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How to Ensure Your Organization’s Digital Transformation Succeeds

Digital Transformation

IN THE AGE of digitization, businesses face a critical imperative: to adapt and embrace innovation or risk being left behind in a rapidly evolving world. This force is called creative destruction, which is the process where innovation and technology advancements are reshaping industries and business models. It is reorienting the competitive landscape — winners will flourish while losers will be at a severe competitive disadvantage, losing ground to competitors and frustrating stakeholders and customers.

To illustrate the potential impacts, in 2007, Nokia had a little over half the mobile phone market with an operating profit of about $7.8 billion. That same year, Apple introduced the iPhone, which revolutionized the industry with its superior touchscreen interface and robust app ecosystem. Nokia just couldn’t keep up. Its phones were quickly viewed as antiquated and difficult to work with for developers. Subsequently, its market share plummeted by 90 percent. In 2013, Nokia’s mobile phone business was sold to Microsoft. A post-mortem was conducted that pointed to a lack of organizational alignment, internal politics, and a lack of technical competence that hindered its ability to transform.

The driving force behind digital transformations is adopting and implementing digital technologies to processes, products, and assets to improve efficiency, enhance customer value, manage risk, and uncover new monetization opportunities. These transformations typically involve a profound change in how a business operates, encompassing people, process, and technology. Beyond digital transformations, organizations are continually tackling other transformations, such as mergers and acquisitions, divestitures, cultural transformations, and much more.

Approximately 89 percent of organizations have already adopted a digital-first business strategy. The spend for digital transformation programs by the year 2030 is expected to exceed $3 trillion.

Shockingly, 70 percent of such initiatives fail to reach their goals, which represents a massive risk with profound implications for those undertaking such a large effort.

This raises some pertinent questions. First, why do these programs fail?

According to McKinsey, the common reasons for failure of transformation programs include a lack of aspiration, lack of a shared vision, lack of engagement, low investment in capability building, and an insufficient structure for the transformation team. I’ve seen many of these in my experiences personally and believe they’re the symptom of the underlying root cause — which is organizational complexity.

Organizations undergoing transformations often operate diverse business lines across various markets, manage aging and complex IT environments, and navigate significant regulatory oversight. Successfully delivering these transformations typically requires a multi-year, multi-workstream program, demanding substantial and targeted efforts across numerous diverse business and functional teams that must collaborate effectively.

This complexity results in challenges such as unique perspectives and languages within diverse teams that hinder communication and accountability. The loss of translation from leadership to implementation teams and across groups that have to collaborate can lead to costly implications. Additionally, organizational complexity can conceal active resistance, and many organizations lack the expertise to govern such massive changes efficiently. Successfully navigating such an environment requires a transformation leader with near superhuman capabilities in order to maintain focus across all the various components toward the goals of the transformation.

The second and more important question remains: How do organizations achieve success?

Success in digital transformation requires organizational alignment, where every element works cohesively to fulfill the organization’s purpose. This alignment encompasses two critical dimensions: vertical alignment, which harmonizes strategies, goals, and activities from the C-suite down to individual contributors, and horizontal alignment, fostering collaboration across various business and functional areas.

To achieve alignment, a common language is crucial. This language creates a shared understanding across diverse perspectives, enabling clear communication by removing ambiguity and confusion. It fosters ownership, accountability, and collaboration in delivering on a complex transformational agenda.

For effectiveness, this common language must meet three criteria:

  1. It must be business-oriented, which is critical for driving change through the lens of the business
  2. It must facilitate cross-functional collaboration and
  3. It must represent different levels of granularity to be useful for senior leadership and lower-level staff.

The sole candidate that satisfies all these criteria is business process.

A common language of business processes allows the organization to envision its digital future through the lens of the business, which enables a digital strategy that’s articulated by impacts to existing processes and the needs for future processes. This would enable the various functional teams, such as business teams, technology teams, risk management, compliance, people leaders, and more to collaborate to effectively implement the future vision. The role of the transformation leader becomes easier as the accountability and transparency delivered by this approach enables them to plan with precision and manage the journey effectively.

To establish this approach, a comprehensive inventory of processes must be developed. Leveraging this inventory to align operational and resource information, various operational data repositories become a unifying Operational Intelligence repository, which is the key driving alignment vertically and horizontally. This also means creating the capability — typically through a Process Center of Excellence (COE) — to build and maintain this information for long-term value.

This framework not only enables delivery of the digital transformation agenda, but is key to operational excellence, which is critical for being an agile organization that can quickly adapt to change.

This strategy requires an investment by the organization, but the choice is clear — invest now and increase your chances for transformational success or face the consequences later.

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Leading Forum
Michael Schank is the founder and managing director of Process Inventory Advisors LLC. He has over 25 years of experience as a management consultant in the financial services industry, advising clients on technology, process, risk, and large-scale business and digital transformations. His book, Digital Transformation Success: Achieving Alignment and Delivering Results with the Process Inventory Framework (Apress, Dec. 24, 2023), shares how to drive a new level of operating efficiency and agility necessary to thrive in this digital era. Learn more at processinventory.com.

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Posted by Michael McKinney at 10:41 AM
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