Five signs your business is ready for digital transformation

Tony Evans Profile picture for user tony.evans October 6, 2016
SAP's Tony Evans draws on his team's field work to identify the factors that lead to digital success. Evans doesn't mince words about the resistance digital transformation will face.

Under Armour, the City of Rio, the National Football League, and Harley Davidson are among the companies and municipalities that are on their way to digital transformation. To outsiders, these organizations may appear to have little in common, but once you are inside looking at how they treat their data, their digital leaders, and their fears about change, there are more similarities than you might think.

Organizations have a habit of approaching digital transformation from a technology perspective, but that’s short-sighted. Digital transformation is about restructuring the business and re-assessing the conscious of the organization, its norms, and pre-existing, proven business models. Lots of forces try to prevent digital transformations from happening, but it’s better to ignore them (if possible) and squelch them (when necessary) so that your business can compete in the digital economy.

In taking stock of companies that are successful in their digital transformations, I see these five attributes again and again.

1. A Chief Digital Officer (CDO) is on board - or will be hired - to drive digital transformation.

CDOs help an organization drive growth by converting traditional analog business to digital ones. As a part of executive management, the CDO should report directly to the CEO or the board, and the position should have a level of authority that is next to untouchable. Most days won’t be easy, so the CDO needs a healthy backbone, as antibodies will constantly push against plans for change and want to protect the status quo.

What doesn’t work is when the CDO is part of IT or sales and marketing. In those cases, there’s a perception that the role is about technology, or finance, and it’s not. Digital transformation isn’t a front-office issue or a back-office issue. The CDO’s role is to develop and transform the business and extend it beyond its current enterprise boundaries. That’s where the real benefits are.

One of our CPG companies has a CDO who is tasked with creating an IoT strategy. Among the first priorities is defining what data to collect so the company can build models, personas and backgrounds of buyers. An early task was to identify the technology to collect the data and decide what to do with it internally.

The end goal, though, is to define how to leverage that data and look up and down the supply chain so the company can drive value to retailers and suppliers in such a way that creates stickiness and puts it at the center of relationships. That’s how the company will move from being a CPG middleman to a holder of critical information that multiple groups in the supply chain want and are eager to buy.

2. Executive management and the board support innovation and are willing to walk away from business as usual.

The workplace is full of skeptics who are invested in the current business, and many of these individuals are responsible for bringing in lots of revenue and have been sitting at the leadership table for a long time. They will fight the CDO and try to push them out of the business.

Company that are going digital can respond to these attacks when they appoint a strong, stable CDO, who has the support of executive management and the board. Every project the CDO undertakes must be seen as new business, not a science project. Without visible and consistent support of the CDO, businesses will experience a war of attrition to see who survives. It’s up to the CDO to last long enough in the job to drive change and operationalize it.

Kodak is a perfect example of this. It had the first patented digital camera but the steeped-in-tradition film product managers prevented the incoming digital leaders from being incorporated into the organization and leveraging the new technology. Now Kodak is practically unknown by anyone under 30 and a weak voice in the digital market.

3. Leaders are turning to design thinking and rapid time-to-market methodologies to solve data problems in new ways.

Digital companies are looking for different qualities when they hire: recruits that have an appetite for rapid change, a willingness to embrace and push forward new innovative ideas, and bright inquisitive minds.

Economists, physicists, and engineers are joining the MBAs to solve problems in new ways. They are able to very quickly imagine and create exploratory and logical data sets to find solutions for their companies that have not been considered previously. These very bright people appreciate and leverage design thinking, design to value, rapid prototyping and other methodologies that encourage creativity and innovation.

4. The corporate mindset embraces and respects change. It sponsors, incubates, and protects innovation. We must encourage individualized innovation within our organizations. Stifling innovation and preventing it is not an option anymore. Businesses need to allow innovation to happen and create structures and metrics that let innovation thrive.

Voltaire said “the answers you seek are in the questions that you ask.” We limit ourselves by asking the wrong questions. An airline, for example, shouldn’t ask “How do we make lines shorter?” Instead, it should ask, “How do we eliminate lines?” “Are there new business models we can create based on our data and expertise?”

We have seen our digital transformation customers successfully add new service models, eliminate significant operational costs, and add revenue by selling existing data. They dared to embrace change and protect innovation - even when it threatened existing revenue streams.

5. Partners are ready and available to broker relationships that support digital transformation. You never want to be limited by your existing partners. The best partners in the digital economy bring together non-linear relationships to create completely new solutions. At one state in Middle America, we brought together a group of public and private entities that normally would never have met. We had data analysts, traffic controllers, infrastructure experts, emergency agencies, and technology experts all discussing a single statewide problem from every possible angle. From that type of experience, business can participate in a whole new value chain that didn’t previously exist.

Earning a little respect

One of my inspirations is Great Britain’s Eddie the Eagle. His story of becoming an unlikely Olympian who officials tried to prevent from participating in the 1988 Winter Olympics plays nicely into the themes of digital transformation and the disruption that is happening in the marketplace.

What we’re seeing is a world where disruption has become the new norm and business success isn’t based on where you went to college, the number of years you’ve been in business, or past achievements. The digital economy respects innovation and how you leverage innovation to take your business where you want it to go. It respects taking risks and having the courage to break from the familiar.

With Eddie the Eagle, no one respected his talent or determination, and even though he finished last in his events, he left a bigger mark on the Games for his courage and spirit than many of the gold medal winners. We are in a business age where companies that have Eddie’s spirit and aspirations can carve out niches in existing markets - or create entirely new ones.

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