The most common mistake businesses make with Digital Transformation is to focus on the ‘digital’ part by adopting new technologies. Technology plays a significant role, but tactics like launching new apps into the marketplace aren’t in themselves transformative. True transformation starts with mindset – a mindset for change. Businesses that adopt this mindset understand that a Digital Transformation involves not just what they produce or work with, but how they work together, and with whom. Change on this scale isn’t for the meek. It takes a strategic view. More than that, it takes ambition.
The scope of a business’ ambition can make or break its success in Digital Transformation. That’s because in today’s world – with change happening at such a rapid pace – lacking ambition, or not being ambitious enough, is the riskiest thing a business can do. A well-defined ambition, when expressed through a Digital Transformation, is a way through the disruption. It’s a way of future-proofing a business, of uncovering new business models, and building competitive advantages for long-lasting impact.
Defining a company’s ambition doesn’t always seem like the most natural step.
It’s more comfortable to stick with existing business models and deploy technology to incrementally improve profit margin. Companies like this may introduce new business software to manage internal processes; while this approach may be digital, it’s not transformative. It serves the business in the short term but won’t provide any long-term business benefits.
Further enforcing such short-sightedness: a task-oriented society that encourages conformity. From a young age, each of us is trained to complete tasks and get rewarded. In business this translates to just doing your job, getting a performance review, then accepting whatever follows. Becoming ambitious requires un-learning these habits of conformity and adopting the mindset for change. It requires looking beyond the immediate reward of completing day-to-day tasks, and to the long-term business benefit of taking strategic risks.
Most of all, it means thinking hard about what unmet human needs may have been overlooked in the marketplace. This is how you uncover new advantages, and ultimately revenue growth. Chipotle recognized an unmet need among the mobile customer who didn’t want to wait in line, and (successfully) pegged their ambition to addressing that need with rapid pickups and deliveries. The State of Texas focused on the unmet needs of people who dreaded dealing with state agencies for things like license renewals, and boom: they’re planning a clean, mobile-friendly portal on par with the most efficient online retailers.
To help business executives become more comfortable with the idea of setting big ambitions, taking risks, and finding unmet human needs we encourage them to do three things:
- Think Big: Envision a future 5, 10, 15 years out – including the trends and technologies that could enhance your business, as well as those that can put you out of business. Collect input from team members across departments and functions to ensure your vision is realistic and inclusive of all functions of your company. Then ask yourself the following questions: How will my customer base evolve? What will they need? How will the competition evolve? And am I equipped to meet this imagined future?
- Start Small: Think strategically and identify one small step you can take toward leveraging technology for the benefit of your bottom line. For example, could your business redesign its website or launch an app that could help customers find what they need faster? Once you realize that Digital Transformation is really series of small steps, versus one giant leap, the concept becomes much easier to swallow.
- Scale Fast: After starting small, assess the success of your first project, collect key takeaways, and then quickly identify other projects your team can take on in the near-term. Then act on them. Quickly.
The goal of this exercise is to introduce the notion of innovation to businesses. Side note: innovation is a bright, shiny word that rightly gets people excited and thinking entrepreneurially. But remember: you still need all the boring supporting structures like strategic leadership, planning, budgeting, technology standards and controls, and change management for innovation to be productive.
With those structures in place, that entrepreneurial energy can be properly funneled into developing new opportunities -- both known and unknown. Known opportunities include those that can be planned for and delivered – Caterpillar’s entry into the rental business, for instance -- while unknown opportunities include those that need to be discovered and developed.
Venmo is a good example here. The mobile payment service owned by PayPal uncovered an unknown opportunity to simplify the way consumers handle and split payments between one another, effectively disrupting the online payment space and the need to carry cash.
Once you’ve set your ambition, you can take steps to execute against it. Organizing efforts around these five areas can help identify the most impactful changes:
- Digital workforce. Does your organization have a strategy for building a strong digital talent pool and helping them get work done in new ways?
- Cross-functional collaboration. Are you working to break down traditional silos to improve collaboration across business units and functions – and even outside of your business?
- Innovation culture. Do you embrace a ‘succeed fast’ approach to innovation that focuses on innovation for both known and unknown opportunities?
- Business value management. Do you have an approach that allows you to constantly create business value, while pushing your innovation agenda? Can you show income statement and balance sheet improvements?
- Ecosystems. Are you leveraging external partners (e.g., startups, technology companies, academia, etc.) to improve digital capabilities and inspire new ways of thinking?
Many of these enablers are interrelated, feeding off of each other to renew your organization and propel it into a new, more innovative future. In more detail:
- The Digital Workforce. A digital workforce isn’t just technically skilled; they also have ways of working that help get ideas out quickly, so your business can have an impact on the market faster. These ways of working draw heavily from agile development methodologies – working iteratively, testing and learning, and rapidly moving ideas from prototype to MVP. At Deloitte, we call this the Digital Foundry Model. The Model often requires developing new skills; for many organizations this also means an entirely new culture and mindset, with a differently-designed workspace to facilitate faster decision-making, and collaboration between competencies and business divisions. An additional success factor is the level of curiosity the digital workforce has about digital techniques and technologies that go into the business solutions. Curious teams lead to faster success.
- Cross-Functional Collaboration. Closely related to the digital workforce is cross-functional collaboration. Creativity and innovation come through the exchanges of ideas, so getting people who think differently to interact and solve problems side-by-side increases your ability to identify more of valuable ‘unknowns’ that can lead to future advantages. Rather than separating your employees by function, it’s important to integrate project teams, so ideas move more freely and can get into the market faster.
- Innovation Culture. Rearranging your seating chart and adopting an agile process won’t get you far if you don’t build a culture of innovation with a clear connection to the future of your business. Innovation may start at the edge – maybe you create a lab or a center for innovation with a lot freedom to think outside the box and explore possibilities. But it can’t just sit there for years without moving into the market. Your innovation teams need a clear path to release those concepts and ideas to the rest of your business without losing the innovative mindset established in their little group. It’s important to create a balance between the freedom to explore, and the incentive to move innovations to market throughout all areas of the business.
- Business Value Management. It’s tempting to get swept up in the art of the possible and chase shiny objects, but you can’t forget your bottom line. On the other hand, if you swing too far and focus only on quarterly earnings, you may miss the boat a year from now. So it’s important to balance your approach to managing your business value, with initiatives that are focused on short term value creation, as well as those that are building your ability to create value years from now. These may be separate initiatives or the same, but every team working for you should have a balance sheet of value creation. The important thing: have a plan for value today, and also for tomorrow.
- Ecosystems. In the digital age, it’s no longer good enough to think only within the four walls of your business. Your organization should be asking: who should we hang out with in the marketplace? It’s a complex world out there, and every organization has its strengths and weaknesses, so look for ways to build ecosystems around your business – through startups, academia, public sector, etc. Prioritize those organizations where that balance sheet of value is reciprocal, and makes each player stronger.
Digital Transformation is more important than ever to future-proof businesses against an unimaginably fast, cognitively-enabled environment. Technology is the great disrupter, but it’s also a source of opportunity – both known, and unknown. Developing an ambitious mindset is the first step in identifying these opportunities. To seize them, organizations must change the way they get work done in the marketplace. Doing that takes a shift in mindset that changes the entire organization from the inside out – from one that focuses on executing business as usual, to one that’s flexible, collaborative, and capable of change and innovation.