Part 1 of the Digital transformation philosophy identified motivations for digital transformation, the need for a well-planned transformation process, and, the required knowledge and considerations essential to start the transformation journey. (These considerations are shown in figure 1 below)
This article (part 2) focusses on the first three considerations: company strategy, critical success factors and digital principles. The next article (part 3) will focus on the remaining considerations.
A company’s strategy defines its approach to enhancing operational strengths, overcoming weaknesses, exploiting opportunities and mitigating threats, and is therefore based on understanding of the organisation’s operational challenges and the disruptive trends in the external market. Digital transformation objectives are therefore goals within the overall company strategy.
When thinking about digital transformation objectives, the constant change experienced in organisations, and, with the rate of technological change; it is only logical to wonder if it is possible to have an acceptable end state for digital transformation and how this would apply to different types of organisations.
Since the reason for digital transformation is the upgrading of an organisation’s business, operating, and resource models to provide it with a competitive advantage in the market, the end state would always be relative to that of its competitors.
Ultimately, after completing a few digital transformations cycles the organisation should have achieved a certain agility, which allows it to be uniquely responsive to changes within its internal and external environments.
CRITICAL SUCCESS FACTORS FOR THE DIGITAL TRANSFORMATION JOURNEY
As an organisation sets out on its digital transformation journey it should consider the following critical success factors.
1. Create a single, coherent and governed digital transformation vision & plan
An understanding of the complex nature of organisations, where changes to one of the components within the system invariably changes other components within the system, reveals the need for a multi-lateral and consolidated approach to digital transformation. It should never be executed as isolated initiatives within individual business units.
A single coherent digital transformation vision & plan should highlight the differences between as-is and to-be states and the approaches and mechanisms required for the achievement of the company wide transformation goals.
Siloed approaches will not only be more resource intensive, from both a cost and effort point of view, but will also create additional complexity in the operating environment, which contradicts the digital transformation ambitions of simplicity and agility. Individual perceptions of the required change can hamper the ability to align goals and outcomes and the all-important creation of a single vision and plan. Overcoming this challenge is likely to require the establishment of some kind of design authority or governing board that take overall responsibility for the achievement of the organisation’s digital transformation goals. It would oversee the ultimate digital transformation design, the prioritisation of initiatives into phases, and the monitoring of accomplishments.
2. Consider more than just technology changes (structural changes)
The digital transformation mechanism toolkit is much bigger than the latest and greatest technology solutions. As per the digital transformation mechanisms considerations presented in the next article (part 3), the mechanism types depend on the type of organizational model to be transformed. Changes could include strategic policy changes, functional structure and related skill changes, process optimisations, legacy system upgrades, changes to partner models, and the use of new technologies, to name but a few – all mechanism types need to be considered.
3. Change iteratively while measuring transformation successes
Changes applied in phases, in parallel if so planned, allow for an evaluation of the effectiveness of transformation approaches, and for the identification of the impact on components that may not initially have been considered as likely to be impacted. Also, success breeds success, and early successes can be an important motivation for embarking on the overall journey that may seem immense.
The use of a phased approach can also assist where proof of concept tests is required to evaluate approaches, or mechanism options, for future iterations of the transformation journey.
For each iteration, an exact model of the begin-state, a model and measurement conditions for the end-state, and progress in the achievement of the full transformation should be established to avoid any confusion during transformation.
DIGITAL TRANSFORMATION PRINCIPLES
A very important step in the creation of a digital transformation plan is the definition of the principles to be used for coherent and consistent decision–making throughout the transformation process. The number of principles employed should be limited, and the reasons for the choice of a principle should be well motivated. The four principles set out below can be used as a minimum.
1. Holistic approach
Base the digital transformation strategy on an understanding of the entire organisational ecosystem, its interdependences, strengths and weaknesses.
Our philosophy is that we want to be an ecosystem. Our philosophy is to empower others to see, empower others to service, making sure that other people are more powerful than us. With our technology, our innovation, our partners – 10 million small business sellers – we can compete with Microsoft and IBM. –Jack Ma
In the digital economy organisational power does not only originate internally, but also from the networks it creates within its ecosystem. Also, agility as the most important ingredient required for resilience, is underpinned by a standardised, simplified and well understood core supporting operational delivery.
Fragmented changes to the core, or any components interacting with the core, which are often initiated as critical tactical upgrades, may disturb the balance responsible for operational successes. Similarly, the implementation of innovative solutions to business problems – widely publicised as the most important tactic to achieve digital transformation – can have wide and unintended consequences if the impact and risk of the solution on the ecosystem are not considered holistically.
Therefore, it is important to holistically understand the potential and limitations of the core and connected components, and, to plan the desired end state based on this understanding while considering all types of transformation mechanisms before planning a transformation journey.
2. Simplicity in design
Simple can be harder than complex: you have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains. -Steve Jobs
Find those simple patterns to be used as the foundation of all solution designs.
Simple design patterns are not only easy to explain and remember, but also easy to optimise and reuse as core components of complex solutions.
Creating simple designs begins with a view of the end / optimal state. It requires an innate ability to distinguish essential requirements from those that are peripheral and optional. The essential requirements make the greatest contribution to resolving the root cause of a problem. To achieve simplicity, it is necessary to first consolidate the requirements and potential solution components (current and new), then evaluate all components for cost/effort versus contribution, filter to the basics (as done during standardisation), and finally to recombine the most beneficial components in the most eloquent manner, thus obtaining less is more elegance.
3. Long term agility
Consider the long-term implications of decisions made now.
This principle relates mostly to technology where the pace of change is fast. Solutions found to be easy to use, or cheap to purchase today may not provide long–term value. Considerations should always be given to the operational agility and growth mindsets of vendors, conditions experienced after initial contract termination and the effort involved and losses suffered in cases of vendor changes. Loss of information and related business intelligence is difficult to calculate, but the impact on any organisation can be destructive.
4. Choose your battles
Focus transformation efforts on the changes that will have the most impact in achieving the end state.
Pareto’s law (known as the 80/20 principle) states that in a given situation 20 percent of the effort accounts for 80 percent of the benefit; implying that not all solutions to a problem should be treated as equal. One should have some way of prioritising the implementation of transformation solutions.
I have always found adapting the Eisenhower matrix to be useful in prioritisations – as shown in Figure 2 below.
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