From a CEO's perspective, getting value and alignment from technology teams can seem like a huge challenge. Often the technology teams feel like a drag factor instead of a valuable enabler. Creating a technology transformation strategy is a cornerstone of broader corporate transformation. After all, if your technology teams can't support digital, who can, and how will your company ever truly benefit from digital technology?
According to KPMG the top issue faced by CEOs is digital transformation.
They present the challenges for a CEO as a top ten list and it is interesting to note that as well as digital transformation so many of the other items on the list are just other aspects of digital transformation.
1. Digital transformation
2. Global political and economic environment
3. Regulation and regulatory environment
4. Innovation and disruption
=5. Sustainability and climate change
=5. Public trust
=5. Leadership capability, accountability, stability
8. Customer and citizen centricity
9. Political paralysis and effective government planning and response
10. Workforce upskilling and transformation
Other items of concern for CEOs that have strong overlaps with with digital transformation are:
- Innovation and disruption
- Leadership capability
- Customer centricity
- Workforce upskilling.
If these are included in one digital transformation category, the score for digital transformation goes from one item out of ten, to five out of ten.
Fifty percent of of issues faced by a CEO are, to varying degrees, related to digital transformation.
The remaining concerns, relating to regulation, political environment, and sustainability also have strong digital themes, and it could be argued that many of these also involve, to some degree, digital transformation. It isn’t surprising that it's ranked number one given that these challenges are on the doorstep right now.
We can summarise the technology specific categories as follows:
Digital Transformation is a huge and complex topic. It encompasses all strategic and tactical activity that ensures a company can compete and exploit advantages in a technology-enabled marketplace.
A digital transformation strategy can react to what is happening, or it can proactively create opportunities, but it can't control the technology environment in which a business competes. Digital transformation recognises the changes that technology brings to customers and uses technology to find ways to create opportunities, mitigate threats, play to strengths, and bolster weaknesses.
Think of digital disruption as a storm. You can't control the storm itself with a digital transformation strategy. But you can see the storm coming, plot it’s course and either find a way around it or prepare to go into it. Unlike a storm however, there is no return to normal afterwards. In the digital world, the environment for competition is harsh, and success or failure can be rapid.
How can a company compete when the pace of technology change has increased, leaving those unable to move fast enough to catch up with dwindling markets and large bills to even begin the transformation?
If those black clouds are already looming up on the horizon, there’s little choice but to go through the storm, but this could have been avoided with the right investments into digital capabilities.
Digital has been a topic of debate for almost two decades. Fighting against disruption after you have been disrupted and find yourself sailing in choppy waters has minimal effect. You can't control the digital environment you’re in, only plan for what needs to be done to operate effectively in it.
Innovation and disruption
Innovation and disruption happens when large companies leave gaps in the market that they can't address because of lack of understanding of their customers, lack of technology maturity, misaligned technology strategy, or an inability or resistance to move quickly.
Digital disruption is usually thought of in terms of outlier companies that come and steal market share using clever technology platforms. In reality, disruption happens all around, and comes from ever more pervasive digital services. This is often referred to as the Fourth Industrial Revolution, which has been described as follows by the World Economic Forum:
The Fourth Industrial Revolution represents a fundamental change in the way we live, work and relate to one another. It is a new chapter in human development, enabled by extraordinary technology advances commensurate with those of the first, second and third industrial revolutions.
The real disruption is the change in the rules of competition, and the disruptors are those who understood the new rules and opportunities presented.
Protecting against disruption, becoming disruptive, and uncomfortable self- disruption have, in many cases, been left unaddressed for too long. The result is a lack of readiness, capability, understanding, and strategic direction. By kicking the can down the road many companies have sailed into the storm they sought to avoid.
The competitive landscape has changed, and the quantity of entities a company competes with has grown. In many cases competition has emerged from small, nimble, focused and specialised companies with simple supply chains, enabled by APIs to other businesses.
The need to build and maintain a large and complex technology estate, is being superseded by the need to be able to rapidly evolve and integrate specialist providers. If a company is sitting on a huge, sprawling and complex technology estate that is difficult to change and run, it is immediately losing out to relative newcomers that are agile and flexible, and use every digital trick in the book to remain lightweight, nimble and relevant.
Leadership capability, accountability & sustainability
The right kind of corporate leadership is required for life in a digital world. A bias for action, evidence-based decision making, and customer-centric thinking are required. Digital transformation is all about the leadership of people and capability development. Any technology can easily be acquired, and many digital transformation initiatives are nothing more than a series of glossy 'bolt-on' bits of tech that don’t deliver on promises.
In the same way, the commoditisation of workers, and the expectation that people can be bought and ‘plugged in’ has resulted in weak digital capabilities. The ability to adapt in a digital ecosystem that changes with relentless pace depends fully on developing skills, people, teams and ways of working. Once teams work well, holding on to them is hugely important. A technology may be acquired, but a digital capability is cultivated and is a source of strong competitive advantage.
With technology adoption, departmentalised IT has lost its role of being the sole custodian of technology. Leaders must ensure that technology becomes facilitative, and that the right skills and understanding run through all functions of a company, breaking technology out of a silo and ensuring it is present and utilised to its highest potential, across all business functions. In this way, technology becomes less like a single organ, and more an integral system that reaches all parts of the body.
Ways to build digital capabilities are discussed in another article, here.
Customer and citizen centricity
Relying on passing trade or footfall has been and remains very important to business. Getting the best spot in the shopping mall, is now the same thing as getting the best spot on the internet. The challenges are the same as ever, namely how to attract and retain customers, and to stay relevant to your customer base.
How can a business please and delight a customer who, without leaving her living room, can easily access and assess your competitors in a vast cyber marketplace. Digital has changed the way business is done, and the competitive landscape is entirely different.
One retailer's competitors are no longer the ten other retailers that can afford to rent on the same High Street. Technology has allowed smaller businesses with vastly lower operating costs to flourish and pursue the same share of wallet.
Barriers to entry have swung away from those who occupy the best locations, to those who are most relevant to their prospective customers. As content has grown increasingly abundant and immediately available, the amount of attention won becomes the limiting factor, rather than the attraction of the physical retail units. How can a retailer in a cyber world become a place where its target demographic likes to ‘hang out’ or go to have fun?
The workforce in a non-digital organisation may not possess the technical skills required to operate online. What matters more is the cultivation of digital ways of working across businesses. Whilst not strictly speaking ‘technical’ skills, other important digital skills such as (but not limited to) the following are needed.
- Recognition of the need for accountability
- Recognition of what digital success looks like, and empowerment to use digital tools
- Measurement skills and understanding of OKRs (Objectives and Key Results)
- Content skills
- Data and analytical skills
- Robotic Process Automation - and use of virtual assistants
- Customer skills - these differ in a digital world, where customers are engaged via digital means and in bulk, via content, chat-bots, chat services, phone, email etc.
- Basic systems skills at the coalface - eg an online customer agent, or in-store sales assistance is properly trained to use internal systems to rapidly help the customer.
Let's remember that 'digital' refers to the company moving with speed and agility rather than a reference to technology. It relates to whole-company change mindset.
How have companies fallen behind?
Why is digital transformation still held at arm's length in many companies? Why do so many companies hold out to see what happens through this difficult time, when they should be thinking hard about not just about technology, but how they will compete when the 'new-normal' really is a digitally transformed world.
In many respects an inflection point is being reached, and those who have not made digital plans and made meaningful progress their journey will fall further behind. Even some who have invested significantly in technology may not reap the benefits, as these may have been superficial additions rather than part of meaningful, strategic, and on-ongoing change.
It isn’t enough to launch large technology programmes, and to re-brand as a ‘we’re a technology company now’. That may help woo the stock market, but doesn’t address strategic fundamentals, and it is a mistake. For example, a retail company’s core competence is selling clothes and it will never be technology. Unless a company builds and sells technology products or services, it isn't a technology company, and it is dangerous to try and become one, taking its eye off the ball in the sector in which it is already established.
The real question isn’t whether it is a technology company or not, its understanding how to protect or create an advantage in its target sector, by using technology and by digitally transforming its organisational structure and behaviours.
It's long been debated whether technology is a strategic pillar for companies. Clearly it is. With the shifts in thinking, technology infrastructure and markets, technology is an essential part of company strategy. Although digital transformation is en-vogue what is really happening is that technology must be considered across aspects of a business. KPMG's list, when boiled down, seems to consist in large part of technology challenges, followed by a mix of other environmental and contextual concerns.
It's time to stop pushing technology into the background, and ensure that technology is properly exploited to underpin company strategy and is part of company strategty. Digital transformation isn't a technology initiative and the fear is that digital transformation is not seen as a long-term, never-ending competitive evolution. Despite the clear evidence, too often the CEO allow digital transformation to be an IT project, when it is core to how a business operates and necessary for its success.
Its no longer about business and technology, they are one and the same.