transformation is, the more likely the organization achieves its goals.
“Empower a deep and diverse team." The data from the analysis clearly shows that diversity and organizational depth drive a more successful transformation.
“Communicate clear and compelling aspirations." Specifically, communicate the "why" and the "what" of the transformation. Something important in digital transformations where the understanding or definition of what digital is varies by as many people as you ask.
These three recommendations are well researched with a good dataset behind them. However, improving the article, especially when it comes to digital transformations, would need an additional level of specificity concerning these points. Merely communicating to a diverse and broad team with innovation and execution trust upon them will not drive success unless several things are in place. For digital transformations, that would be the following three key elements.
Use a tool designed for strategy execution management: Given that many employees will be involved in the execution of the strategy, using a software tool to ensure they are aligned, can track progress, and provide bottom-up feedback is critical. A software tool that coordinates the strategy execution with all the people involved in the digital transformation. Especially since digital is not a project; it is a continuous business change that will last many years. As the McKinsey article points out, the more people involved in the transformation process, the more impactful it is on the business results. However, we are also all aware that when you apply an increasing number of people that need to communicate with each other, that can cause delays, mistakes, or even termination of activity. This is undoubtedly true for digital transformations where the digital organizational competencies across the people involved, on average, tend to be lower than the core business competencies of the organization. It is therefore paramount to coordinate the digital transformation between all participating people in the organization. For that, it is essential to consider a tool designed for this. Strategy Execution Management tools, such as DecideAct’s tools, will improve the ability to succeed with the digital transformation and the overall strategy.
Benchmark the organization’s Digital Maturity: As the McKinsey article points out, being evident in the communication around the transformation and strategy is paramount. When a leadership team and managers across the organization jointly understand its current digital maturity and where it wants to be in 2 or 5 years, the outcome is a common language for all managers in the organization to use. This addresses one aspect not mentioned in the McKinsey article as it stresses broad involvement, sharing of responsibility, and making execution of everyone's job. That can only happen if there is a shared agreement on the current state, a common vision for the future, and a shared language. Tools such as the Digital Maturity Benchmark tool from DI2X or the detailed digital maturity assessment from Digitopia would be excellent methods of reaching a common understanding of the current state, direction, and a common language for all managers. That would mean communication about the transformation becomes consistent.
Assess the Digital Organizational Capabilities: The article outlines the benefit of involving many employees in the transition and ensuring the people involved are from diverse backgrounds. However, when it comes to digital transformations, digital competencies across the organization are limited. Limited digital capabilities across the organization will impact the ability to execute the digital transformation. Before embarking on the next phase of digital transformation, the organization should assess the current state of digital competencies and then build a plan to improve the most critical competencies to ensure success. The Digital Capability Maturity Model of DI2X is a helpful tool that enables a rapid organizational assessment. The conclusion in the McKinsey article about the need for a diverse and deep team will for digital transformations only succeed if there is a sufficient level of digital capability maturity in the organization.
The next step for organizations in Digital transformation is clearly to ensure a broad, more diverse, and deeper involvement of the entire organization. Data shows that this increases the positive impact of transformations. However, in addition to such actions, CEOs and individuals responsible for the execution of the digital transformation must consider the following three steps:
Create a benchmark for the digital maturity of the organization, enabling them to adopt a common language across the organization for where they are going
Benchmark the digital capabilities of the entire organization to assess the current maturity and specific areas of focus and development in the future
Adoption of a tool for Strategy Execution Management to manage all involved in the transformation.
Digital transformations will become more complex as the organization's apparent areas have been digitalized. CEOs need to take note of the required actions to succeed.