What leaders get wrong about their role in digital transformation?

Most digital transformations fail. According to IDC, worldwide spending on digital transformation technologies (hardware, software, and services) is expected to be more than $2.1T in 2021. Yet, of the S$1.3T that was spent in 2018, it is estimated that $900B went to waste (Tabrizi et al., 2019). While spending on digital transformation has skyrocketed globally, most research shows that few digital transformations achieve their desired results (Bendor-Samuel, 2019; Wade, 2018; Solis, 2020; Rogers, 2016; Kitani, 2019; Sutcliff, Narsalay, and Sen, 2019; McKinsey & Company, 2016; Boutetie?re, Montagner, and Reich, 2018; Deakin, LaBerge, and O’Beirne, 2019).

A 2019 survey of 1,000 C-level executives by Celonis supports the call for a more holistic approach, as it was found that almost one in two don’t know where to start, with 4 out of 10 confirming that their transformation has been a waste of time. “It’s a matter of leaping before they look”, with “70% intending to invest in AI, machine learning and automation and yet only 32% intend to invest more in getting better visibility of their processes” (McKendrick, 2019).

Role in Digital Transformation

What do senior leaders in incumbent organisations get wrong about their role in digital transformation that results in such high failure rates? When you trace the origin of such failures, the root cause tends to lead back to one thing most leaders are not doing today; focus on the how, and not just on the why and what.

The success of most transformations lies in the how

The way businesses compete has changed dramatically in the past two decades, aided by the pervasiveness of the internet, availability of low-cost computing power and the outsourcing of manufacturing. This has led to a significant narrowing of the knowledge gap, a significant ability to copy products, an increased ability to scale globally, and massive choice in the hands of customers.

The “why” you should transform, achieve higher customer advocacy, better experience and increase productivity is no longer a key differentiator. Only the late majority of incumbent laggards are still asking this question. On the other hand, “what” you need to do, tends to suffer from over generalisation, so much so that the answers are very cliché, e.g. “hire the best”, “adopt the latest and greatest”, “get buy-in from the top”, etc, and mostly known to one and all.

The key to most transformations today is thus in the “how”; how do you design your experience and processes, before you digitalise or apply the right technology solutions. The figure below illustrates this with an example from building great buildings.

When you build a great building, you don’t first showcase the builder. Then, why is it that most transformations tend to showcase the “builder”, which is inevitably about digital or technology?

To build a great building, you first engage the best architect. The equivalent in your digital transformation is the chief designer of your products, services and operating and business model requirements. This person is pivotal to your success, and you should not start your transformation without clearly understanding who can and going to play this key role.

Then, there is the civil engineer, who ensures that the building can stand on its own. The equivalent in your transformation is your process team. Things often go wrong today because the process is overlooked and not robust. The process is crucial in translating your requirements into well-written stories for development. Similarly, digital transformation is not mostly about technology. It’s about orchestrating how you design, how you create new processes and re-engineer old ones, and finally how you apply digital and technology to operate these processes faster, and with fewer errors.

Naturally, you need a good builder, but the best builder with an incompetent architect and civil engineer won’t help you build the best building. Why then, do so many leaders think it can? This is a major flaw that leaders get wrong about their role in digital transformation. Their role is to ask the right “how” questions and to orchestrate the many tradeoffs and considerations necessary to get this “concept-to-code” process right.

To complicate matters further, this process is not linear. For example, it is often necessary to understand what solutions are available to speed up the process, and whether the technologies underpinning these solutions are mature or nascent, as they will affect the feasibility of the transformation. If the feasibility is low, then it may be necessary to go back to the drawing board and redo the design.

White space gaps between design (usually owned by the business), process (usually owned by operations, sales and services) and technology (usually owned by manufacturing and information technology) cause miscommunication and distortions that attribute to the high failure rates of transformation in most incumbent companies.

To resolve these issues, leaders need to adopt a holistic and integrated methodology and approach to business transformations involving customers, business, process and technology, and people. One of the only such approaches today, The alldigitalfuture Playbook or taP for short can alleviate such issues and serve as a common language and method that significantly raises your probability of success.

Dr Dennis Khoo is a digital transformation expert, keynote speaker and the creator of the first digital bank in ASEAN. He is the author of Driving Digital Transformation (£19.99)and The alldigitalfuture Playbook (£99.99).