Bain & Company
The 10 Rules of Digital Transformation
In my work at SAP, I support a community of SAP customers in India – INDUS. One of the initiatives of this community is a micro-community of people who are working in their respective organizations around the topic of digital transformation. Members of this community are from organizations of all sizes, differ in their positions in the organizations and also come from varying functions. The passion for digital transformation is what unites them.
They come together on a virtual meeting every month for about 90 minutes to listen to a thought leader or a practitioner and their approach to digital transformation. The first practitioner we hosted for this community was Rahul Raghuraman from Mahindra and Mahindra. He is part of the Group strategy office and he shared his thoughts, perspectives and how digital transformation is viewed in his organization. What follows is what I learnt from the session.
He started the session with the 10 rules of digital transformation and I thought that this is a great set of rules that we can keep in mind before we embark on a digital transformation project. You can access the recording of the entire session here.
So, here we go:
Rule 1: Leadership Vision and Commitment are key
In any large scale transformation project, or for that matter, any transformation project, the commitment of the leadership plays an important role in how the project finally pans out. According to a survey done by Mckinsey, leadership matters as much in a transformation project as in day-to-day activities. Leaders can’t just delegate the transformation project to a program team and expect results. In my opinion, these projects need executive support in three different forms:
Access & Attention: Everyone in the team or organization needs to see that the executives are paying attention to the project. They are actively following up on the progress being made on the project. They include these in their regular updates and business reviews. Budget & Belief: It is not enough to just pay attention, leaders also need to ensure that the team has enough budgets (money, resources) to be able to continue their work on the transformation projects. When it comes to digital transformation projects, it requires them to truly believe that these projects have transformative potential and invest in their beliefs. Communication & Continuous Action: It is important that there is two sided communications at all times in terms of what is being done, why is it being done and what are the results. The project team needs to communicate this with the leaders, leaders then need to take that and continually communicate back to the larger organizations and take actions that reflect the progress made.
Rule 2: Create Business Value
This is so critical for the digital team to get right as quickly as possible. Almost every organization requires a business case for them to invest in any project, let alone a digital transformation project. So, when you are launching your first project, trust in the ability of the team to create business value, is a currency you are usually short of. It is in this situation that leadership belief & commitment is key. This can get you started but unless the team continues to earn the trust of the leaders and the larger organization, the transformation effort will be short lived. So, how do you go about ensuring that you end up creating business value.
Low Hanging Fruits: There are many who approach this from the perspective of winning quick wins or addressing the low hanging fruits. This could mean automating a manual process either using a mobile app or a website.
Leveraged: Then there is the approach to pick projects that have the potential for disproportionate and out sized results, compared to the investments that they need. These projects are not easily visible. One needs to search for them. They can be found in the complaints that you hear around the coffee corners and during water-cooler conversations.
Transformative: Most organizations have a preferred key activity that drives success for them. They could be product driven, R&D driven, sales driven, partner driven, marketing driven, service driven, customer driven, etc. One only needs to listen in to the water cooler or coffee corner conversations of people in that group to find these complaints. If you can find a complaint that is most emotionally charged and find a way to address it using digital technologies, that is a great start. This will give you visibility and earn you much needed trust to go after ever bigger transformation projects.
Rule 3: Think Customer journey first
Once you have identified the project, it is important that you start thinking of this not as a project or a program but as a product. The simple shift in your mindset can pay off rich dividend in terms of your approach to the transformation effort. Once you start approaching this as a product design effort, you then need to identify who your target customer (sales executive, marketing manager, research & development head, plant head, accounts manager or whoever else) is and look at their entire journey – both current and future.
This ability for you to document the current journey and how the future journey might look like gives you the opportunity to develop quick prototypes and seek early feedback from the users and incorporate these feedback into your final product or service that you will deliver. This also addresses the biggest deterrent of many digital transformation initiatives – lack of adoption. IF they think that they have been a part of the process of developing the product or service, the chances that they will adopt it once you go-live is much higher.
In addition, your initial contrast frame can serve as a great reminder to all about the journey that you took. Keep that image front and centre when you communicate the progress made on the programs.
Rule 4: The front-end and back-end must talk
In most organizations you already have a lot of digital systems in place. Whatever you build as part of your digital transformation projects should live among them and not outside of them. Meaning, you need to ensure that the digital products or services that you will end up creating need to talk to all the different systems that are already existing in your organization.
I know that this comes with its own set of challenges but is an important characteristics of digital transformation projects that succeed. They break silos (both within organizations as well as in the data) rather than build them, unless you have a strategic reason to keep your work separate from the corporate systems.
This also comes with the added advantage of leverage. I am sure that any digital transformation project is not a once and done effort. You will continue to explore ways to add new capabilities and projects (products or services). Any and all data that you gather / create as a result of these projects could then be potentially be used elsewhere if they are all available in the same enterprise data warehouse.
Rule 5: Go for product-market fit
One of the reasons why digital transformation projects fail is because the focus is mostly on the digital aspect of digital transformation and not really on the transformation part of the program. However, it is important to look at this entire thing as transformation enabled by digital. If we agree on this, we can then also agree that it is important to ensure that whatever you develop should actually solve a problem for a specific kind of a person who in-turn leads to a transaction of value (money, attention or status).
If the focus is on digital technologies and not on solving real problems in a way that makes life better for the users, it results in low or no adoption of the solution. So, it is important to ensure that this product-market fit is got right. Usually, it takes a few iterations for anyone to get this fit right. This also means that we need to use agile methodologies and iterate quickly, learning from each iteration and building upon it.
You only launch it wide and deep when the team is convinced of having attained a good product-market fit. Till then, the project has to be in beta mode. The development of the product never ends. I personally believe that if your product reaches v 5.0 and beyond is when you will truly see the big benefits (out-sized impact when compared to the investments) will start coming in.
Rule 6: Partnerships, Partnerships, Partnerships
Digital transformation projects are not just IT or technology projects. They cut across organizations. So, it is imperative that you partner with the part of the organization that is both affected by the initiative and also that benefits by the initiative (and yes both can be different, depending on which project you are running. The earlier they get involved and contribute, the better will the adoption be. Their engagement will also bring in the much needed business perspective that they have built over years of running the process. You bring in the fresh perspective. It is at the intersection of experience and fresh perspectives do you find fresh insights, the secret ingredient for successful digital transformation projects.
It is also a good idea if you partner with start-ups or other potential partners (technology or otherwise) who also bring in their expertise to the team. In some cases, the initiatives that we run require very specialized set of expertise that we may or may not have internally within our organization, like skills around building and training AI/ML algorithms or AI/VR experiences or any such skills. So, it is a good idea to partner with someone who can bring these expertise to the team and contribute.
What we need to remember is that with all partnerships, these partnerships also should have a win-win proposition for all parties involved. So, when choosing an external partner be very careful in selecting the partners, such that they can support the team in all phases of the roll-out and not just while doing pilots. This is a sure shot recipe of disaster later when you decide to scale the project.
Rule 7: Business models and the power of platforms
One of the things that all teams that want to engage in digital transformation projects need to do is to understand the different business models that your existing business is using currently. You can use any different models to analyze that. One simple and comprehensive model is the business model canvas built by Alexander Osterwalder and the team. This is a simple one-page explanation of the business model of your organization. We need to know that businesses can and potentially do operate with multiple business models. Having a thorough understanding of these models can help you in the following ways:
Give you an understanding of potential new business models that you can enable through digital technologies (create new revenue models, create new customer engagement models, new ways to reduce cost, enable new partnerships, optimize existing processes, etc. This also tells you which part of the business you need to partner with. When you go speak to the business, this gives you credibility and builds trust. When they see that you understand how things operate in their part of the world, they will trust and respect you, which is the foundation on which you can build the partnerships. This also gives you a language that you can use when engaging with the business leaders like CEO/CFO. This will help you in getting the necessary approvals and the resources that you need for completing these processes.
Most digital transformation projects never take off because there is a lack of business case and the team is unable to convince the business to give them the resources needed for the projects. This ability to understand the business models and to articulate clearly how the project will affect the business model and which part of the business model will get you a lot of respect and much needed resources.
Rule 8: Enable a cultural revolution
Digital transformation or for that matter any transformation initiative typically brings with it change, change in how things are done. There is enough written about the criticality of good change management practices in any transformation initiatives. I will only reiterate the following when it comes to the transformation projects that you are running.
Culture is transformed one conversation at a time. So, involve everyone who will be impacted by what you are doing early, often and regularly. If your project will involve in people using new tools or new processes, you need to provide them with all the training that is necessary for them to use the new tool or process. The primary reason for resistance to change is fear – fear of the unknown. So, if there are any chances that your project will involve significant change, bring it up and talk about it. Plan for these tough conversations and have them as early as possible. The key idea here is that they need to feel in control of what happens to them.
Rule 9: People = Uber Allies
Ultimately, all transformation projects boil down to people. The more people you have as your allies, the better it is for you. This includes your leaders, the business associates who will get affected (positively or negatively) and the external partners. All transformation projects, in the end, are about changing behaviors. The more people who are willing to support and work with you, the better are your prospects at success.
Rule 10: Genius is eternal patience
This is a contradiction of sorts. On one end, you need to be able to demonstrate results quickly, you also need to instill patience in your stakeholders about the time it takes to see tangible results.
This becomes critically important as the scale of your projects increases, the speed at which you can get the results will slow down as the scope of any transformation project is inversely related to the speed at which the project will deliver result.
Add to this the fact you will start getting your transformative results when you reach version 5 or 6. So, you need to iterate and in order for you to do so, you need your stakeholders to show some patience and allow you to work on the project till you reach that version.
I can only reiterate the importance and relevance of these rules that Rahul shared in his presentation. I will cover some of these rules in detail in later posts. Creating transformations is tough, as it should be. So, do not start a transformation project (digital or otherwise) if you don’t intend to go through the entire journey.
The other critical factor is the ability to shut down a project if at any stage you find out that it doesn’t make business sense any more. Nothing will erode the trust that you have built with your business faster than continuing to work on a transformation project knowing fully well that it will not deliver the results that you have promised.
If and when you decide to shut down, do it in such a way that you are able to share what you learnt in the process and your thinking about why you initially thought that the project was worthwhile, what changed and why you think now that this is no longer the case. This will increase the trust that the business has on you, thereby allowing you to continue to work on transformation projects.