Key considerations when embracing digital transformation

It is a truth universally acknowledged that digital transformation and innovation is paramount in the pursuit of competitive advantage. Employees are demanding change; end user experience is crucial, and data and analytics reign supreme. So why is success so hard to achieve, and why is the prospect of it so daunting?

McKinsey reports that less than 30 per cent of digital transformations succeed and the hard truth is that digital transformation isn’t an easy or measurable process. Organisations put lofty objectives in place and use complex technology to achieve them, when realistically the technology should be the output of the transformation strategy, not the conduit.

When approaching or planning digital transformation, we need to be clear on the ‘why’ before the ‘what’. In other words, rather than being inwardly focused, we should instead be looking at the outcomes we wish to deliver and not the means by which we achieve them. In order to gain competitive advantage, we should be asking what customer outcome we are striving to achieve. Customer experience first, last and always.

There are some key considerations that should provide a framework before embarking on any digital transformation.

The first cab off the rank? Get the right people.

It is important that digital and tech savvy leaders are employed: those who will really drive and understand the vision of the transformation, how it will improve the customer experience, and what is required internally to achieve it. These may not be C-Level executives, but rather those who are intrinsically involved in the day to day processes that keep the wheels of the business turning. Then they need to be empowered to make the right decisions and dedicated as a resource to the change effort.

These leaders must thoroughly understand the capabilities of the workforce so they can continue to give them the right tools to do their jobs efficiently. The leaders engage and foster relationships with all centres of knowledge within the organisation within all departments, connecting both digital and traditional processes. Rolling out a whole new system that nobody is familiar with will have a massive impact on productivity. Engaging and collaborating with employees may uncover critical paths for streamlining process. From internal stakeholders/employees to customers, the whole eco-system should be aware of the vision, and what part they play in the process. The strategy needs to have synergy with all those moving parts. It is a cultural, not a technical, shift.

Digital transformation should not be viewed merely as a technology change; rather that the technology deployed should be part of the strategic decision. It assists with the evolving business culture by streamlining processes and so determines the customer experience. If an initiative is to be launched, everyone should have buy-in on their part in the journey. They should also thoroughly understand what the overarching journey is.

But what of the current legacy systems? Digital transformation is not a one size fits all. Whatever is working in the current environment should be evaluated, as some skills and capabilities may be integral as part of the journey. It may be counterintuitive to rip those out to head into a brave new world. Full digitisation could affect the peripheral business, and several key skills from the ‘old way’ could be integral part in forging the new future. Double down on those skills. A clear strategy will build and extend the current skillset with a view to meeting the future ideal.

And just how is the success of the transformation measured? Again, this should be hardwired into the transformation strategy. If customer experience is king, then success can be measured in several ways depending on the end goal. Digital proficiency, Net Promoter Score and revenue are good markers, but a shift in the way the business thinks will be the primary indicator. The customer gains value as the path they use to purchase products becomes slick and seamless. The business reaps the benefits with better customer retention and profit as it adapts to the needs of their customers.

Digital transformation is an ongoing initiative and must be treated like a movable feast. Irrespective of the goal set initially, leaders and implementers should be prepared to pivot and change at any juncture. Technology moves fast, and a successful transformation will allow for ways to improve customer experience along the way. If it is built into the DNA of the business, then everyone involved will consider it their job to improve the experience.

If focus remains on the vision, on the ‘why’ – the customer experience – you are more likely to end up in the minority of those who will achieve a successful transition.

Responding to Disruption: Stormy weather ahead?

By Kerry Topp


“If you do what you’ve always done, then you’ll get what you’ve always got.”

There’s a paradox here: why would companies that have been successful and created a winning formula need to do anything different? Why should they feel the need to transform or invest in new areas when they can maximise shareholder returns right now?

The reason: If boards and executives don’t have transformation and continuous improvement in their strategies, they are building vulnerability into their organisations.

To quote Ralf Dreischmeier, Global Leader of Technology Advantage Practice at Boston Consulting Group: “Executives need to create their own ‘digital attacker’ businesses. Long-dominant companies are increasingly under attack from a host of digital start-ups that are out to reinvent businesses and industries by addressing consumer needs in completely new ways.”

Dreischmeier states that incumbents should be more disruptive: “Large companies hold a lot of cards—including resources, assets, relationships, and data—that smaller competitors frequently do not have enough of. But they often do not fundamentally rethink their business model.”

This challenge is at the heart of why companies in New Zealand are slow to commit to activities which seek out new markets and opportunities, and help their people change and survive.

But why?

To quote another guru, Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, recently said: “Making Industry 4.0 work requires major shifts in organisational practices and structures.”

These shifts, Schwab said, include new approaches to IT and data management, to regulatory and tax compliance, new organisational structures, and changes in company culture.

Professor Schwab has been at the epicentre of global affairs for over four decades and he’s convinced that we are at the beginning of a revolution that is fundamentally changing the way we will live, work and relate to one another.

He explored this concept in his book, The Fourth Industrial Revolution. He characterises this Revolution through a range of new technologies that are fusing the physical, digital and biological worlds. The impact of these technologies will affect all disciplines, economies and industries, and challenge ideas about what it means to be human.

“The world has the potential to connect billions more people to digital networks, dramatically improve the efficiency of organisations and even manage assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial revolutions.”

However, Schwab also expressed grave concerns that organisations might be unable to adapt and governments could fail to employ and regulate new technologies to capture their benefits. Also that shifting power could create new security concerns, and inequality could grow causing societies to fragment.

If we focus for a moment on the Financial Services sector as an example. There is no doubt the sector is going through a seismic shift. Changing customer demands, the growth of financial technology companies like Xero, the pressing need to be innovative and the changing relationship between Boards and executives are all reshaping the industry. At the same time, executives need to balance these demands against the expectations of analysts and the requirements of regulators.

This is certainly something coming through loud and clear from the 490 Financial Services CEOs who took part in a 2016 Global CEO Survey recently. The survey, entitled “Turning risk into opportunity – The changing face of Financial Services”, highlighted that CEOs were worried about speed of technological developments, with 81 percent of respondents either extremely or somewhat concerned about keeping up with the pace of change. The next biggest worry was that a limited talent pool could inhibit their growth, which 70 percent of respondents were concerned about.

So what’s the answer?

First, education – specifically, the education of Boards and executives. These incumbents need to be aware of the magnitude of the potential threat but also the opportunity that technology disruption will likely create for their business.

Tech Futures Lab is doing exactly this. As Sacha Judd, Managing Director of Hoku Group recently put it, “The Tech Futures Lab workshop … is critical information that should inform all our decision-making, as the exponential growth of new technologies challenges all of the assumptions that we’ve previously held about what the world will look like, and how our industries and society will adapt.”

Secondly, strong leadership at a time of uncertainty and change is incredibly important.

As Adobe Chief Executive Shantanu Narayen recently put it: “A great Board is one that spends disproportionate amounts of time with management, taking active steps to understand the opportunities and challenges facing the business,” he says. “With the world increasingly moving to digital and businesses implementing digital strategies, Boards also need to boost their digital capabilities to be better strategic advisers to the business.”

But it’s not just technology that Boards need to grapple with, it’s “entrepreneurial venturing” or, put another way, deferring returns today by investing in potential growth areas which can achieve returns in years to come. Boards and execs need to set the expectation that they will be more entrepreneurially-minded and less risk-averse when it comes to investing, and they’ll need to feel comfortable making some decisions based on instinct rather than hard numbers.

Why? Because this is a new world – some of the things that are happening now are unprecedented and you have to be in the game to stand a chance of winning.

New Zealand boards and executives are, on the whole, not especially diverse. They tend to be dominated by very smart accountants and lawyers because of the types of material things discussed – risk, finance, etc.  However, there is a real and present danger of “group-think” with that make up. Companies should consider the addition of a disruptor – an experienced entrepreneurial and tech-savvy protagonist – to their team.

Because as Ralf Dreischmeier said: “Leaders in the digital age are different from leaders in the past. They prototype an agile strategy and learn from their experiences. They attack their own businesses before disrupters do. At the same time, they digitise their core business and get the most value from both their existing and external data, all the while mastering the digital ecosystems they operate in.”

Is this how current Board members and executives have been thinking? In my experience, this is only happening in a handful of local organisations.

Now is the time for vision, strategy, an entrepreneurial streak, strong communication, expectation setting and above all, strong leadership.

Disrupt or be disrupted is the motto of today – but I would add that company leadership needs to enable their people to be safe to “venture smart and venture more”.

Good luck on your venturing – our future economy needs you.