Digital Transformation: 5 Steps to Success

Digital Transformation Part 2: Prerequisites for Successful Transformation

A contribution by TRANSFORM-First® – the expert network for business transformation.
Authors: Günter Conrad and Dr. Errit Schlossberger

This is the second article in the 5-part series by TRANSFORM-First about the phenomenon of Digital Transformation. The question in the first article “Digital Transformation – just a new hype?” was answered with a clear NO. Rather, Digital Transformation has existential significance for most companies.

At the same time, Digital Transformation often corresponds to a “change in head and limbs”. The necessity must therefore be carefully examined, and if one decides to take the path, one wants to have good condition and suitable map material to arrive successfully. This second article therefore deals with the prerequisites for successful digital transformations.

Many companies shy away from the risk of (permanent) Digital Transformation or underestimate the danger of stagnation.

• According to the latest “Digital Business Readiness” study by Crisp Research, 42% of the companies surveyed in Germany are merely followers of Digital Transformation. Another 19% don’t even accept this change for their company.
• According to Cisco’s study “The Digital Vortex”, Digital Transformation endangers almost every second company through changes in business models, value chains, and product offerings. Affected industries include, besides the technology sector, especially the media, telecommunications, finance, and retail sectors.

Digital Transformation: Impulse 1

Companies that are not ready or set out too late to leave the “proven” comfort zone run the risk of suffering the same fate as Quelle, Schlecker, Weltbild, Nokia, or Kodak. Clarity about one’s true situation is therefore the first prerequisite.

1st Prerequisite: Clear Understanding of One’s Own Position and Condition

A structured assessment helps companies determine whether Digital Transformation is necessary and where action is needed. Three strategic questions need to be answered:

A. Are we affected by Digital Transformation?

• Which megatrends, trends, and product cycles will fundamentally change our markets?
• Which new competitors and new products could threaten the industry now or in 6 months?

B. How do we respond to this?

• Accepting the challenge and deciding to transform significantly towards future viability
• Pilot project similar to a research balloon to venture into new spheres
• Minor, incremental adjustments
• Doing nothing

C. Do we have the necessary strengths, resources, and skills? How do we obtain these and how much time do we need?

A checklist helps to recognize one’s own strengths and weaknesses and, if necessary, to bring in external competencies:

• Clear and lived company strategy
• Clearly formulated goals and transparent goal tracking (cockpit reporting)
• Stringent and experienced program management
• Sufficient financial resources
• Strength of customer loyalty and the brand or product brands
• Intensity and quality of customer dialogue
• Degree of genuine customer enthusiasm
• Professionalism of innovation processes and patent and license management
• Correct product breadth or depth
• Quality of relationships with suppliers and partners
• Loyal personnel who accept the change
• A leadership culture with high-performance teams that think holistically, responsibly, and across departments, and where Digital Transformation is a top priority

Digital Transformation: Impulse 2

Only those who know the digital strengths and weaknesses of their company can create the prerequisites to bring new things into the world.

2nd Prerequisite: Clear and Internalized Corporate Strategy

Only a clearly aligned company can bundle its forces like a laser and achieve peak performance. It should be able to formulate or sharpen its new, digitally induced corporate strategy and vision in the shortest possible time, without armies of consultants conducting analyses for months. Proven and efficient procedures are immediately available for this, e.g., the method proven for decades by the TRANSFORM-First network: StrategieKompakt.DIGITALE TRANSFORMATION StrategieKompakt

“The Transformation Imperative”, T. Vollmann, IMD Lausanne

With StrategieKompakt, the most important strategic questions are answered in a clearly structured and efficient manner, such as:

• What are the prevailing digital trends and trend disruptions?
• What expectations do stakeholders have for the company?
• And more fundamentally: Why does the company exist at all – what unique added value does it provide to its customers – today and in the future?
• What exclusive or core competencies does the company have?
• Every six months, it should also be reviewed whether there are new developments relevant to the strategy.

The renowned American Altimeter Group identifies three key factors for the success of a digital transformation:

• A clear vision and leadership driving digital transformation
• The fastest possible optimization of the digital user experience
• The establishment of a Digital Transformation Team

Digital Transformation: Impulse 3

Digital strategy and vision provide the foundation for a successful transformation. They focus attention on what’s essential. Over time, ‘accumulated’ side topics that don’t fit the focus become obvious and should be put to the test as quickly as possible.

3. Prerequisite: Disciplined Program Management

A successful change ‘from top to bottom’ requires qualified planning of individual projects, their sequence, and the required know-how.

Accordingly, the adjusted strategy is followed by an implementation plan in which all necessary projects are identified and defined, comparable to a settlement plan. All projects together form the transformation program, from which the total effort (personnel, financial, and mechanical) and timeframes are visible and can be ‘decided’ upon.

Disciplined program management, by the way, doesn’t only apply to ‘large corporations’ but to every transforming company. When up to 50% of available resources will be required for the transformation program, it doesn’t matter whether it’s 50 employees or 5,000.

The difficulties in introducing the toll system for trucks have shown what enormous losses can occur if not all involved parties are willing and able to submit to disciplined program management.

Digital Transformation: Impulse 4

To take advantage of the opportunities of transformation programs, to steer the change process, and to manage potential risks, qualified program management is indispensable.

4. Prerequisite: Digital Leadership and High Performing Teams

The term ‘Digital Leadership’ is, of course, a marketing term and can only be misunderstood. It’s about leadership in the new digitalized business world.

Digital markets ‘run’ at a massively increased ‘clock rate,’ and the number of ‘all or nothing’ decisions has significantly increased. Traditional hierarchical structures are massively overwhelmed in such environments, also visible in the stress symptoms of their members.

Accordingly, the decision to create flat leadership structures with all the associated different behaviors and values is the basic prerequisite for successfully playing in the digital world.

The same applies to all employees who will only deliver the required performance and results according to the new rules of High Performing Teams.

True customer orientation and dissolved departmental thinking are two characteristics of this required corporate culture. At FC Bayern Munich, a defender is also allowed and encouraged to score a goal.

5. Prerequisite: Performance Measurement

Only clearly formulated goals can be achieved. And only if progress is repeatedly and correctly measured is there a high chance of success. Therefore, a ‘measurement culture’ is an essential prerequisite for a successful transformation program. ‘You get what you measure!’

Digital Transformation creates new opportunities to increase revenue and reduce costs

The following examples illustrate the impact that Digital Transformation can have on companies:

• Cost reduction through automation of core processes along customer touchpoints
• Productivity increase through the use of collaboration tools
• Creation of entirely new business fields through combination or addition of new technologies
• Expansion of existing product and service offerings through more open architectures and cooperations that help solve comprehensive problems holistically
• Better understanding of customer behavior through the use of Big Data tools
• Enhancement of customer experiences through integration and ‘barrier-free’ digital access channels

Digital Transformation: Impulse 5

With a holistic and structured approach that includes situation assessment, strategy, design, and impact evaluation, the chances of achieving the desired effects with a digital transformation increase. This is not just about revenue and costs, but also about creating a better culture with permanent innovations and changes, as well as more loyal customers.

In the third part of our Digital Transformation series, learn how Digital Leadership and High Performing Teams can be realized.

Recommended Links:

Wikipedia: Digital Transformation