Organisations that chase transformational opportunities without first understanding whether their people have the required mindsets to seize them will likely fail..
In this Orange Paper, we will look at digital transformations in detail. This paper covers:
- The general drivers for transformations
- Why transformations are so difficult
- Why transformations typically fail
- How to define transformation
- The commitment to shaping cultures
- How to reimagine customer value
- Transforming to deliver change
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Introduction
Disruption is everywhere. It seems that within the modern business landscape that whichever way they turn, organisations are hitting some form of upset to the established order of ‘how things get done’.
A seemingly constant stream of continuous change is bringing new complexities that have wide ranging and deeply disruptive impacts. So far ranging in fact, that far more and more industries are being severely impacted than originally thought.
There are those that are clearly closer to the eye of the storm than others; media; retail, financial services and automotive immediately come to mind. However, there are also several industries that, on the surface, appear to remain relatively untouched by the waves of disruption.
From manufacturing, hospitality and real estate all the way through to education, professional services and even the realms of politics and governance.
There is not a single part of the integrated systems of business, society and individual lives that haven’t been touched by some existential form of disruption over the past thirteen years.
Wherever industries sit within the ongoing vortex of disruption. However far they think that they have come. There seems to be a growing awareness that despite a host of best efforts and estimates of up to $1.3 trillion (2018) a year being spent on transformation efforts – around 70% of them are still not succeeding.
Why is this figure so high?
Evidence suggests that a significant amount of transformation approaches mainly focus on improving the efficiencies within legacy systems, structures and processes. In other words – digitising existing analogue era capabilities and expecting to carry on doing what has always been done – only faster.
Such digitalisation-only approaches tend to build upon insufficiently adapted cultural, data and leadership foundations. Without the required support in place, it impacts the ability to successfully transform and deliver the changes needed to operate effectively within the modern world.
What this type of approach fails to recognise is the true importance of people-centred factors in delivering truly transformational transformations.
Understanding the human challenges that come with profound transformation within complex organisations with extensive legacies is critical to adaptability and the successful delivery of future change.
In the face of huge amounts of externally driven change organisations are realising that they must transform along a more balanced path that includes leaders, people and behaviours, as well as new digital systems, processes and technology.
Having identified these challenges, blue sky solutions can be designed, tested pragmatically and with those that are effective and then being scaled quickly in order to aid future capability development were relevant across the organisation.
if they want to see different results organisations needs to stop doing the same thing ‘better’. In order to change, they must transform. They must understand that such transformations are driven by adopting different leadership skills, more adaptive behaviours and improving access to the collective capabilities of its people.
‘If I had asked people what they wanted, they would have said faster horses’ – Henry Ford
General drivers for transformations
The unprecedented speed at which the nature of business is changing is reflected in challenges that are occurring for all organisations, regardless of their industry:
- Digital driving organisational transformation – NOT change;
- New and ubiquitous availability of digital and information technologies;
- Distinct transformational leadership skills and capabilities;
- Modern workforce expectations and planning;
- Increasing workforce and performance
- Job fit, career progression and skills gap;
- Increased volume, velocity, variety, veracity, and value of change;
It is important to recognise what connects these disruptions is not just the obvious technological aspects.
The challenges that these drivers for change cause within organisations originate from a need for major transformation, re-invention and a shift in value propositions – both what they are and how they are delivered.
These internal people-focused drivers are enmeshed and entwined throughout the additional transformational factors of strategy, design, portfolio and business architecture.
Why are transformations so difficult?
Critical to organisations performing well is building healthy, adaptive cultures that are able to balance transformation with operational readiness, is continuously assessing and confronting the hidden forces that get in the way of its own development.
Whilst rapidly shifting external drivers mean that more organisations than ever now require transformation, little discussion focuses on potential cultural resistance. Even when change undermines or fundamentally alters tried and tested equipment, structures, command-routes, and operating procedures.
Traditionally when organisations, cultures and people start to become comfortable with the status quo, they tend to lose the impetus and effective capacity to transform.
Other people-centred challenges include:
CLEAR GOVERNANCE
Challenges occur in aligning responsibility, accountability and resource due to legacy organisational design and lack of empowered leaders with a clear vision and mandate.
TECHNOLOGY FOCUS
It’s easy to get lost in the word ‘digital’ meaning that such transformations are all about updating technology. Overlooking that people drive real transformations can be disastrous.
PROCEDURAL EMPHASIS
Industrial era procedures based on centralised planning, decentralised execution and stringent control measures are ill-suited to the faster, more open and collaborative digital age.
OPERATIONAL SILOS
Insufficient communication and cross-function visibility can make transformations a challenge and impede the full benefits being released.
DIGITAL LEADERSHIP
The skills and attributes that make leaders successful and effective are changing. Using legacy mindsets to drive modern transformation can act as an anchor to the agility needed for digital transformations.
TRAINING & DEVELOPMENT
One-size-fits-all training and decades long change cycles, have meant that organisations have lost the breadth and depth of critical thinking skills, knowledge and experience required to transform effectively and sustain themselves over the long term.
These and other cultural challenges will make driving any long-term transformation a significant challenge. If not addressed, such cultural norms will become more complex by the presence of new technologies, operational guidelines and rapidly evolving external threats.
We tend to do the wrong things right, which leads to us being more wrong.” – Russell Lincoln Ackoff (2007)
If organisations wish to grow and avoid stagnation or obsolescence, then they will have to undertake an open and honest appraisal of these challenges, both from their pasts, presents and futures and combine the learning into a single collective vision of who and what they want to be and most importantly, what their purpose will be as they move into the digital age.
Why transformations typically fail
As customer expectations escalate organisations need to meet heightened expectations with new value propositions that deliver both expected and unexpected value.
Imagining how this could be achieved should be done in ways that both appreciate and at the same time, dispute conventional wisdom about how organisations currently approach value creation for their own customers.
Those organisations that have already experienced heavy disruption have often overlooked three main areas during their attempts at transformation:
Defining transformation
Real transformation involves being bold enough to sacrifice what is for what could be. If not, the reality is that the best that can happen is stagnation. The worst is sleepwalking into obscurity.
COMMITMENT TO RE-SHAPING CULTURES
Laying the proper foundations will ensure that the organisation remains resilient and adaptable enough to face the uncertainty that accompanies transformations.
COMMITMENT TO RE-SHAPING CULTURES
Not just looking at what value is produced, but when, where and how customers are able to access it. Offering such choices requires balancing efficiencies with effectiveness in a way that seems seamless to customers.
Accepting genuine transformation
The first challenge is a misunderstanding around what transformations actually involve. For example, what’s the difference between a digital transformation vs. digitalisation? Well ask a hundred experts about different business terminology, and you’ll get a hundred different answers.
In this instance we see a lot of organisations skipping the “Digital Enablement” stage straight to the “Digitalisation” phase. Having done this, they often then mis-label such efforts as a “Digital Transformation”. This can create a false sense of progress.
In reality, transformations can be long and painful processes that require courage, trust and patience.
Understanding what the word ‘transformation’ means for your organisation requires being bold enough to ask what needs to be sacrificed to evolve into something new.
This requires a fundamental shift in how organisations approach innovation and risk management. Leaders who prioritise efficiency over taking risks will find themselves unable to navigate increasingly uncharted waters.
Digital enablement
Creating a suitable infrastructure foundation capable of supporting the introduction of new digital technologies, data and processes e.g. culture-shaping, data capture and quality improvement processes and employee development.
Digitalisation
The conversion of core organisational systems, processes and services to digital ones. This connection of organisational data flows across silos is leveraged by new [disruptive] digital technology.
Digital transformation
Transforming operating models to significantly enhance or redesign value propositions. This often happens through completely reimagined or unconnected business systems and delivery capabilities.
Commitment to re-shaping cultures
Historic cultural norms, behaviours and loyalties can create a lack of centralised visibility and consistency of approach towards the design and implementation of transformations.
A sustained effort, focusing on shaping culture is required if an organisation is to truly transform. Healthy high-performing cultures support transformation and help people thrive by combining four thematic areas in a balanced and mutually supportive manner. Focusing on these four areas will help shape the required cultural ‘norms’ and belief system that build an adaptive network of reciprocal obligations
Shared belief systems generate the trust, communication, cooperation and collaboration required to act as the foundation to support and deliver the other aspects of transformation.
By ensuring that any new strategy, structure, and culture are all in alignment through standalone culture-shaping and leadership development programmes, organisations can accelerate transformations and deliver even more successful results.
Reimagine customer value
Arguably the biggest risk to any organisation facing disruption or transformation today is the persistence of legacy mindsets around what constitutes their core business value output. It is understandable that organisations facing large-scale transformations are cautious when they hear the words ‘core business value’. This is because they have usually spent a significant amount of time learning to be successful in delivering value in a certain way.
However, instead of looking at what they are delivering to customers (that is another, much longer conversation) – they should be focusing on how they are delivering it.
For example, the most successful companies of the past 10 years all have one thing in common. Their business models and customer value delivery all came from centralised platforms. From Facebook and Deliveroo to Netflix and Airbnb, all of these organisations make it as easy as possible for their customers to engage with their content, as well as making it possible to share it independently with each other.
The idea of Business as a Platform (BaaP) enables the development of an ‘always-on’ capability.
BaaP is a model that enables customers to access functional business capabilities, materials, and support when, where, and how they choose.
Whatever the method of delivering value, it needs to be developed by balancing customer needs and organisational expertise that delivers a more simple, engaging and effective customer experience.
Transforming to deliver change
Transformations deal with the evolving relationships between existing organisational paradigms and disruptive external change.
The truth is that organisations within all industries are looking at a level of disruption over the next three to five years in a way that has never been witnessed over the past 130 years since the industrial revolution.
Addressing these three areas quickly is a good starting point for any transformation. The drivers that determine where, when, and how to make further investments are becoming far stronger and occurring significantly faster than in the past. This then requires a fresh approach to how all organisations do business.
The decision to transform also entails financial analysis and investment in technological initiatives. It also requires ensuring effective handling of business as usual within the core businesses. Organisations must consider changes in value output to their customers and the expenses incurred by their traditional business structure e.g., how they utilise office spaces vs. smarter working.
These types of transformations will be challenging but are vital to redirecting organisational focus towards riskier high-growth projects.
The only constant in life is change – and levels of disruption and complexity are only going to continue to grow. Being able to deal with new challenges requires being open to new game-changing ideas, mindsets, and uncertainty.
So, in order to be able to better deliver constant change, organisations need to transform.
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