Most industries understand they need to do it — if they haven’t already. Like it or not, they don’t ultimately know what it is. So let’s start with the basics.
When asked “What is digital transformation?” a Google search will spit out the following:
“Digital transformation refers to the process by which organizations leverage digital technologies to fundamentally change their operations, business models, and customer experiences. This transformation encompasses integrating digital tools and technologies into all areas of a business, resulting in significant changes to how the business operates and delivers value to customers.”
That’s a mouthful, and it isn’t all that descriptive. The gist is that your company works to take a digital-first approach to everything it does.
Deeper in the weeds, it’s essentially these six things:
- Technology Integration
- Process Optimization
- Customer Experience
- Data-Driven Decision Making
- Cultural Change
- Business Model Innovation
Bullet number five is most often the sticking point — Cultural Change. Once again, digging in we find this:
Fostering a culture of innovation and flexibility within an organization. This often involves training employees to adopt new technologies and encouraging a mindset that embraces change and continuous improvement.
The simplest way to describe why the need for investment in Digital Transformation persists is simple — there’s a multi-generational resistance to truly adopting technology to drive business the way tech experts and evangelists know it can be done.
“If we can’t get a paid media team to standardize how they use UTM codes to build campaign URLs; we can’t get correct data ROI measurement.” As such, we can’t accomplish bullet points 2 (Process Optimization) and 4 (Data-Driven Decision Making), and the digital transformation initiative eventually fails.
How did it come to this?
The concept of Digital Transformation as a business force began to develop real momentum about a decade ago. The roots of why we’re still fighting to get results where we should have been 10 years ago are bound up in a couple of things that I’m going to oversimplify.
- Boomers and older Gen Xers still love paper and physical media.
- The financial crises of the 2000s still haunt the hell out of CFOs.
The times they have a changed, that’s for sure, but the people holding the purse strings have not. The C-Suite undeniably has a tech gap, but it’s not just the execs… In most of my past roles across a variety of industries, the hardest part of rolling out any technology initiative is getting fellow employees to adopt new protocols. They don’t want to change how they’ve always done it.
If it’s been almost 30 years since this Internet flash in the pan started, why are we still fighting the potential of digital transformation? Why do our leaders and elders persist in dragging their feet?
Why do initiatives fail and why do companies avoid them?
Primary reasons for digital transformation failure:
- Cultural Resistance — This is the biggie.
- Lack of Vision and Leadership — It has to come from the top, and if the CEO doesn’t understand what it is, why it’s necessary, and then insist, it usually doesn’t happen.
- Skill Gaps — This ties into 1, part of why the culture of “but we’ve always done it this way” reigns is the fear of being made obsolete.
- Financial Constraints — It’s pricey, and it requires a serious financial commitment.
- Legacy Systems — Far too often the sunk cost fallacy related to existing infrastructure derails real change.
- Uncertain ROI — It’s hard to quantify the value without larger predictive initiatives but refusing to evolve guarantees the eventual extinction of the business in question.
- Customer and Market Dynamics — Failing to take the customer’s very real and rapidly evolving needs and wants into account also ensures failure.
What to do about it
Consulting firms will tell you they can help you achieve it, but typically they don’t have the chops or the staff themselves to truly make it happen, and for a variety of reasons companies don’t have the will or the budget to see it through. The cultural change part remains the greatest impediment, but that is gradually changing.
We approach a time when large swaths of digitally resistant employees will retire. Convincing those who are left to join the 21st Century will require very demonstrative evidence of the following:
They don’t have a choice but to adapt. Their peers will no longer lack the institutional experience that keeps adoption-resistant senior employees in place. This means C-Suite execs can’t continue to retain tech-avoidant employees on the basis that they’re good with the clients — the clients are likely to require the digital necessities too.
If we don’t want to wait, if we want to get ahead of the curve to avoid being left behind we have to use compassion for those folks who aren’t adapting while empowering those who have the digital chops to get the jobs done.
More than anything, we need to ensure that execs are onboard. That means the word needs to come from the C-Suite with a clear and present vision from all members, not just the CTO.
- The CTO has to ensure his staff knows that the mandate to transition out of legacy systems and modernize is non-negotiable despite the costs.
- The CMO has to fully agree with moving to a digital-first model and work to integrate legacy efforts with a new digital world.
- Accounts directors have to know that account executives have to work in intense concert with digital marketing pros.
- Old-school models of accounting have to begin their own transformations, and the CFO has to be ready to push for that change with clients and investors.
What does a successful Digital Transformation look like?
Harvard Business Review suggests that there are four pillars to a successful transformation.
- IT Uplift: Upgrading IT and mobile infrastructure, data lakes, and cloud services. This modernization uses the “digital initiatives” budget to enhance IT and communication platforms, resulting in modern tools that boost employee efficiency, reduce IT maintenance costs, and increase satisfaction.Most often, this is led by a CTO.
- Digitizing Operations: Optimizing and simplifying processes with digital tools like AI, 5G, and IoT. This ranges from replacing analog activities to rearchitecting systems to meet modern demands, saving time, money, and resources, and enhancing problem-solving and customer service, often led by the CFO or COO.
- Digital Marketing: Using digital tools to interact with and sell to customers, aiming to win clients, build brand awareness, profile clients, and facilitate online sales. Involves investing in clean data, AI for customer insights, and an omnichannel presence. Led by a CMO, key metrics include return on marketing investments, reduced acquisition costs, and valuable data generation.
- New Ventures: Creating new business models, products, and services with innovation and agility. Led by the CEO or head of sales, these initiatives require investment and a team to test growth sources. Goals include new revenue streams, with KPIs on unit economics, customer problem-solving, and profitability. Example: a large bank entering various industries, driven by an innovation-focused team and measuring success through retention, engagement, and cross-selling
Essentially, these pillars just mean a plan and roadmap for digital transformation needs to come from leadership with a commitment and associated timeline across the major departments of a company. Achieving success with each isn’t easy. It requires big commitments over a lengthy period. The key is the timeline for each, and the complex planning that goes into each project.
Multiple, adept project managers for each pillar must be hired with the expectation that changes external to the process itself will have an effect on the overall project. Fluctuations in the economy, politics, etc. will alter the speed at which projects are completed, and thus the overall timeline for each individual pillar’s implementation.
Final Thoughts
Neby Ejigu, a colleague and former boss of mine produced a playbook for digital transformation that speaks to the specific challenges of agencies as they relate to client transformations, not just agency transformations. It’s a worthy read and features both discussions of the challenges and success strategies that he’s used as the Senior Partner for Digital Transformation at Finn Partners where we worked together. While there are bits of glitter in there I would caution companies not to glom onto quite so hard (cough: AI/Automation), most of what Neby describes is a good set of ingredients for the recipe you should be using when you’re having the big talks about what Digital Transformation really looks like for your organization.
Above all, vision, commitment, and an iron will at the executive level are paramount to the success of your transformation and that of your clients. That same set of virtues has to be transmitted to your staff with a focus on empowering them to transform themselves as much as they transform their work. Appropriately framing perceptions about this herculean task is one of the first challenges we all face when taking the first steps.