What CEOs Need To Know About Embracing Digital Transformation

“Digital” has fundamentally changed consumer expectations. Great brands have two choices, they can radically transform their customer experience to make it digitally elegant, or they can cede a significant portion of their market to digital-first companies who are already doing it.

While many great brands are struggling to find their digital footing, there are also great examples of legacy enterprises who are succeeding in transformation and securing a place for themselves in a new digital world including WalMart, Federal Express, The New York Times and HBO.

However, many large enterprises struggle mightily launch and deliver this type of transformation due to a predictable set of five challenges to digital transformation.  We’ll discuss what these key challenges are and what do you need to do about it.

Resistance to Change

Large companies are not designed to change quickly. By and large, they are designed to systematize the status quo and allow change only when thoroughly proven to be beneficial and only to the degree that it doesn’t create risk. While this sounds sensible and can be effective in relatively static markets, in the rapidly evolving digital world that we live in, this approach is a major competitive disadvantage.

---

Join us in New York this December for the 2018 CEO2CEO Summit. LinkedIn Co-Founder Reid Hoffman and his co-author Chris Yeh will be talking about their new book on mastering scale. 

Register today!

---

Resistance to change also occurs at an individual level. Executives at your company will tend to view potential transformation in terms of their own careers and security. For those who have built their mini-empires within the current structure, making a significant shift, even if they see it will be in the best interest of the company, might not feel like it’s in their personal best interest, and so they naturally resist it.

What can you do about this? First, be prepared for a rocky road. If you value corporate tranquility above all else, digital transformation is not for you. Second, bring in agents of transformation to your leadership team and “have their back” as they drive change. Third, work to create a culture of innovation and publicly reward those who are exhibiting the right behaviors at all levels of  the organization.

Fear of Failure

Digital transformation means finding new paths to value and new ways to interact with your customer, and requires accepting that will fail along the way. Those who succeed learn to “embrace failure” as a learning opportunity. The truth is, failure is never fun, but repeated failure is a hallmark of every successful digital company because it inspires learning and adaptation.

What can you do about this? Work on your own psychology about failure. Consider how you view a stock portfolio. Don’t beat yourself up if you pick a few investments that don’t work out, and recognize that at times even the whole portfolio will lose value, but if you apply the key principles of successful transformation, you can win over time.

Lack of Understanding the Customer

Identifying the key ways to add value to your customer’s journey is the #1 way to craft an elegant digital experience. To do so requires an intimate understanding of the customer, their unmet needs, desires and fears. Most companies don’t really understand their customers very well. While many have research departments, very often these departments are focused on specific measure and metrics and neither generate a true three-dimensional understanding of the customer nor do they socialize that within the organization. Solve both of these problems and you have the foundational insight that will increase your transformation batting average.

Lack of Agility

Successful digital companies take their customer insights and rapidly explore, pilot and then scale different opportunities for digital value. The key word here is “rapidly.” Speed is important  because it allows the company to try many experiments, quickly scale those that succeed, and iterate those that aren’t yet working.

But this requires the ability to conceive and implement ideas in weeks rather than months or years. Many large enterprises have two giant bungee cords that hold initiatives back from rapid implementation.

The first challenge is technology. Without a modern architecture featuring easy access to customer data and APIs to transaction systems, it’s slow and costly to go from idea to implementation. Companies need to modernize these technology stacks and consider them essential tools for the future of their enterprise. If that sounds like a multi-year project, your CIO can find a way to create an outsourced environment in the cloud that can allow for rapid experimentation and piloting while the core infrastructure is improved. If they tell you they can’t do it due to security concerns, tell them to find a better security team or consultant.

The second speed challenge is decision-making.  If your company has a capital approval process that requires a fifteen tab spreadsheet and months of committee meetings to approve a few hundred thousand dollars of funding for a new idea, you aren’t moving at the speed of digital.

While managing spend is part of running a well-managed business, if it gets in the way of essential digital transformation, it needs reform.  Give the people running your innovation projects the autonomy and authority to make decisions on the ground-level so that they happen with the speed necessary to keep up with the digital world. If  you don’t trust them, find people you do trust.  Also, budget is not the only facet of decision-making.  In corporate environments, legal review, brand review, or other well-intentioned stage gates can protract launch schedules from weeks to quarters.  Successful companies have fast-track processes for digital transformation initiatives.

Insufficiently Collaborative Culture

Creating an elegant digital customer journey cannot be exclusively, or even primarily implemented by the “digital” team. It requires intimate coordination with marketing, IT, operations, customer support, product development and most likely nearly every part of your organization. When this requirement is combined with some of the challenges listed above, it can create a gauntlet for digital innovators that can seem impossible to navigate.

Hire or identify digital leaders who have a collaborative and inspiring nature. Support them by setting the expectation of close collaboration. Measure all your leadership team members in part by their contributions to a unified customer journey. And invest in the tools and processes that foster cross- divisional collaboration on the digital vision and execution.

Conclusion

Achieving digital transformation often requires a broader organizational transformation that touches nearly every part of the enterprise and its processes and technology. It might seem nice if it were easier, but on the other hand, when you succeed, as some have, you will have a true competitive advantage compared to other legacy enterprises who are still struggling to get there.

Also, there is no substitute for an active CEO in the area of digital transformation. You need to demand real transformational progress, not just “innovation theater” designed to distract with cool digital toys while the core business remains unchanged. The world and your customers continue to change in profound ways, the companies that will thrive in the future are those that are riding that wave of change, not clinging to the twentieth century.