Why are digital transformations often underperforming?

Some companies complain about the ROI – lower than expected - of their digital initiatives, feel dispersed or over solicited by technological opportunities, when not outpaced by new entrants, start-ups. Others testify about a true difficulty in accelerating their time-to-market, have a customer experience that takes only feeble improvement steps or are discontented by their IT agility and openness to external ecosystems.

Now that we have gained failures, successes, i.e., significant experience, I would like to share in this short post some insights acquired across several industries, as doer, as advisor or as sparring partner with peers from multiple industries.

 Preliminary words

The concept of “digital transformation” is often overused in managerial speeches. Let us align, with a systemic perspective, what transformation primarily means in the ongoing digital era:

1. Leverage digital channels and new ways of interacting with Customers, to offer a privileged experience, in an omnichannel channel context that fulfills customer expectations (historically, the first impact of digital, called at that time the “online transformation”).
2. Digitize and automate smartly in order to revamp business processes, tasks, business & IT operations, starting with the simplest and continuing with more complex ones that require more processing intelligence.
3. Value your core business & expand it to new territories – the “more” business, thanks to evolving usages and new opportunities enabled by data, AI (Artificial Intelligence), and a broad range of digital technologies.
4. Explore new business models and protect yourself from being disrupted by new entrants or first movers with new business models.
5. Redesign or at least rejuvenate ways of working to become more agile - thus to facilitate both strategic and tactical moves – and also to raise the execution level (customer satisfaction, delivery productivity, operational efficiency, CAPEX profitability).
6. And lastly, as digital transformation implies a thorough human change, open minds and cultures to new paradigms and upgrade the competences portfolio, a prerequisite to sustainably meet business and technological transformational challenges.

Companies do not necessarily cover the full spectrum described above but cover at least 4 out of the 6 key dimensions.

The purpose of this post is to highlight some key learnings – non-exclusively and observed among best game changers in multiple industries, that explain why accomplishment is lower than expected.

8 key learnings on the way to sustain Change:

Systemic Thinking, from Day 1

Before playing music, you make sure you have all the music score sheets and in the appropriate order. While igniting a companywide transformation, systemic thinking is needed. Of course, having an end-to-end view of transformation does not mean you transform everything at the same time.

Looking at several industries, I could see that many companies anchored digital transformation within IT and then encountered difficulties bringing marketing and business lines later on board. By the way, return on experience has also proven that a “pulled” transformation is less costly and more transformative than a “pushed” transformation.

Many companies also tended to put a lot of energy on “downstream” transformation that is to say on “operations”. They clearly underestimated the transformation of “upstream” activities such as offer design, overall governance evolution or decision process evolution. This is particularly true in the “subscription” based industries such as banking, insurance, telco, utilities...It is only when IT and marketing jointly question the way you design your offers and your current product / services portfolio to become more “digital native”, more “client native”, more “agile native” – in parallel with the IT architecture redesign – that you are able to execute an IT transformation much faster and at lower cash burn level. Being systemic from Day 1 helps identify the pieces of the puzzle, design the transformation roadmap, pinpoint dependances and get everybody on board.

Orchestration to pulse Change

Digital transformation is a multiple refoundation: an IT shift, a Marketing / Sales / CRM redesign, a talent development revolution, a mindset change… and the horizontal management effort is often really underestimated. 

There is no single and ideal choice for anchoring transformation in organizations, but the overall detailed orchestration is an imperative. CEOs alone cannot manage this at the appropriate operational level as the devil is in the details. Orchestrating the puzzle helps for example to determine and adapt the right investment speed, avoiding thus over or under investment situations… and the answer is not within IT only: alignment with people upskilling, go-to market roadmaps, agile product teams’ needs, continuous deployment requirements, market scaling forecasts and overall organization maturity.

Best practices show that, whatever the company size, end-to-end horizontal orchestration is key to ensure consistency and synchronicity of action plans over time. It cuts complex problems into smaller problems that are then solved in multidisciplinary teams. Orchestration amplifies people’s mobilization across organizations and thus embeds change. Orchestration facilitates “transformation conversations” at all levels.

A multi-speed Transformation

Digital transformation is a long and tough journey that mixes tactical and strategic initiatives. It is a multi-dimensional shift for all where pulse and tangible business outcomes are key catalysts for change.

On one hand, this transformation requires “slow move” levers such as mindset change, competences evolution, infrastructure changes…for which immediate payback is hardly measurable. On the other hand, tactical actions and operational quick wins introduce short-term focus and sometimes disturbances.

Covid-19 crisis was an outstanding playground to test companies’ ability to concurrently run their tactical and strategical engine. Were all companies, with primarily physical retail activities, supposed to have ignited their transformation some time ago, truly able to adapt to a new retail context two months after the first European lockdown? Explore online and schedule an appointment in stores, reserve or pay online and pick up in store… 

The luxury industry, that already suffers from one-third of revenue decrease due to Asian tourist purchase repatriation, should have been exemplary to try to compensate local sales losses. Unfortunately, some luxury retailers were not able to meet this shift on time or with the appropriate minimum viable customer experience level whereas others were able to upgrade their phygital journeys accordingly and enhance them incrementally.

In the insurance business, some players were able to inflect their roadmap to meet current Covid-19 challenges by launching a 'Last Mile' delivery insurance offer (double / triple digit increase of home delivery markets) or better cover cyber risks or simply deployed live-chat support or chatbots to help their customers.

Striking the right balance between the two “modes” is complex. Tactical actions are however extremely healthy as they are more outcome and “ROI” oriented and require immediate “down-to-earth” execution. The increasing ability to articulate both is a proof that organizations increase their agility and reach fast execution capabilities.

The Client as the North Star

Many companies are growing “Client” led transformation. This is definitively the best and easiest way to mobilize and align internally. They take that opportunity to redesign and upgrade their Customer Experience. “Client” or “customer” are here understood as “user”, i.e. customers, employees, front liners, a developer as user of an API… Becoming truly user-centric requires seeing, understanding what customers see, experience, and perceive. It implies that companies adopt customer language (and forget company technical dialect when designing products and interactions), collect qualitative and quantitative customer facts & data, adopt design-driven ways of working, operate heavy-duty customer feedback loops…

Furthermore, the adoption of end-to-end customer journeys in the experience design but also in the daily interaction management is on the way. Competition intensive consumer-facing industries are leading this evolution and B2B and B2B2C sectors – such as life-science industries – are accelerating the pace.
On the product and services design side, having efficient iterative customer feedback loops, putting prototypes in users’ hands also at initial stages, co-designing with customers gradually become standards for all players that decided to be truly customer centric. Most businesses now have ignited a clear learning curve ahead and are progressively deepening their customer centered design practices. In this area, numerous players reach significant progress in terms of product or service acceptance and quality, customer satisfaction, illustrated by substantial NPS©  increase. Now, it just requires the time to transform and generalize the appropriate practices.

On the “Operations” side (i.e., the way products and services are sold, delivered on time, supported…), all the players went through the “curative” mode that is to say they solved the big customer pains that are as visible as an elephant in the corridor. But once a significant number of detractors has been reduced thanks to major “basic” roadblocks resolution, most of them do not record a leap forward in their NPS© progress: they face difficulties with establishing the link between customer perception and root causes and measure the benefits of the newly implemented actions.

Adopting end-to-end Customer journeys and Customer-centric ways of working requires an evolution of the traditional customer satisfaction measurement techniques. So far, NPS© practices – widely used - are primarily disconnected from operational data and only cover a limited share of the customer base. It is time to adapt the thermometer and correlate traditional NPS© to operational events for 100% of the customer base. A challenge for Chief Customer Officers for 2021!

The Information Systems: the Simplification Imperative

The Digital world is expecting IS (Information Systems) to square the circle: deliver more & faster, in a more complex and open ecosystem and of course at compressed costs to preserve competitiveness.
Tomorrow’s IS resources (people, capex, opex) are depending on the current IS weight (Number of applications, number of user interfaces, modularity of architecture & code…) multiplied by the ongoing change factor (product release frequency, flow of new technologies, software evolutions…). The introduction of agile, devops, continuous testing, APIs… has helped achieve a better performance at product / project and product/project portfolio level: time-to-market reduction, productivity increase, defects reduction, cost reduction related to over-quality and functional surfeit.

On a broader spectrum, too few companies have a global view of the “IS weight” management (except the application number reduction – the simplest): the overall technical debt, the refactoring backlog management remains limited to IT governance whereas it should be more largely shared and discussed iteratively across companies. Same statement regarding architectural choices, API design… that are strategic choices to be understood and made by all stakeholders. A tough transformational story to be written with several hands, again. I used to say a few years ago that the digital shift is marrying business and IT. Married for the best (new business launches, exiting AI projects…) and for the worst (IS house cleaning). It has never been so true

Remain Lean over time

When deploying agile in the early stages many companies successfully apply the principles of the Agile Manifesto. When moving at scale, SAFE (Scaled Agile Framework) or LESS (Large-Scale Scrum) methodology frameworks are sometimes used not as a toolbox but more as a “guide” to deploy agile and get transformed. Those well-structured frameworks are powerful to design and deliver a set of large and complex projects but not adapted to deploy agile as a mindset and drive the digital transformation.

Moving from the waterfall to the iterative delivery was a good opportunity to get rid of the heavy technostructure that was sometimes vampirizing the doers’ workload. In parallel to the deployment of those frameworks, it is healthy to regularly re-challenge the ways of working to avoid a comeback of too complex and time-consuming governance and processes that give the illusion of control and optimization. Business and IT governance and processes must be servant enablers for the doers who should focus their attention on their customers and their delivery momentum. Remain Lean facilitates interactions between people (less non-productive workload = more time to interact), flexibility and reactivity.

Transformation Embodiment to scale

To gain momentum and scale, transformation needs to become rapidly tangible for the makers’ communities and soon for the widest corporate audience. In many cases across industries, digital transformation is perceived as too conceptual or too technical. Beyond new leadership practices, mottos and symbols are tools that companies tend to overlook.

Decision-making presentations are often too implicit and even wishful thinking. Recently, I had the opportunity to take part - as observer - in a double-digit investment board. Decision makers spent 1/3 of their time listening to a Product Marketing presentation, 1/3 on Costs, Revenues and ROI, 1/3 on Risk mitigation, Q&A included. At the end of the meeting, I took the liberty to ask each participant to draw what they believe the product will look like and how it will solve the customers’ problem. They were all surprised by the diversity and lack of alignment of their response. This symbolistic wake-up call was a great opportunity to make them understand they were taking decisions based on too conceptual material.
I recall, in another context, a survey done on the time spent by a population of projects managers and team members showing that they were spending up to 45% of their time producing slides of which 2/3 were never read: “No-slide, but prototype!”.

Having some mottos or simple claims is a good way to spread change levers. Mottos and symbols can uniquely depict the “to-be model” in a nutshell.

Leadership posture is probably the strongest tool to activate. Among Board Members, it is rare to find people that used to be real “digital doers” in this brave new world. When you pioneer, nobody knows. Doers are the knowledgeable. Having a top management that is in a listening and a learning posture is a power factor. More than that, moving to a « servant leadership » attitude reinforces the change perception also at the highest levels in the company: from report to support mindset! No long-lasting boring transformation steering committee. Short but frequent “transformation conversations”, where game changers discuss with top management, get quick feedbacks and decisions… conversations that inescapably end with ExCom members’ question: “what can I do today to help you before our next session?”. Leadership ignites, stimulates, and catalyzes over time through its behavior and its ability to lead by example.

Serial Learners for Serial Mutants

People and organizations are evolving from a wave step-change to a continuous change. Digitalized companies, no matter the industry they belong to, are Serial Mutants.

Best transformers have understood that they need to grow their organization to become learning machines to always adopt the appropriate state of mind and operating model and leverage a continuous flow of technologies that is to say to become and remain agile. Talent development is of essence and initiatives have never been so rife and employees so aware how critical is it for their future employability…: collective or individual coaching, upskill/reskilling initiatives, new leadership development programs, online courses, learning by doing… especially in large companies, whereas SMEs are relatively more conservative. This is a major and long-term multi-year investment.

Many players – especially SMEs - do not take the time to assess their starting point before defining a set of complementary initiatives for their employees. Many subcontractors which are offering these kinds of services have a poor understanding of potential expertise expected and we must admit that this is not an easy job since change momentum is high and expertise spectrum broad. Employees preexisting to the digital transformation represents more than 80% of the talent battle per upskilling. This initial step-change is thus critical.

Training, coaching is not enough: leaders have a major role to play. A few months ago, while I was keynoting about new operating models in customer-facing industries, I was asked to define what the profile of the leaders we need to drive transformation is. My answer was: “this leader has to be a generous demanding doer, able to think & act differently and to connect people through meaning”. I laid the emphasis upon generosity: leaders need, in a role model posture, to impel change by doing, giving – I should rather say “donating” - their time to “make” with their teams… i.e. in other words to be open handed with the people who need to adapt and learn. He needs to inspire trust and show by doing how to do things differently. A “hands-on” approach brings substantial opportunities to grow teams’ and individuals’ confidence, allows failures from which the community learns and lastly proves that change and derived outcomes can happen. This is a necessary but not a sufficient key success factor for sustainable change and commitment to become serial learners.