Some Expert Advice on Digital Business Transformation: Forget the Technology

That’s the view of Jane McConnell, an independent management consultant who has helped steer digital business strategies at companies including Bayer, Ericsson and Pernod Ricard for almost two decades.

“Technology, I would say, is the smallest, easiest part of it,” McConnell told Chief Executive in an interview. “Becoming a more digital organization results in different work practices, different ways of communicating—and it fundamentally changes a lot of things, including the status of hierarchy.”

Each year for the past 10 years, McConnell has produced a report on how well companies across various sectors are adapting to digitization. And her most recent prognosis isn’t great. This year, her survey of 311 senior executives in 27 countries found around 50% thought the pace of their own digital business transformation was slow, while only 10% said it was fast.

Obstacles to improvement
One of the biggest obstacles they encountered was a resistance to changed work practices. For example, the creation of online communities within companies triggered loss-of-control fears because staff could more easily communicate ideas across functional groups.

Enterprise social networks—kind of like a company’s own internal LinkedIn or Facebook—have now been deployed in well over half the organizations that are advancing digitally today, McConnell said. Used effectively, they offer staff the opportunity to throw out questions and receive helpful responses within hours, perhaps from colleagues in different continents they’d never met before. They also facilitate ‘working out loud’, where teams make their progress visible via internal blogs or even video streaming.

“People resist because they prefer to keep things to themselves until they are finished,” McConnell said. “But you can pick up nuggets of value in your organization you didn’t even know werer out there because you were working in your little closed world.”

Why CEOs must take charge
Hierarchical changes aside, McConnell said it’s still the CEO’s job to steer a company’s digital business transformation. Her most recent survey, which was sponsored this year by tech company Modus, found that the highest-level person for digital matters was the CEO (or a direct report to the CEO) in 60% of organizations. The level had risen dramatically from 40% in the previous year, but still indicates a lot of leaders aren’t yet taking the issue seriously enough.

The need for CEOs to get on top are manifold:

• First, McConnell said they’re best placed to deal with power struggles, as different business units—be they communications, IT or marketing—try to “own digital”.
• Second, she said research has shown that senior leaders are one of the top change drivers in any organization.
• And third, and perhaps most importantly, McConnell said it’s up to the CEO to bring the outside world into the organization.

“People get so caught up in their day-to-day work that they forget the customer outside,” she said. “Too many companies just start outside. They want to have, [as one example], an e-commerce site so customers can buy online, but they don’t stop and think how much that will impact their own internal processes and how they work.”

Practical applications
Once they’ve taken charge, here are her 3 top pieces of advice to CEOs embarking on a digital business transformation strategy.

1.Make it core to your strategy. Her first piece of advice was learned from a CIO at a very large company . “He says that, if you have a digital transformation program, it must be considered a key part of your organizational change in general,” she said. “It can’t be off in the corner by itself. It needs to be integrated into the depth and breadth of what your organization is trying to achieve.”

2. Top-down isn’t good enough. There’s no point having a vision if it isn’t tangible to the rank and file. “You need to work collaboratively across your organization to define that vision and put execution plans in place,” McConnell said. “That means involving customer-facing people and operational people.”

3. Focus on practical outcomes, not dollars. “This is probably the most important,” McConnell said. “CEOs often don’t want to invest any money or resources if they can’t define the return on investment, but digital transformation isn’t something that’s easily quantifiable in dollars,” she said. Instead, she recommends leaders focus on more measurable goals, such as increasing efficiency or improving business models.

CEOs who don’t take the lead could be left managing businesses with lots of shiny new toys—that few people actually know how—or even want—to use properly.