Because of the complexity involved, most reinventions fall short of their original goals. Extracting the full value from a digital transformation requires a carefully coordinated approach across four “Ds”:
The 4 D’s of Digital Transformation
Discover: what your digital ambition is (based on where the value is).
Design: programs that target profitable customer experience journeys.
Deliver: the change through an ecosystem of partners.
De-risk: the process by thoughtfully sequencing steps.
While this approach may seem self-evident, most companies fall short in the execution. There are myriad reasons for this, but the most common are that the business either underinvests in the capabilities needed or doesn’t drive the transformation program sufficiently across all four of the “Ds.” A company may invest tens of millions of dollars to “Discover” great insights, for example, but if its “Deliver” strategy is inadequate, those insights are for naught. Let’s dig further into the 4 D’s:
Discover: Shape your digital ambition, strategy, and business case.
In this phase, companies develop a clear view of where value is being created and destroyed as the basis for a clear business strategy. That requires an analysis of their business, sector, customer behavior trends, and the larger economy to identify and quantify both threats and opportunities. These kinds of digital opportunity scans should be sorted by short- and long-term pockets of value.
At the same time, companies need to engage in a sober analysis of their own digital capabilities and resources. Capabilities that build foundations for other key processes and activities (e.g. modular IT and agile technology platforms) are particularly important. And while leadership matters, mid-level talent is the most critical element for a company’s digital transformation success.
Design: Create and prototype breakthrough experiences.
Actually, acting on a digital ambition can be daunting. Most successful companies start by focusing on the most important customer journeys, then work back from there to design and build out breakthrough customer experiences. Using design thinking and skills, these companies define each journey, looking especially for the pain points and potential missed connections. The change team can then map out, screen-by-screen, models for a new interface. In this phase, the company must avoid getting caught in endless rounds of planning but instead rapidly build prototypes, translating concepts into minimum viable products (MVPs) to test and iterate in the market before scaling.
This phase also includes building out rapid delivery approaches and an IT infrastructure that blends the legacy systems with microservices and modular plug-and-play elements. While agile IT has become standard, more digital businesses are embracing DevOps (integrated development and operations teams) and continuous delivery so that software can be developed, tested, and deployed quickly to consumers and end-users. On the organization side, the fluid nature of cross-functional collaboration, rapid decision making, and iterative development means that the business should focus on the enablers for this kind of teamwork. This includes effective metrics and scorecards to evaluate digital transformation performance and incentive structures to drive the right behaviors, mindsets, and outcomes.
Deliver: Develop a network of partners who can rapidly scale your ambition.
Getting the speed and scale necessary for a reinvention increasingly requires an ecosystem of external teams, partners, suppliers, and customers. In practice, this means working with a mix of platform players, delivery specialists, and niche players. These are the relationships that companies can call on to provide specific skills and capabilities quickly.
This reality has made ecosystem management an important competency, especially understanding how to find and plug into the right mix of complementary capabilities. One national bookseller, for example, built out a digital offer by partnering with a telecoms company for its technology and with a range of retailers to build up a marketplace. This approach allowed it to rapidly hit the marketplace and increase the revenue of 78 percent in a year. As companies push to scale their digital reinvention throughout the organization, the crucial role of seasoned change managers comes into focus. These leaders not only play “air traffic controller” to the many moving parts but also have the business credibility and skill to solve real business problems. They must maintain an accelerated pace of change, and drive accountability across the business. The change leaders will look across the entire enterprise, examining the organizational structure, data governance, talent recruitment, performance management, and IT systems for areas of opportunity, making decisions that balance efficiency and speed with the outcome.
De-risking: structuring the process to minimize risk.
One of the most common reasons a digital transformation might fail is that the organization develops “change exhaustion” and funds start to dry up. To mitigate this risk, it’s important to focus on quick wins that not only build momentum but also generate cost savings that can be re-invested in the next round of transformations. This sequencing approach applies to tech as well. Many companies choose to invest first in “horizontal” components, such as business-process management (BPM) layers or central administration platforms that can be shared across many initiatives, while balancing them with more “visible” elements to provide the proof of concept.
Technology risks, especially cybersecurity, will also require increased attention as companies digitize more operations and processes. Organizations can mitigate these risks by automating tests on software, establishing systems in which failures can be rolled back in minutes, and establishing build environments in which fixes can be made without putting significant parts of the business at risk. Senior leaders, in particular, need to focus on the structural and organizational issues—from building cybersecurity into all business functions to changing user behavior—that hamper the ability to manage cyber risk. One risk senior leaders often overlook is losing ownership over sources of value. These might include the company’s data, customer relationships, or other assets. Having a clear understanding of where the value is coming from allows businesses to navigate ecosystem relationships profitably.
Don’t Be Afraid of Digital Transformation
While a full digital transformation or change may seem daunting, it is completely possible to find massive success and to grow your company or organization because of it. In fact, it’s what we help organizations do every single day. Schedule a free demo to see how we might be able to support your next change management initiative.