5 Steps to Making the Digital Transformation

Most companies want to better leverage digital technologies — social, mobile and cloud services — to deliver an enhanced customer experience, enable new business models and drive greater operating efficiencies. They also dread falling behind their bolder, more agile competitors. Yet, most leaders are unclear as how better to use the technology they have or decide which new tools to adopt. How can these laggards prudently catch up?

It is well documented how transformational leaders like Starbucks, Nike, Cisco and Apple have employed digital enablement — organizationally and technologically — to generate new revenues, extend market leadership, and reduce cost by streamlining processes and practices. Unfortunately, these firms are the exception not the rule.

MIT Sloan Management Review and Capgemini Consulting conducted a survey in 2013 of 1,559 executives and managers spread across a wide range of industries. The survey looked at the state of digital transformation, and the barriers and enablers that are impacting this journey. To be clear, we are talking about embracing breakthroughWeb 3.0 technologies such as cloud computing, crowdsourcing, 3D printing andlocation-based analytics, not more common applications like e-commerce or server virtualization.

The study’s key conclusion is sobering but hopeful. Despite the promise (or hype) of a digitally enabled business, most companies have been tentative in fully adopting new technologies and supporting them with organizational changes. Fortunately, the study also highlights some best practices that point a way forward to fully exploiting potential of digital technology. Some of the study’s key finding are:

• There is a digital imperative. A convincing 78% of respondents said achieving digital transformation will become critical to their organizations within the next two years.

• However, words do not match with reality. Only 38% of respondents said digital transformation was a high priority on their CEOs’ agendas.

• Awareness of the intent-action gap is a good first step. A strong 63% of the executives acknowledge the pace of technology change in their organization is too slow.

• Firms that were considered digitally savvy typically outperformed companies that lagged in technological implementation.

There are worrisome but often benign causes for this lethargy. The study and our research point to many factors, including:

Lack of urgency: Firms with no ‘burning platform,’ competing management priorities or who focus inordinately on short-term results will be less willing to put sufficient focus and resources behind digital initiatives.

Pessimistic culture: Many organizations are naturally risk averse, have management systems that don’t handle technology issues well or display a ‘not invented here’ mindset to technological adoption.

Low digital awareness among leaders: A digital divide exists in many companies between junior or middle managers who understand the potential of digital technology and those leaders who make strategic and financial decisions.

These barriers must be overcome. Entire industries (e.g., travel, music, retailing) have been disrupted by digital pure-plays and/or seen their margins shrink significantly. Acknowledging the issue is no longer enough; organizations must get in the game. Here are five best-practice recommendations we have made to a variety of clients:

Raise digital literacy. To begin with, all cross-functional leaders need to understand key digital trends, what their competition (current and emerging) is doing and what are some best practices from outside their industry. Nike looked beyond the apparel industry to the wireless, controls and sensor industries when launching its Nike+ offering.

Focus the impact. Technology should not be adopted because it is cool and flashy. It must support the core mission and priorities of the firm — not create new ones. When Starbucks made its digital transition, it added services that would enhance the customer experience (free wi-fi) and streamline operations (add digital payments to speed up the order/payment process).

Organize for success. Companies can take many steps to support transformation, including mandating digital representation on cross-functional teams, forming digital ‘centres of excellence’ and giving enterprise-level authority for digital investments. When media firm Gannett and Columbia University wanted to accelerate its adoption of digital technologies, it created a new chief digital officer position with a mandate to spur technological adoption and relentlessly evangelize the vision.

Re-tune practices. Make digital literacy part of key practices like recruiting, research and training. Create and connect digital transformation metrics to reporting, incentives and the performance management system. One of our clients in the IT sector requires their planning activities and templates to include a digital lens.

Walk, don’t run. Big bang technology adoption rarely works. Pick an operational, service or marketing pain point and investigate how digital technology can help solve the problem or improve performance. Pilot something. If it works well, scale quickly. If it doesn’t meet expectations, kill quickly, inculcate the lessons and move on to something else.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1,000 organizations. Mitchell can be reached at mosak@quantaconsulting.com