Co-authored with Nikolaus Obwegeser and Benjamin Müller
While many companies were reportedly undergoing some form of digital transformation before COVID-19, it seems they were not far enough along their journey to respond effectively. At the outset of the pandemic, companies scrambled to look for IT equipment such as laptops and IT services like Zoom to get a grip of the new digital reality that came overnight. As the crisis unfolded, it became increasingly clear that those companies lacking a robust digital backbone or the ability to conduct their business online were struggling.
But there is also good news for those “digital laggards” now: the main reason why up to 90% of digital transformations fail – lack of alignment and resistance – is suddenly off the table. COVID-19 has removed scepticism and resistance to digital transformation and replaced it with a sense of unity and urgency, as companies are forced to leverage digital technologies to ensure business continuity.
Forward-looking executives realize that they face a different challenge today: How to turn a makeshift digital transformation to survive the crisis into a true and sustainable push towards becoming a digital frontrunner?
4 Steps To Creating A Lasting Digital Footprint
People are biased to look for simple and immediate solutions that reduce uncertainty, especially during times of crises. No surprise then that digital transformation efforts driven by business survival look different from those that are carefully planned and prepared. Instead of a North Star that hovers in the distance above all digital initiatives, the overarching question becomes: How can we leverage digital technologies to ensure business continuity now?
However, avoiding irrevocable mistakes is critical to ensure a more long-term oriented digitalization later. As one business leader in the education sector told us: “The trick is not to squeeze a 3 year digital program into a 3 month program. The trick is to make sure that what you do today is still valuable in a few years from now.”
The following four steps provide a guideline for companies to leverage the current momentum of their digital transformation for long-term digital success.
1. Create and empower your digital A-team
There has been much discussion whether digital needs to be driven by a dedicated team or distributed across the different parts of the organization. Prior studies show that an empowered and well-funded unit is critical for avoiding unnecessary bureaucracy and for accelerating implementations, especially in times of high pressure.
When we compared successful and failed digital transformations, one major distinguishing aspect stood out: successful digital teams were able to hit the ground running from the get-go. That is, while the skills and expertise of team members are surely important, it was the organizational environment and support that was in place to support the digital take-off. Successful digital teams report directly to the CEO, have enough funding available to make a real impact, and own the decision rights to actually effect change on an organization-wide scale. Leveraging digital talent, a Chief Digital Officer (CDO) who has proven transformation experience, and a core digital team comprising diverse competencies and an entrepreneurial spirit are key. Take the case of infrastructure and energy company ABB, who brought in Guido Jouret, a veteran of Cisco and Nokia, to accelerate their digital transformation in 2016. Reporting directly to the CEO, Jouret built a centralized team with dedicated funding to “make the rest of ABB more digital.”
2. Make sure to capture great ideas
Great ideas are generated both internally and externally – from employees, customers, suppliers, and partners. To effectively leverage the creative power of their networks, companies need a systematic approach to capture ideas and funnel them into a pipeline for evaluation and prioritization. Leading organizations have set up clear processes and the appropriate tools/platforms that help them to manage a constant flow of ideas. Back in 2014, Danish toy manufacturer LEGO pioneered their “LEGO Ideas” platform to engage their customers. It represented a strategic pivot, from viewing their customers as “hackers” infringing copyright to actively leveraging them to feed LEGO’s product development and design processes.
Organizations that implement a systematic ideation approach not only benefit from enhanced innovation, but also improved communication, better workplace satisfaction, and the ability to spot changes in their business landscape before their competitors. During a crisis, actively scouting and leveraging great ideas is essential. The recent burst of open innovation during the pandemic shows the vast potential of creating value with front-line employees, customers, and partners. For open innovation to be successful, diversity among partners is key. In fact, the best ideas may come from unexpected places. At the peak of the pandemic, Scandinavian trucking giant Scania for example established a shared command centre with the Karolinska Hospital in Stockholm in a common effort to make sure that the supply for personal protective equipment for healthcare workers is ensured.
3. Implement a rapid test-and-learn environment
Digital disruptors are often said to follow a “fail fast, fail often” culture, but this could prove to be a costly strategy when the survival of an organization is at stake. We recommend that companies strive for a test-and-learn environment that supports hypothesis-driven experimentation with a rapid turnaround.
During a crisis, finding the middle ground between unguided experimentation and risk-averse reservation is essential. While playing it safe may seem like the right thing to do, it is important to recognize the opportunity of falling barriers when it comes to experimentation and improvisation among customers, employees, and even regulators. Executives have an opportunity now to quickly implement a system that leverages this environment and allows employees to systematically and efficiently formulate and evaluate new ideas around hypotheses. Companies like 7-eleven Japan have demonstrated how this can work: establish a set of clear guidelines for all employees to formulate hypotheses, regularly follow-up on the results of experiments, and focus on how to improve over time.
4. Plan for long-term success beyond survival
While short-term initiatives can help ensure business continuity, companies must periodically ensure that their actions contribute towards long-term digital success. We recommend that companies periodically ask themselves two questions to ensure they are constantly moving in the right direction:
Question 1: Can we accommodate evolving technical developments?
In survival mode, many companies need to quickly introduce new technologies to ensure business continuity. Companies’ swift turn towards SaaS solutions are a case in point (e.g., video conferencing services like Zoom that are not part of the company’s core application portfolio). Companies may be tempted to incorporate digital tools next to legacy IT infrastructure because they are easy to come by and enable quick acting. But at the same time, these tentative solutions run the risk of creating misconfigurations in systems, processes, and data. Developing a robust enterprise architecture that supports continuous integration of new developments is essential for digital success. At the same time, keeping a close eye on those developments that only serve as quick fixes during the crisis is essential to make sure they do not become so systemic for a company that they cannot be retired when the crisis is over.
Question 2: What is the purpose that drives our digital transformation?
In today’s world where exciting new technologies (e.g., Blockchain, AI, quantum computing, augmented reality) are being developed faster than ever before, executives are easily swayed to follow the newest trends and fashions without evaluating it against the bigger purpose their organizations seek to achieve. In times of crisis, the often-exaggerated business potential of technologies climbing the Hype Cycle can often make these technologies seem like a silver bullet. Besides the question of whether these often imaginary hopes hold up in reality, we advise companies to revisit the choices they made during times of crises and evaluate them against their purpose. It may seem costly to adapt or even abandon digital investments, but if they do not fit with an organization’s purpose, the price of holding on will be much higher.
Some final words: Digital transformation works best when technology follows the pull of changes in strategy, structures, and processes, not the other way around – especially in established organizations. At its best, digital transformation unlocks the ability to design a true cultural change and offers employees to become digital transformers in their own right. A clear purpose and a set of shared values and norms helps to make the digital transformation journey more graspable for everyone and has been shown to result in substantially higher success rates.