What holds business leaders back from plunging full-throttle into digital transformation? It’s fear — fear of the unknown, especially since everyone is learning their way around this new world as they go along.
Paramount among these fears are fears of cannibalization, of undermining long-established and currently profitable ways of doing business and replacing it with something new and unknown. But disrupting one’s own business may be the only way to stave off the threats of disruption by hungry and tech-savvy startups. As Ganesh Ayyar, CEO of Mphasis, puts it: “If you don’t embrace cannibalization — for all the good talk that we have of the CEO transformation, self-transformation, organizational transformation, a new set of strategies, new culture — you will stop in your tracks and you will not progress.”
In a recent and engaging interview with Knowledge@Wharton, Ayyar and University of Pennsylvania Wharton professor Tyler Wry explored what it means to undertake digital transformation. Does it mean going to cloud for most services and applications? Does it mean setting up electronic channels for customers and partners to do business? Does it mean competing on data analytics? Is it social media? While there are no hard and fast rules for digital transformation, there are some truths that have emerged in recent years:
Digital transformation is hard work. Despite what vendors may say, there’s no such thing as a seamless, overnight transformation to digital bliss. “When you’re talking about a digital transformation in an analog industry, with cannibalization, there is an incredible amount of risk that gets layered onto these decisions when they’re in established organizations versus small firms or start-ups,” says Wry. “This is something that takes a lot of thought, and it’s a very challenging thing — how you engage cannibalization in practice because you are risking existing relationships, you are risking existing business lines, revenue streams, employees. And it’s a really tough challenge. If you are not willing to undertake that part of the journey it’s probably game over anyway.”
Digital transformation is not about technology. While it may seem counter-intuitive, digital transformation shouldn’t be pinned to a particular technology. “Technology is changing at such a fast pace that if an organization implements a technology and calls itself digital, it’s missing the point,” Wry says. “You need to actually develop the capabilities to guide the organization through not just one change, but ongoing changes over time, as technologies change. And then you can start to have the conversation about this being a digital enterprise.”
Corporate culture and speed matter. Embracing digital technologies doesn’t make an enterprise a digital enterprise, says Ayyar. Corporate culture is what delivers, along with the ability to boost productivity in a massive way. “When we analyzed digital enterprises, two qualities stood out,” Wry explains. “One is continuance innovation or a culture of experimentation, and second was speed. Everything was done at five times, 10 times, 50 times the speed. These two attributes — and having the right culture and those technological elements — make a digital enterprise.”
A digital-savvy corporate culture goes deep. Startups tend to have what-have-we-got-to-lose cultures, and are comfortable with applying cloud, data analytics, mobile and social media to disrupt and separate established companies from their customers. That’s a far cry from the way established organizations look at the world. “Culture is not about meetings, it’s not communication, it’s not the superficial things,” says Wry. “If people have been doing the same thing in the same way, and believe that it’s the right way, getting them to change and having that change stick is an extraordinarily difficult thing to do. And then, if you are a multinational enterprise, you layer different sorts of national cultural expectations on top of that. So this is really tough.”
The success of digital transformation depends on the ability to measure progress. Measurement is key, Ayyar and Wry agree. Ayyar indicates his company employs two key measures: “Are we winning business in new areas?” and “Am I relevant to my customers?” Wry adds that “the most immediate indicators are the behavioral ones. Do you see behavioral change? Do you see sales? Do you see positive customer responses?” Digital leaders are open leaders. Becoming a digital leader may mean unlearning a lifetime of management skills, Wry comments. Digitally savvy leaders are know for “being open to change, being receptive to new ways of learning, being willing to butt up against areas where you don’t know things — and then not react out of fear or feel threatened as the person in the room who knows the most.” Digital transformation comes from within the executive soul, and radiates outward. “If you aren’t engaging with the right information and you’re not open to transforming yourself, it’s going to be hard to drive these changes through the organization,” he adds. Such a change ”required adaptiveness,” Ayyar says. “It would require change and self-transformation at the leadership level, which starts with the CEO and the CXOs.”
Digital transformation means thinking like an entrepreneur. What matters in digital transformation is the way people are able to assemble technologies into new ideas or concepts — regardless of how far it may stray from the established business model. Wry, who teaches entrepreneurship, notes that the core of entrepreneurial — and therefore innovative — thinking “is you need to experiment, you need to be adaptable, you need to be moving very fast.”
This article was written by Joe McKendrick from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.