The need to digitally transform your organization is now — or at least should be — a strategic imperative. The fact, however, that the term digital transformation is now a bona fide buzzword has obfuscated its importance.
The problem is that we create buzzwords because we need a simple, shorthand way of communicating what is otherwise a complex idea. In the process, however, the deeper, underlying complexity of the idea is often lost, and the term becomes merely symbolic.
Digital transformation has reached this symbolic point in the cycle where it has begun to lose its real meaning. This loss of meaning poses a significant risk to organizations that now must execute and sustain a digital transformation effort.
As we have written about extensively, the greatest risk is that organizations perceive digital transformation principally as a technology-driven effort. It is not. It is, first and foremost, a business transformation.
But beyond that fundamental re-centering, people who seek to lead their organizations on a transformational journey must deconstruct digital transformation and recognize its distinct, yet intertwined components.
It’s Not One, It’s Four
The complex idea behind the term digital transformation is that technology has created a fundamental shift in how organizations operate. The consumerization of technology — and the customer empowerment it created — has upended the traditional operating paradigm of organizations moving it away from a capital and process-centric model to a customer-centric one.
While technology has fueled the demand for transformation, the essence of the transformation is much broader and more holistic. It effectively requires that organizations transform virtually all aspects of their operational models, management structures, and go-to-market strategies.
Such a transformation is not solely — or even primarily — about technology. In fact, successfully executing and sustaining a real digital transformation requires that the organization perform four distinct, concurrent, intertwined and continuous transformations: Cultural, Business/Operating Model, Skills, and Technology.
Transformation #1: Cultural
Each of the four transformations that must occur is equally important. An organization will not succeed in its digital transformation efforts without being successful in each of them. However, there is an argument to be made that the place to start is with your cultural transformation as it is really about resetting the social contract within the organization.
Most organizations, however, do not start here — and many never tackle it at all. The reason: it’s the hardest and most ambiguous of the four transformational efforts.
The reason that you should execute your cultural transformation sooner rather than later, however, is because the greatest threat to your transformational efforts is organizational inertia. Transformation is just a pretty word for “we’re changing everything!”
A culture is essentially a set of established (albeit generally unwritten) social norms, and therefore, a transformational effort almost always represents a cultural threat.
Your organization will work insidiously against your transformational efforts — often without anyone realizing what is happening. Because of this risk, you must deliberately and explicitly execute efforts to transform your culture into one that is open to constant change, reorienting it around the customer so that it can continually adapt to what will be a never-ending flow of shifts in the market and customer expectations.
Much has been written elsewhere about the mechanics of cultural transformation, but the key message is that you cannot successfully execute a digital transformation without a discrete and significant effort to transform the organization’s culture.
Transformation #2: Business/Operating Model
One of the key tests of whether or not you have embarked on an actual digital transformation journey or are just executing a technology project is whether or not you are disrupting your core business and/or operating models. As we wrote about previously, if everything still seems to work the same as it always has, it’s a pretty good bet you’re not transforming anything.
The reason for this is that digital transformation is a reorientation away from a business process focus to a focus on the primacy of the customer. Industrial organizations centered their operating paradigm around efficiency, scale, and optimization — all to create mass-produced products (or services) for a mass-market as economically as possible.
Digital transformation is about upending this model and shifting the focus to the customer. Digital enterprises must, therefore, center their operating paradigm around the ability to adapt to changing customer demands and expectations, to creating mass customization and to developing new customer-focused innovations.
While the look and feel of the business and/or operating model transformation will, by necessity, be different for each organization, the lack of such a transformation will be a clear signal that no real transformation is occurring.
Transformation #3: Skills
A digital transformation effort can be exciting. But it will also be scary and threatening to many people within your organization. This fear will exist because as you continue on your transformational journey, it becomes abundantly clear to everyone that the skills that have gotten them to this point in their career will be insufficient to carry them forward into the future.
This skills gap is clearly apparent for those within IT as they grapple with an avalanche of new technologies, strategies, and approaches. But the skills challenge will extend far beyond the boundaries of IT. Staff from throughout the enterprise will need to adapt to the new expectations of the organization’s transformed business and operating model.
In addition, as organizations continue to embed technology deeper into every business process and every customer interaction, the responsibility for understanding, selecting and managing it will become a core part of everyone’s job description.
This democratization of technology ownership will put pressure on non-IT staff who must learn whole new domains (and try to keep up with their constant state of change), but it will also create an identity crisis for IT staff who have to get comfortable giving up control.
As a result, transformational leaders must execute a direct and strategic effort to transform the skills of their employees throughout the enterprise. Organizational leaders, however, must closely align this skills transformation with the other domains as they will guide the skills necessary in the transformed organization.
Transformation #4: Technology
The final transformational component is the technology transformation itself — the part with which organizations are generally the most comfortable. However, that comfort can create risk.
An over-focus on the technology part of a digital transformation can create digital blind spots that will undermine the effort.
Moreover, it is critical that organizations only execute the technology transformation in the context of the business objectives and not just for technology’s sake. An alignment to the business and operating model transformation is an excellent way to ensure that this mistake doesn’t happen.
Executing a digital transformation is serious business. For too many organizations, it has simply become a catch phrase they use to imply that they are doing something notable, important and worthy of funding.
The reality is that executing a high-profile, splashy “transformational project” is relatively easy. Performing the type of deep, lasting, fundamental change that is the essence of digital transformation is much harder.
To succeed, you need to address the transformation of the organization at all levels – discretely, but also simultaneously. If you are willing to do this hard work, however, you can affect the lasting change that is necessary to remain relevant and lead your organization into this exciting future.
Founder & Institute Fellow
Charles Araujo is a technology analyst and internationally recognized authority on the Digital Enterprise and Leadership in the Digital Era who advises technology companies and enterprise leaders on how to navigate the transition from the Industrial Age to the Digital Era. Having spent over thirty years in the technology industry, he has been researching Digital Transformation long before it became the uber-buzzword of today, and is now focused on helping Digital Era Leaders prepare themselves and their organizations as the macro trends of the primacy of the customer and the primacy of the algorithm collide, ushering us into what he calls The New Human Age.
Principal Analyst with Intellyx, founder of The Institute for Digital Transformation, author of three books, and most recently the co-founder (with his wife) of The MAPS Institute, he is a sought-after keynote speaker and has been quoted or published in CIO, Time, InformationWeek, CIO Insight, NetworkWorld, Computerworld, USA Today, and Forbes.