The Digital Transformation Journey

Stephen DeAngelis

December 23, 2019

As a new year approaches, thoughts often turn to how we would like to see things change. Many business executives will undoubtedly contemplate how their organizations are going to change in response to the maturing Digital Age. Most analysts now agree organizations founded in the Industrial Age need to transform into digital enterprises if they are to thrive in today’s business environment. Bill Waid, General Manager at FICO Decision Management, explains, “It’s hard to find an industry that isn’t feeling the effects of digital disruption. It’s a high-stakes battle that is being waged around the globe, fueled by new technologies such as artificial intelligence, machine learning, big data, advanced analytics and more. If you aren’t taking these threats seriously, your business is at risk. … No industry is immune to the fact that you can either be the disrupter or the disrupted.”[1] Bob Violino (@BobViolino) reports a survey conducted by research firm Vanson Bourne on behalf of Teradata, concluded, “Five key forces are impacting business success in today’s market — hyper disruption, pervasive digitization, autonomous action, a cloud imperative and enterprise consumerization.”[2] The study also concluded, “Most … companies (61 percent) feel underprepared to strategically address market disruption driven by competitors.” With digital transformation being such an imperative, many companies are struggling to find a path that will take them on a successful digital transformation journey.

 

The digital transformation journey requires effort

 

Digital evangelist and author Tony Saldanha (@tony_saldanha), asserts, “The transition to digital is a $1.7 trillion industry, yet 70% of attempts end up failing.”[3] Melissa Swift (@meswift), a Senior Client Partner at Korn Ferry, believes Saldanha’s failure rate is exaggerated. She writes, “The chestnut about ’70 percent of transformations fail’ has been nicely debunked – this well-researched HBR article puts the proportion of completely failed transformations closer to one-tenth.”[4] She adds, “According to the data, some degree of success is achieved in about a third of transformations – leaving 50-60 percent in a grey area between glory and doom.” The point being made is that digital transformation takes real effort.

 

Saldanha points to “the lack of clear goals, and a disciplined process to achieve them” as contributing factors to the high failure rate. He also blames confusing terminology. For example, he states, “The term ‘digital’ is fuzzy.” He continues, “Real digital transformation, to be precise, is the rewiring of an existing enterprise so that your physical product becomes smarter, your go-to-market models become more digital, and your internal operations become at least two times as efficient.” Many companies seem to believe going digital (e.g., digitizing data bases) is becoming a digital enterprise. Digitization (or digitalization) is not digital transformation. Digitization is the gateway to digital transformation. During a 2017 conference, Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, told participants, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[5]

 

Stages of the digital transformation journey

 

According to Saldanha, there are five stages to the digital transformation journey.[6] They are:

 

Stage one: foundation. According to Saldanha, “This is where enterprises are actively automating internal processes (such as selling, manufacturing, or finance). Implementing most enterprise resource management systems. … In reality, this is automation or digitalization — not transformation — but it provides an important foundation.”

 

Stage two: siloed. In this stage Saldanha writes, “You might see individual functions or businesses start to use disruptive technologies to create new business models. These efforts are siloed, and there is no overall company strategy driving transformation. The change is restricted to areas in which passionate leaders are pushing for disruptive change.”

 

Stage three: partially synchronized. By stage three, writes, Saldanha, “The owner, leader, or CEO has recognized the disruptive power of digital technologies and defined a digital future state. However, the enterprise has not completed transforming to a digital backbone or new business models nor has the agile, innovative culture become sustainable.”

 

Stage four: fully synchronized. According to Saldanha, “This marks the point where an enterprise-wide digital platform or new business model has fully taken root. However, you are still one technology (or business model) change away from being disrupted. To be successful at this stage, it’s important to restructure the digital skills and capabilities of the organization.”

 

Stage five: living DNA. “This is the step at which the transformation becomes sustainable,” Saldanha writes.

When transformation efforts are stalled or struggling in Swift’s grey area between glory and doom, Carla Rudder (@carlarudder) suggests asking and answering eight questions.[7] They are:

 

1. Are we confusing digitization with digital transformation?
2. How will this effort impact our customers?
3. Is our vision unified, meaningful, and actionable?
4. Are our success metrics motivating for the employees driving digital transformation?
5. What cultural roadblocks stand in the way of change?
6. Do key stakeholders agree on goals?
7. Do we have the right skills on the team?
8. What are we holding onto that we can evolve?

 

Rudder believes, “The answers can help you revive a digital transformation that is stalled, stuck, or heading in the wrong direction.”

 

Elements for digital transformation success

 

Joseph Palenzuela (@seph_palenzuela) from Toptal contacted Enterra® and directed us to their research in which they identified six keys or elements to a successful digital transformation strategy. They write, “Pivoting to a digital mindset requires a number of shifts and the development of certain underlying traits to be effective. We’ve identified six core elements, which build on one another to create a digital mindset and digital transformation framework. Underpinning this structure is the first key: Leadership.”[8] The other elements are: boldness; agility; adaptivity; data focus; and talent. Great business leaders always balance people, process, and technology when they look to improve performance. As the Toptal researchers note, those elements are important for the success of digital transformation as well. They conclude, “The digital transformation landscape might be compared to the 1800s California Gold Rush. The risks are there, but the potential is massive and best practices are being defined in-flight. Companies who want to utilize these transformations to their advantage start with the right talent, define a digital mindset, and create action plans with flexibility in mind. Continuous reevaluation becomes standard. The very nature of a ‘healthy organization’ is being reexamined. For companies that can adapt the radical mindset-shift that digital transformation demands, the future is full of exciting potential, despite its evolving nature.”

 

Concluding thoughts

 

Even though most analysts agree digital transformation is an imperative, Swift notes, “In some organizations today, the seemingly innocuous phrase ‘digital transformation’ is the ultimate set of dirty words. It makes some leaders cringe and others spit fire. And a shocking proportion of leaders want no part of any conversation where that phrase might come up.” She agrees with Saldanha that the words “digital” and “transformation” can be fuzzy to the point of distraction. Her recommendation is to forget the words and start the journey. She explains, “Reduce your use of the term ‘digital transformation,’ and deal with fewer irritated co-workers. Tackling the big-and-small picture impacts of a world where technology often moves faster than our ability to grasp it can actually be an energizing and ultimately joyful task. To paraphrase Gloria Estefan, don’t let the words get in the way.”

 

Footnotes
[1] Bill Waid, “The Digital Imperative: Disrupt Or Be Disrupted,” Forbes, 22 October 2019.
[2] Bob Violino, “Many firms see digital transformation as key to success or survival,” Information Management, 12 November 2019.
[3] Tony Saldanha, “Why Digital Transformations Fail — and How to Fix That,” Knowledge@Wharton, 29 October 2019.
[4] Melissa Swift, “Why people love to hate ‘digital transformation’,” The Enterprisers Project,
[5] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[6] Tony Saldanha, “The Stages of Digital Transformation,” E Content, 18 November 2019.
[7] Carla Rudder, “When digital transformation stalls: 8 questions to ask,” The Enterprisers Project, 6 November 2019.
[8] Staff, “How Digital Transformations Succeed,” Toptal, September 2019.