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What Do Digital Transformation Leaders Do Differently?

Forbes Technology Council

CEO of Digital.ai, Leader in Value Stream Management, providing end-to-end visibility to deliver business value from digital transformation.

Every company is a digital company in our digital economy. For years, companies across industries have embraced the idea of digital transformation, investing in new technologies and strategies to become more digital. Now the coronavirus pandemic has increased the urgency around accelerating these initiatives. 

In a Gartner survey from May through June 2020, 69% of boards of directors reported accelerating their digital business initiatives, and nearly half predict changing their business model, as a result of the pandemic. 

Companies want to go digital; the problem is that what most see as digital business transformation is actually just digital business optimization. This article is the first in a series that will explore the challenges and rewards of digital transformation. Real transformation doesn't happen overnight, but it starts with an important mindset shift.

The Butterfly vs. The Fastest Caterpillar

True digital transformation is disruptive. It occurs only when you understand how to create value for your customers in new ways, and you are willing to change your entire business model and develop digital technologies to follow through on them. 

Although 66% of business leaders think they are engaging in digital transformation, only 11% are actually doing so, according to research from Gartner. The majority of leaders are simply digitally optimizing their business for incremental productivity and efficiency improvements. It can be difficult to recognize this distinction — balancing doing things right (streamlining existing business processes) while also doing the right things (innovating and changing the business to deliver meaningful business outcomes). 

George Westerman, senior lecturer at the MIT Sloan School of Management, compared successful digital transformation to “a caterpillar turning into a butterfly.” But when transformation efforts fall short, “all you have is a really fast caterpillar.”

A fast caterpillar may achieve business objectives faster and cheaper, creating a better user experience or boosting efficiency by moving to the cloud or building mobile apps. A butterfly learns to deploy digital technologies to reshape how it operates, establishing new sustainable revenue streams and omnichannel experiences for evolving customer expectations.   

Here are four of the main reasons companies prioritize digital optimization over true transformation — and what digital transformation leaders do differently. 

1. Value is hard to define, measure and improve.

The value of digital transformation is not as easy to define and improve as that of optimization. Digital transformation aims to create new value and business models using digital technologies, which are driven by largely intangible elements — for example, software-based innovation and the collaboration and creativity of knowledge workers.

Because it’s so challenging to measure and refine the value and outcomes delivered by digital transformation, businesses often end up focusing on the simpler task of tracking the efficiency of digital optimization’s process and outputs. 

In companies that succeed at true digital transformation, business and technology teams jointly define the value as a hypothesis. They collaborate to discover the true value, driving outcomes by continuously learning and improving the value they provide to their stakeholders. 

2. Innovating at scale requires a new approach. 

Innovation in leading digital-native companies, like Apple and Amazon, doesn’t come from one or two individuals; it comes from teams. A “team of teams” of creative knowledge workers is essential to produce digital solutions in a dynamic world. Many companies can be agile and innovate within small teams, but they stumble when trying to scale to larger and more complex organizations, with different cultures, tools and systems. Companies with multiple teams can become siloed and lose sight of shared purpose and value. 

Companies that scale their transformation efforts, while also optimizing their existing business, organize themselves around “value streams,” independent but interconnected teams of teams with a shared purpose of delivering differentiated customer value.

3. Need for a new mindset, as constant change is demanding.

In digital transformation, ongoing volatility, uncertainty, complexity and ambiguity (VUCA) are guaranteed. Effective teams accept that disorder comes with the territory. They develop a resilient and adaptive digital mindset that allows them to learn, grow and improve as they deal with unforeseen changes. This mindset, based on agile learning via short iterative bursts, helps teams adjust to changing needs and proposed outcomes. 

Digital optimization is more structured and orderly than transformation. But the real rewards are tied to reinventing the risks of transformation. Companies that empower their teams to change their mindsets as “digital athletes” — those who take risks, learn, adapt, iterate and improve — create a culture that fosters true transformation. 

4. Silos prevent constancy of purpose.

According to management transformation pioneer, W. Edwards Deming, companies must create “constancy of purpose” toward improving a product or service. Constancy of purpose is missing in teams focused on optimization. Companies are often guarded about sharing information across the groups and teams, such as sensitive data, product and customer experience usage, and sales and marketing and pipeline info, even within the company. 

However, in today's digital world, companies need a more open approach to sharing information. A thriving team of teams needs constancy of purpose to drive decisions and offer visibility and insights within the entire organization. Many teams working toward optimization lack a shared understanding of the overall context of their actions, remaining in the cocoon of the caterpillar. They will make decisions that are good for the team but not necessarily good for the company transformation — or butterfly — as a whole.

As we navigate new challenges and opportunities after the pandemic, digital transformation will continue to grow in importance. True digital transformation is hard; however, digital leaders can take steps and pathways that make it easier — with business and technology teams co-creating and jointly accountable for value, innovating at scale with a team of teams, embracing a digital mindset to adapt to changes and driving constancy of purpose with visibility across the enterprise. 

Innovative companies will take a hard look at their digital initiatives and prioritize true transformation over optimization. Others will be left behind as caterpillars that can never quite catch up. 


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