An opinion piece published on CIO Dive recently captured my attention. Its title makes the bold assertion: “It’s Definitely Too Late For Your Digital Transformation.”
The article’s author, Ben Lamm, founder, chairman, and CEO of Hypergiant Industries, used several striking statistics to back up this claim.
He cited a study commissioned by Dell EMC and Intel that found only 6% of companies have “fully transformed,” or achieved the goals of their digital transformation strategies. The vast majority of companies — 88% — are considered “emerging” or “evolving” in their transformation efforts, according to research from the ESG group.
The remaining 6% have yet to even begin to digitally transform.
Here’s what Mr. Lamm had to say about the companies in these three groups:
“The 88% of companies hanging out in the middle of their digital transformation journey are officially dead. Let’s call them the ‘Analog 88.’ May they rest in peace. The 6% that haven’t even started planning a transformation were dead a long, long time ago. And the 6% that have completed the transformation are now the market winners.”
Woah, I thought when I read that paragraph. Those are some strong words. But are they accurate? Are the fates of 94% of companies actually this grim?
Is it really too late to achieve successful digital transformation?
Not dead — yet
Based on my own research on digital transformation, as well as the ideas Mr. Lamm offers in his article, my conclusion is slightly more optimistic than his.
I think the Analog 88 are in trouble, but they can be resuscitated.
First, the leaders of these organizations must realize the urgency with which they need to transform — not only in terms of their technological capabilities, but in their change management model, culture, and talent strategies.
Second, they need to make some serious moves and fast. At this point in time, failing to execute successful transformation will spell their demise.
Are you a winner or a loser in the “winner takes all” era?
The 6% of companies that successfully digitally transformed have inherited their respective markets, according to Mr. Lamm. Indeed, 30 companies took home half of the total profits earned by all U.S. companies in 2017, he stated.
The link between dominating in digital transformation and dominating in business isn’t under dispute. Moreover, the “Successful 6” (that nickname is from me) has already begun the next phase of their digital transformation.
Digital Transformation 2.0 is not just about the successful adoption of new technology. It’s not just about transitioning from manual or legacy system to more sophisticated digital ones. The next great endeavor is the “intelligence transformation,” according to Mr. Lamm, which focuses on AI and automation.
If the Analog 88 can’t even finish their first major digital change initiative, competing with the Successful 6 will be impossible.
How the Analog 88 can come back to life: 5 steps
Mr. Lamm offers some key lessons for business leaders in his article. The main lesson is not, as you might expect, to embrace new technology trends earlier.
Instead, he says “businesses should build organizational capacity for emerging trends sooner.”
An organization’s IT infrastructure is rarely to blame for digital transformation slowness or failure. It’s the human element that wields the true power. I completely agree with this. The quality of the strategy, the leadership’s ability to champion it, and employees’ willingness to embrace change have a far bigger impact on digital transformation success.
But unlike Mr. Lamm, I don’t think it’s too late for the Analog 88 to succeed. The reality is they have a lot of catching up to do. But with the right culture and resources, successful change is possible.
Here are five ways to build the organizational capacity required for effective digital transformation.
1. Create a digital culture
Don’t underestimate the profound power of the human element to your digital transformation effort. Creating a strong digital culture is the first step to getting the human component to align with your transformation goals.
We define digital culture as:
A culture that embraces change and takes full advantage of technological investments. It maximizes and enables the use of digital tools as a means to improve the business model, enhances operational efficiency, and boosts customer service.
The main tenets of a digital culture include unlearning outdated mindsets and processes that slow you down; agile leadership; rapid decision-making; and adaptability. These traits are essential for promoting innovation and empowering employees to take ownership of your digital change initiative.
2. Establish a formal change management infrastructure
Widescale change demands a formal change management model. Adaptability and agility are the hallmarks of a successful digital culture, but without formal systems and processes to guide change, too much disruption will lead to anarchy and resistance.
According to research from McKinsey, organizations that adhere to the four-pronged “Influence Model” have more successful change management. This includes access to strong role models, clarifying the need for change, providing attractive talent development opportunities, and creating formal reinforcement mechanisms.
3. Nip resistance to change in the bud
When employee resistance to change arises, you’ve hit a wall. Countless studies confirm the same find: resistance to change has the most powerful stopping force in any change effort.
According to McKinsey, 70% of all change management efforts fail as a result of employee resistance to change and lack of management support. Understanding why resistance occurs is the first step to preventing it in the first place.
Many types of fear manifest in resistance. Fear of incompetence — of feeling unable to perform at one’s highest level due to disruptive change — is a major one. Fear of the unfamiliar, fear of failure, and fear of losing status all have an effect.
Not having a voice or any sense of ownership over the change also leads to feelings of indifference and passive resistance. According to Capgemini, only 36% of employees say there are possibilities for everyone in their company to take part in the conversation around digital initiatives. To eliminate resistance to change, you must empower your employees to take ownership of it. Give them a voice and show them a path to grow.
4. Raise digital adoption to the top of your agenda
There is no digital transformation success without digital adoption. You may own powerful digital tools, but unless your employees can use them as intended and to the fullest extent, they will be useless to you.
Beyond software implementation, your responsibility as a digital transformation leader is to ensure high-level user engagement and usability. But complex UI, frequent version updates, and the sheer volume of platforms your staff need to master make this a major challenge.
Digital training and guidance solutions allow you to overcome all of these challenges. Powered by artificial intelligence and machine learning, these tools analyze context-sensitive factors — such as the user’s current actions, their position in the company, the goals of the department, their time on the page, and others — to provide tailored support in the moment of need.
They don’t just provide step-by-step guidance to help users overcome problems. They learn to anticipate the user’s needs before a problem arises to preserve efficiency and keep productivity high. With a digital adoption solution, you pretty much guarantee high digital adoption rates.
5. Emphasize AI and automation
Mr. Lamm says: “It’s critical that every executive leader abandon ‘digital transformation’ efforts and pour their resources into machine intelligence” — to support what he calls intelligence transformation and what I call Digital Transformation 2.0.
He goes on to cite a PwC study that found 54% of business executives claim to have already implemented AI solutions that boost their productivity.
Indeed, there is great potential for AI and robotic process automation to enhance employee productivity and lower operational costs. But I disagree with Mr. Lamm that the intelligence transformation will supplant digital transformation. The intelligence transformation is merely the second phase, and it won’t be possible to jump ahead without completing phase 1.
Instead, businesses that fall into the Analog 88 must incorporate AI technology into their current digital transformation strategies. Without it, they will always be too far behind to compete.