The effective use of digital technologies is paramount in a competitive environment. To succeed, you don’t need a separate digital strategy; you need a business strategy for the digital age. But digital transformation is difficult to manage because it requires you to change many moving parts of your enterprise, much like redesigning and rebuilding an airplane while in flight.
In a recent article, McKinsey & Company identified ten traps that can derail digital transformations. They mention factors such as ‘fear of the unknown’, ‘lack of focus’, ‘lack of discipline’ and ‘going too slowly’. In our own experience across several industries and with many different clients, we’ve seen many of these pitfalls ourselves.
To overcome them, though, we have identified five key practices that will help you succeed in your digital transformation.
1. Define your strategic direction
Like the Cheshire Cat says in Alice in Wonderland, “If you don’t know where you’re going, any road will take you there.” Many organizations suffer from such a lack of direction and focus. But how do you define your strategy in an easy-to-understand manner? And how do you assess its feasibility?
We at BiZZdesign, as you might have guessed, advocate the use of models to describe and analyze your strategic options and choices. Several techniques are useful in this context, like Osterwalder & Pigneur’s Business Model Canvas (pictured below). This model expresses the key constituents of a business model in a clear and concise way.
Business Model Canvas framework
There are many more useful analysis instruments, e.g. Porter’s Five Forces, the Balanced Scorecard and SWOT and PESTEL analyses, among others. On top of these, we support techniques that incorporate business model stress-testing, which identify the strengths and weaknesses of your proposed business models by evaluating them against different scenarios before implementation.
In future blogs, I will elaborate on our support for these techniques. The most important takeaway is that all of these options are based on an integrated world of models, allowing you to look at the same strategic initiatives from various perspectives in a coherent way.
2. Align the organization
Defining a coherent strategy is, of course, just the first step. Once you have a strategy, you need to ensure that everyone understands the new direction and acts accordingly. That requires providing clear, useful information on the strategy and its impacts to everyone in the organization at their own level of detail.
Of course, change management is no simple matter and, as Peter Drucker put it, “Culture eats strategy for breakfast.” Nevertheless, there are common lessons to be learned from successful transformations. One of the most important is that, in today’s world, transparency is key.
As was reconfirmed by a survey co-organized by The Open Group, BPTrends, BiZZdesign, the University of Twente and other partners in 2016, a key factor inhibiting strategy implementation is the lack of understanding regarding strategic intent. Providing readily accessible information to various groups in the organization (at their own level) via an online channel like our HoriZZon portal helps foster understanding and alignment.
3. Implement your strategy in an adaptive manner
The strategic models mentioned before can easily be related to your enterprise architecture. This allows you to assess the impact and feasibility of new business models, as well as design their implementation in the context of your current organization.
Note that we do not advocate a classic, waterfall-style ‘big up-front design’ approach. As we have argued in our eBook, ‘The Adaptive Enterprise’, successful business change is not a matter of rigidly implementing big plans. It requires top-down strategic guidance, but also bottom-up, collaborative improvement. You need to bring people together from different areas of the organization to provide the necessary knowledge and skills, and then use high-quality information to support decision-making, design and implementation.
Architecture models provide a context, scope and set of constraints for these different teams, who then have the local authority to create their part of the larger transformation in an agile manner. Conversely, these models help teams coordinate their efforts, learn from each other, avoid unnecessary duplication of work and prevent an incoherent set of ‘agile silos’ or ‘instant legacy’ software.
PESTEL analysis example
4. Stimulate local innovation, improvement and learning
Top-down, deliberate strategic change is only half the picture. By the 1980’s, Mintzberg and Waters had already identified emergent strategy as the other half of the equation. However, in many organizations, it is difficult for local teams to improve their ways of working, create better software or otherwise implement bottom-up innovation, even though the people on the metaphorical ‘shop floor’ often know best how things might be improved. This is mostly because they lack the insights needed to assess the effects of changes, and hence are not authorized to make it happen.
If you lack the necessary data, you need to go up the hierarchy; only senior management has the authority to make decisions based on gut feeling rather than the facts. But providing people with the right information from a single source of truth facilitates delegated decision-making. This, in turn, speeds up change in your organization, and you will not have to wait for decisions to ‘trickle down’ from higher up.
A single source of truth aggregates and integrates information form various sources, and presents the outcomes in easily consumable dashboards, diagrams and other formats. This is a key instrument in supporting teams in their local improvements and in relating these improvements to the larger-scale strategic direction of your enterprise. Moreover, it inspires people to learn from others and provides a platform for disseminating innovations across your enterprise.
5. Stay compliant with applicable regulations
No digital transformation can run unconstrained. Now more than ever, organizations have to deal with regulatory pressure from both internal and external sources. Some of that pressure is industry-specific, as seen in finance or healthcare, while some is more generic, as seen with the new EU GDPR regulation on data privacy.
It is crucial that risk, security and compliance are not addressed after the fact, but are treated as a key influence on design. For example, a business model based on the extensive use of personal data may simply be invalidated by new privacy regulations. Moreover, security-by-design is now often mandated by law, as is the case with the GDPR .
The common theme here is the need for clear insights into the various risks your enterprise runs. And in the context of digital transformation, cyber risks are, of course, top of mind. In our platform, we support different types of analysis that help you assess and address such risks.
[Related]: Risk, Security & Compliance Analyses
Our platform supports risk analyses using the same models you already created to develop your strategy, architecture, data models, business processes and decision logic. All of this fosters the integrated approach needed in today’s pressurized environment.
Manage risks to implement transformation
To quote the McKinsey & Company article again: “To build real value, business leaders need to take risks. But those who succeed will be the ones who understand how to manage the risks that matter and avoid the traps that can scuttle a transformation—all while pushing their organizations to the limit.”