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Focus on execution for digital transformation at scale
Expert advice for tackling the shortcomings in digital business model transformations...
Most business leaders recognize the need to transform their organization using digital technology, a need that’s been heightened by COVID-19. However, very few organizations will ever pull off a successful digital transformation.
Up to 90% of these change programs will fail. But it’s not because of technology, it’s more because of people, processes and culture. Based on interviews with 200 digital leaders carried out by IMD professors Michael Wade and Didier Bonnet, along with the researcher Tomoko Yokoi, we know the problem is usually a failure of execution.
The trio of experts hosted a recent I by IMD Book Club discussion about their new book, Hacking Digital, which offers solutions to the most common digital transformation challenges. A fourth co-author is Nikolaus Obwegeser.
Foster digital talent
Finding enough digital talent is one key issue that participants in the webinar raised. “However successful a firm is at digital transformation, at some point they will hit the digital resourcing problem,” said Bonnet, Affiliate Professor of Strategy and Digital Transformation. “You need to work closely with human resources to make sure there is forward visibility of the kind of capabilities you need, and that they’re being introduced in the organization.”
Tear down silos
His co-author Wade said digital business model transformation cannot be achieved in organizational silos. “That is one of the reasons why the failure rate is so high,” said Wade, Professor of Innovation and Strategy. “The benefits you get from data and technology are horizontal and are amplified by width across an organization. In a silo you get limited benefits.”
A good place to start is to have a clear and common objective. You also need to look at incentives, and make sure they are aligned across the business. “People are smart, they understand motivations, they can maximize their own utility,” said Wade, who directs IMD’s Global Center for Digital Business Transformation.
Build digital governance
The role of governance is to provide this unified approach to delivering your transformation. “When you don’t have governance, you get a duplication of effort,” Bonnet said.
There is no “silver bullet” solution: the level of governance will depend on your digital ambitions, your company culture, and the level of resource-sharing required. But hybrid models — that balance centralization and devolution — tend to work the best. And you cannot leave governance to chance; it won’t occur naturally. “It’s not the most sexy thing but governance is where I see the clearest link to profitability,” said Bonnet.
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Establish and maintain credibility
Many organizations will appoint chief digital officers to lead the transformation effort. But a big challenge is how digital leaders can establish and maintain credibility, in a very limited timeframe. IMD’s research shows that most people who are appointed in senior digital leadership positions have a rather short tenure, on average just over 2.5 years.
“It’s not only about having digital competencies, but also having those interpersonal skills and the ability to lead across an organization,” said Yokoi, an IMD researcher and senior business executive with expertise in digital business transformations. “Clarifying scope and responsibilities upfront is important. A mandate to lead digital transformation is usually very ambiguous.”
She said it was important to communicate your strategic intent. This will give people the chance to share their input, and give you an opportunity to build trust in the organization.
Go from start-up to scale-up
Wade said the failure to scale is a big obstacle to digital business model transformation. Many organizations struggle to scale up initiatives because of issues in data gathering, an excessive focus on the technology, changes in priorities, and flaws in strategy.
A shortage of talent acts as another constraint on growth. “And we can’t overlook budget issues,” said Wade. “Often, pilots get funding but who is going to pay for it as the project scales?”
He said you have to think big from the start: plan to scale and understand the limits to growth early on.
Adapt to local conditions
To do this, avoid the “cut and paste trap”, or the temptation to translate a successful project to a new business area or geography. This won’t work unless you adapt the successful project to the local conditions and rules, said Wade: “Make a very clear distinction between what’s core to the solution, and the elements that are modifiable depending on the context.”
The IMD expert added that a business ecosystem — a dynamic, interconnected network of suppliers — will play an important role in digital business model transformation. That’s because ecosystems can promote scale through the exchange of information across the value chain.
To really reap the benefits, Bonnet said webinar participants should treat ecosystem partners like an extension of the organization rather than just suppliers: “This is a mistake that we see made quite often.”
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