Digital Transformation for Enterprises

Supporting the Programs & the leaders

1. Background

Digital Transformation has been one of the defining forces of the last decade – impacting industries, consumers, economies and livelihoods. No sector has been left untouched. 

Each type of business has a different context for Digital Transformation. We see four broad classes of businesses on the dimensions of size/scale and Digital maturity which are shown as the four quadrants alongside.

At the leading quadrant are large digital platforms that have built significant scale with millions of customer base. “Network Effect” and the winner-takes-all characteristic of Digital platforms propels these companies even further. They compete across categories, and often with their own supplier base. Their focus is to scale fast and are expansive in their scope & ambition.

The digital economy has spawned an ecosystem of “digital natives” which are depicted as the top left quadrant. These are typically startups - many have grown successfully, some as “unicorns”. They have great talent, are backed with strong venture funding and pursue their niche vision with a strong passion. They are disrupters by nature – competing fiercely within themselves and with the old economy. Some of them will succeed brilliantly, others would fail or be absorbed; but all together this ecosystem drives Digital Transformation in very innovative ways.

While these two classes of enterprises are in the limelight as true Digital Enterprises and have indeed transformed many aspects of life and business, a very large share of economy and livelihoods are (and will continue to be) in the “old economy” – both established enterprises as well as the very large & unorganised pool of micro & nano enterprises which are shown in the two bottom quadrants.

Large enterprises are looking to Digital for growth, for defending their turf (from the digital natives), to compete within their segment and to stay relevant to the consumers of tomorrow. While they have the resources, they are challenged on managing the dichotomy of their existing business and driving transformations and to change internal mindsets and ways of working.

The small enterprises (in the bottom left quadrant) face a bigger risk of being left behind as the ecosystem adopts digital. They also require additional developmental support to make their foray in Digital and also need to reorganize themselves and leverage open networks to succeed.

Digital Transformation presents clear imperatives for all four classes of businesses – but with differing challenges and pathways to success. There is also significant interplay between the above players as they compete, complement and collaborate in a new digital ecosystem

This article focuses on established large/medium enterprises and their journey on Digital and what could help them be more successful.

2. Digital Transformation: Imperative for Established Enterprises

Enterprises across industries are embracing digital with the objectives of :

• Growth with both market expansion and competitive growth - new “Digital” products & services, innovative channels, improved availability & service and great customer experience. This includes competing and also collaborating with the new digital-native players & platforms

• Cost efficiency with end-to-end optimization (procurement, manufacturing, logistics, sales) as well as productivity – on the back of digitisation of core processes

Beyond these direct business objectives, they see the opportunity & need to reconfigure for speed & agility – in particular leveraging Data, Analytics and AI

Every enterprise dreads the Kodak or Nokia moment where they were pushed to irrelevance at a critical inflexion point. This FOMO aspect, along with some strategic and specific business objectives often drives the launch a Digital Transformation program.

3.  Digital Transformations for Established enterprises : Challenges & Risks

While the case for Digital Transformation is clear, this journey is fraught with its own challenges and risks – which have indeed manifested in many such programs across sectors and geographies. There have been good success stories of enterprises leveraging digital– and these are what get quoted in business magazines and case studies. However, the overall picture is not all rosy. Some programs stall midway and get abandoned, and some fail hard, harming the business. And many just flounder, get completed “technically”, but deliver minimal business impact.

The reasons for these are many – some common themes, while others may be unique to the company at hand.

Large organizations have an inbuilt rejection mechanism. Digital, by its very nature, is about driving massive change – so there is an inherent conflict in every stage of the journey. The “Innovator’s dilemma” manifests itself as “why fix or change what is not broken”.

These organizations are used to metrics, decision criteria & methodologies to govern and execute programs that were appropriate in traditional projects but come under stress in the Digital age. It is difficult to make shifts to new approaches like “Agile” & “Product Teams” which seem to be counter to their more strait jacketed approaches.

Talent is a key determinant of success in a Digital Transformation. It is a challenge for established enterprises (who may be seen as “legacy” enterprises) to attract & retain the new age talent.

Equally an overdrive on change to a digital model can break what has been built over decades. There are umpteen examples of businesses having pivoted too much and too fast to a new model; but thereafter having to abandon this, impacting customers and investors.

While digital transformations are more than just technology projects, the new technology brings its own risks on transition, security and adoption – all of which can adversely impact the business.

So, all in all, while the upsides are significant and transformation almost inevitable, the downsides need to be managed very carefully. Indeed, a risk averse business leader is likely to defer much needed transformation program fearing above risks.

4.  Digital Transformation : Choices and Decision dilemmas

Transformation programs present several decision points and are often at crossroads.  There are a range of choices which  work best in a context - there will be umpteen examples where they worked well and many others where they didn’t ! Making these choices becomes one of the most critical challenges for Digital Transformation leaders.

"One day Alice came to a fork in the road and saw a Cheshire cat in a tree.

'Which road do I take?' she asked. 'Where do you want to go?' was his response.

 'I don't know,' Alice answered. 'Then,' said the cat, 'it doesn't matter."

– Lewis Carroll, Alice in Wonderland

Table below lists some of the typical dilemmas that many of us would have faced in Digital Transformation programs:

Dilemmas in Digital Transformation

In all above there is no “one right answer” – and therein lies the challenge. Most assessments will end with a set of pros & cons which are useful but not good enough to take a decision. In most cases this will be a leadership call to take – with the program teams looking to the leader(s) for an explicit decision or implicit cues on which way to turn.

5.   Supporting Digital Transformations and Transformation Leaders

With the significant opportunities & upside on Digital Transformation initiatives and the big challenges & risks, the transformation teams and particularly the leader(s) look for additional support to navigate the paths. Transformation programs are setup with strong internal resources as well as external consulting support (on functional & technical areas) who play a key role in the heavy lift of the program delivery. But despite this, the program leaders face some unique dilemmas and challenges and look for that added support or mentorship.

Transformation leadership can be a very lonely spot – despite large teams and consulting resources. Strong mentorship can help in fleshing out these dilemmas and be an effective sounding board to share the dreams & ambition and also the deeper concerns & worries – and then to progressively arrive at a decision with full understanding of the trade-offs.

Mentorship of Transformation leaders and the programs, needs to bring to the table some critical aspects, including :

• Trust: Mentors need to earn and sustain the trust of the transformation leaders, to understand the real issues (often beyond the objective stated ones) and display deep empathy to evolve best courses of action

• Lived Experiences: Nothing substitutes the learnings from having been in a similar seat with similar stakes through multiple programs and the accompanying joys and battle scars

• Deep Expertise: Deep understanding of the domain (functional / industry), the technologies and the new trends is required for the mentor to make a meaningful contribution

• External Orientation: To be well tuned to the evolving ecosystem, industry & academia to bring in the best of thinking of today

• Cross-Functional Approach: Transformations are cross functional across the business. Mentor(s) need to bring this perspective

  
  

As required in Digital Transformation programs, mentorship can bring in the right blend of :

• A strong analytical view of the solutions - processes, tools/technologies & resources and a hardnosed view of benefits, investments & risks

• An empathetic look at the choices & dilemmas, the real pushes & pulls of the leader in navigating the organization and driving change; and crafting that inspiring vision for the program

  
  

In digital transformation programs, mentorship for leaders can be the multiplier to significantly improve ambition, execution, and outcomes.

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