We have been talking about Digital Transformation for over 20 years. According to Forbes, almost every one of the publisher’s Global 2000 companies is on some form of digital transformation journey. Yet what does it actually mean? And why are 9 out of 10 such projects predicted to fail? Only 5% of digital transformations meet, let alone exceed expectations.
At WhartonBC, we wonder if this is, in part, because those leading these transformation programmes focus on what is tangible, what is accessible, and what they understand. Thereby they are missing more nuanced behaviours and issues, like fear and trust. People matter most of all, but people often get forgotten.
Here, we consider some common pitfalls in digital transformation, and how to overcome them.
Align Leadership & Transformation Initiatives
First and foremost, businesses must align their leadership and management against a common rationale, story and a prioritised set of transformation initiatives. A recent report published by the Harvard Business Review noted that many ‘digital failures’ could be attributed to unspoken disagreement among top managers about their goals. This can be remedied if both opportunities and purpose are clearly articulated. A transformation can only succeed if leaders understand why they are embarking on the journey ahead, as illustrated in Simon Sinek’s golden circle. Only then can they focus on how and what, before they invest in the process.
Additionally, organisations should avoid digitising silos. Engraining silos through executing multiple unconnected digital projects is digital suicide. As stated by Conny Dorrestijn during a recent Open Banking panel we joined “companies look at digital technology and start digitising existing processes, which might achieve cost savings but gains on the revenue side are made through sharing data. Then using relevant data from various sources to become meaningful again to customers”. Businesses are living organisms; each part links and impacts another. Therefore, functions need to interact to identify opportunities, prioritise and collaborate to become more successful.
Reinvent Organisational Structures & Decision Making
Only 1/4 of executives believe their company’s operating model has evolved quickly enough to align to their strategy. The right operating model and decision-making structures are essential to enable organisations to be agile and drive their digital agenda forward at pace.
Federic Laloux’s Reinventing Organisations talks at length about how what is taught at business schools and how we run organisations today is reaching their limit, particularly in the complexity of digital. He suggests three ‘break-throughs’: Self-Management; Wholeness; Evolutionary Purpose. These pointers for success work on the premise that leaders should no longer command and control but ‘sense and respond’ through self-management. WhartonBC believes in the sentiment of his work, noting that the construct of working life is leaving many with no time to think, reflect and act. However for many having time to sense and respond is counter-cultural, and may result in people reverting back to type. Thus adopting a ‘freedom within a framework’ approach, whilst exploring some of the industry trends on operating models discussed in our Growing Pains blog is key.
Leaders would also do well to build diversity of thought into decision making. As noted in Ben Fuchs’ Advantage Blindness work, when every other employee has been to the same business school and completed the same training, naturally, most will think in the same way. Businesses either recruit a reflection of themselves or look to bring in new perspectives and skills, yet how long do new hires stay before they need to let go of their difference to survive? Organisations can’t rely on a single leader or just the board room to set strategy and decision making. Building diversity of thought throughout the employee lifecycle to bring new ideas, curiosity and challenge is needed to accelerate transformation from the old ways of doing things.
Address Resistance to Change & Working Practices
WhartonBC’s research within the Insurance and Risk sectors has found that 2/3rds of organisations report that leaders focus on changing the technology but not the skills and capabilities needed to make effective use of these. Unless organisations address how people work, digital investment is highly unlikely to bring about the change desired. So how can businesses go further, and create an environment that will yield successful results, overcoming resistance to change that 43% of organisations cited as the biggest impediment to digital success?
First bear in mind that the nature of ‘talent’, and the expectations of talented individuals are fundamentally shifting. Standard, full-time, permanent working hours are becoming a thing of the past. Indeed, by 2020, 70% of the workforce will work flexibly. Enabling new styles of working aligned to customer outcomes is essential to create an agile culture.
Running hand in hand is the need to create psychologically safe, transparent and open workplaces where people can “raise ideas, challenges and issues without being embarrassed, rejected or punished”(Amy Edmondson). According to research by Higgins & Reitz, fear is the greatest reason people fail to speak up.
Employees, as well as leaders, have their part to play too, and when a culture of ‘intrapreneurism’ is encouraged, employees are able to think and act as though they were entrepreneurs themselves. Take Google’s endeavours, where its own Gmail product came about after employees were allowed to spend 20% of their time dedicated on projects of their choice. Satya Nadella transformed Microsoft by changing the culture at all levels, inspired by a growth mindset, active listening and learning from failures.
Embrace Open Talent Economy & Digital Capabilities
In order to be successful, businesses need the right people, with the right skills, in the right roles with the right managers.
WhartonBC’s 2019 CISI poll found that 51% of business leaders believe their firms only possess pockets of the capability needed for digital transformation. Demand for digital talent is outstripping supply, particularly in Financial Services where there is a renewed war on talent as graduates are not choosing to move into the sector. Even 75% of FinTechs are fearing a skills crisis over the next 3 years.
These businesses would do well to rethink sources of talent, and consider how to flex the shape and size of an organisation with changing demand, sourcing skills from the full talent continuum and finding hidden talent within their own organisation. How many businesses recognise the talents of neurodiverse people, such as those on the Autistic spectrum or with Down syndrome? Certainly not enough. 70% of HR functions fail to factor neurodivergence into their people programmes. However, the skills of people represented by agencies like Auticon should not be overlooked; with exceptional attention to detail, pattern recognition and logical, systematic approaches to projects, businesses could well miss out if this pool of talent is neglected.
Finally, don’t forget the wishlist of both Generation Z and Millennials seeking career development, opportunities and lattices rather than ladders. Readers of Sheryl Sandberg’s Lean In might recall her words of wisdom, “Careers are a jungle gym-not a ladder.” Young employees, it seems, would agree.
Five years ago, a study from the John M. Olin School of Business at Washington University estimated that 40% of today’s Fortune 500 companies on the S&P 500 would no longer exist in 10 years. To take that a step further, companies that will sit on the Fortune 500 in 2025 – your disruptors – probably don’t even exist today. To stay ahead, business leaders must be bold and brave. Go further and explore the four leadership personas that are critical for success in the 4th Industrial Revolution.
If you are midway through or considering undertaking a digital transformation, I urge you to consider the following actions:
- Ask your leaders why you are undertaking a digital transformation. If there is any ambiguity in the purpose take some time to realign your leadership team behind the why and ensure this is cascaded across your organisation.
- Consider asking the opinion of someone from a different background or team before you make your next decision. Does their alternative view point strengthen your decision or challenge you to look at it differently?
- To reduce resistance to change, have a look at our Seven Steps to Speak Up Success blog for practical ideas on how to encourage a culture where speaking and listening up becomes the norm.
Together we can drive a more sustainable and resilient financial system that accelerates innovation and growth in our economy.