Digital Transformation Is Not (Only) About Technology

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For some time now businesses have approached the concept of Digital Transformation, often with disappointing effects. It seems that the wrong focus has been set, with mostly the technology being at the core of all concerns. But there is one factor that needs more attention: the human factor.

Humans have been widely neglected in the workplace for the past few decades. Treated merely as an add-on, a quick fix for tasks that machines could not do. The human “resource” was one of many other resources. Constantly measured, optimized, replaced. 

Luckily, and paradoxically at the same time, the yet another technological advancements forces human re-integration into the workplace. They are now a vital part of the value creation chain. Digital transformation (DX) has a marvelous, unintended side effect: the new and higher valuation of people abilities.

But DX requires a completely new skill set. Skills that weren’t even known a few years back. A study by IDT reveals that there is a large skills gap for technologies the current digital transformation comes with. The most sought-after skills are Digital Security, Mobile Technologies and Big Data Analytics.

Digital Transformation Skills
Skills gap (Source: Research Report 2017 Initiative for Digital Transformation – IDT)

In another study, PwC Canada uncovers some more required skills to stem the digital transformation:

  • Technology architecture and design
  • Evaluating emerging technologies
  • Digital strategy and planning
  • Creative strategy and design
  • UX/human-centered design
  • Business deployment of tech
  • Prototyping
  • Cybersecurity and privacy
  • Data analytics

Therefore, to stay competitive, companies should start training their employees. Or hiring on the market, but attracting the right talents is not an easy task.

The potential of Digital Transformation isn’t yet fully harnessed

Despite the required new set of skills, what must today’s leaders do to make digital transformation happen? What should they focus on? Sure is, it does not work the way it has been dealt with so far. The shift happens too slow, managers are too undecided, too hesitant. And often, because of the high price tag, the true digital transformation is simply avoided.

Digital transformation is not about taking off your tie, wearing white sneakers with the suit, marking all projects as agile, setting-up digital labs and producing fancy apps inline with the newest UI design guidelines.

All of that is ok. I am not saying you should stop that. You can wear those sneakers. Or play around with apps. But these activities barely scratch the surface of the real digital transformation.

Here a brief reminder of what DX is:

Digital Transformation (DX) is the application of digital technologies to fundamentally impact all aspects of business and society

Notice the emphasis on society, not technologies. Of course, technologies have a great impact on how things are done. Artificial intelligence, the blockchain, Internet of Things (IoT) – these are all vital innovations that force people to change their way of working. But still, it is the human component that makes the change happen, and most importantly, sustainable.


From digitization to digital transformation

 

Digital maturity is the product of strategy, culture, and leadership

Digital maturity is the measure of how far a business is on the transformation scale. It usually starts with the unawareness of the changes happening in the market. After noticing the falling revenues and rising customer complaints these companies start to think about adoption. Concepts are defined, project plans are drafted, product roadmaps reviewed. At this stage, the started initiatives are mostly isolated, single projects trying to lift the company towards digitalization. But no clear new business model has yet emerged from these efforts. The next maturity stage is about bundling these non-integrated efforts and defining a digital strategy. Ideally, these activities lead to a new business model capable of competing on the market. There is not really a final stage of transformation. The company’s environment is a moving target. To stay as close as possible to this target, companies must constantly adapt and reinvent itself. See Netflix’s story of this endeavor.

Despite the dynamics and complexity, digital mature companies recognize that digital transformation is not only about technologies. There are two other important (human) components: culture and leadership. These companies have strategies that go way beyond the technical blueprints. They are strong at innovation, decision-making, and risk-taking. And to survive the digital wave, cultural mindsets must change. Now, more than ever, the business leader needs to address factors such as collaboration, creativity, or curiosity of their employees. Cultivating these characteristics is the best way to tackle business and societal challenges. 

For that, companies need high-quality leaders. And leaders must adapt much quicker than the rest of the organization. They need to “live” the digital world. They don’t have to be technology wizards, but understanding both, the business and technology worlds, is essential. On the strategy level, they must be able to recognize the trends and find possible use cases for their companies to create new sources of revenue. These are Chief Innovators who prepare the organization for the upcoming transformation. 

Focus on the customer

In all these efforts of climbing the digital maturity level, the customer must still be in the center of every activity. The priority is to create structures that enable the company to respond more quickly to market changes and customer demands. In the end, it is the satisfied customer what the company needs.

The digital age is about becoming indispensable to the consumer. If you take a look at the most valuable brands in the world, these are the brands that distinguish themselves through digital services on the market. Bit by bit they gain the trust of the customers. And this maximizes the customer lifetime value.

Digitization creates a completely new level of detail on your customers (existing or potential). Question is how can you integrate new customer preferences into the company’s digital service portfolio? The answer is data. Data is the basis for all your efforts. Customers generate data, lots of data. Insights from these data form the basis for new services. And those new services again generate new data. This is the lifecycle you want to follow. Your company must become a master of tracking the customer’s digital footprints. 

Don’t be afraid to work with your competition

In the past, companies used their internal system as the primary source of data. Today it’s not enough. You need to build alliances in order to have a full, 360 degrees view of your customers. Google, Amazon, Airbnb. Companies great at playing the platform economy. They know where their customers come from and where they’re heading.

However, these companies were built from the beginning around data. This is typical for internet businesses. Their products are digital (yes, even Airbnb – this is not a hospitality company). For companies with more physical products or services, touch (data) points must be defined.

Forming alliances with digitally oriented firms is of great benefit. Take for example the Aviation, Travel and Tourism ecosystem. The customer journey starts way long before the flight, or bus ride, or stay at a hotel. Airlines are not always aware where the customer comes from, what his profile is, or preferences. But to be a full-service mobility company they need to do more than that. And doing it alone can prove difficult, if not impossible.

The Aviation, Travel and Toursim ecosystem (Source: World Economic Forum/Accenture analysis)
The Aviation, Travel and Tourism ecosystem (Source: World Economic Forum/Accenture analysis)

Companies should not be afraid of passing customers to its partners. If it benefits the customers, then it should not be withheld from them. 

End the relationship with rogue employees

In all these efforts you have to tackle outside of your company, you may still have to deal with one unpleasant aspect internally: rogue employees.

Be prepared to identify and exclude rogue employees. Discredit the rumors they spread. Company’s egoists and divas are a threat to every initiative you try to run. There most certainly won’t be any applause for the measures you take. But this what you are being paid for as a manager. Sometimes, “solving a problem” means getting rid of the problem. In long term, it will strengthen the company. And those who have been standing in the shadow till now will thank you for that.

Most of the humanity tends to be change averse. Even reactionary. It is the leader’s task to convince skeptical people of the need for more intense cooperation, internally and externally. All the “why’s” and “where to’s” must be answered. It is your primary responsibility as a leader to control attention and direct the energy. But you can’t be too sensitive. Don’t allow endless discussions. It all takes too long. You have to act swiftly. Otherwise, you will take the back seat and watch the pioneers succeeding. 

This is the mystery of the digital age: to connect better you must first disconnect. 

Innovation follows creativity

Once you have cleared the way, start focusing on bringing the innovation power to your company. Those who want to succeed in the market must rely on the creative potential of their employees. Only they can sense novel customer needs that can be met through digitization. Therefore, creativity must be reintroduced into the entire company. Not only the IT nerds should be allowed to play around. Let anyone try it out. The urge for creating something new must be stronger than your company’s hierarchy and political powers. Innovation transforms creativity into customer-defined value. And at the end, the customer pays for all that creativity.

Unfortunately, the human mind does not have a creative spark trigger. Creativity is about making sense of new logic. But it takes time to attain that logic. It is a function of coincidences, rule violations, experiences. This process cannot be accelerated, nor stopped. But the management can and should create an environment where creativity is encouraged. Having a mix of employees with different viewpoints certainly helps.

Digitalization reinvents invention. It gives the time and space for dialogues. For new team constellations. For random dialogues at the coffee machine. During walking and talking to different people.

Creativity is nothing mysterious or extraordinary. It is, same as the digital transformation,  about joining of existing, but previously separate concepts. The “new” is already here, you just have to change the perspective. 

Digital age appreciates the analog human beings

As an employee, you should be really enjoying the arriving of the digital age. Yes, it can be overwhelming, tiresome, or stressful. But it is also the age of regaining what has been lost: appreciation of human abilities. Digital transformation is also people transformation. More time is left for creative work. And the 21st century is about creating new opportunities.

Important to mention is, that digital technology is not only a young person’s game. It does not matter whether you belong to Baby Boomers, Millennials or Generation Z. All can and should participate.

So, stop focusing only on the technical part of the digital transformation. Create awareness for the other factors. And hurry up, as the next age, whatever its name will be, is waiting around the corner. And it may not be that humane.

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Author. I write about technologies and their impact on our lives.

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