Digital transformation journey: Making an elephant dance

Building digital products, analytical models and using technology is the easy part of the digital transformation journey

There’s a lot to love about elephants — like the best traditional companies, they are strong, powerful and have long memories! What they aren’t known for is agility — they can gallop at quite a pace but find it hard to make sharp turns. A quick scan of YouTube will show that elephants can in fact be trained to dance to music or to a trainer’s command. Digital transformations for traditional companies require similar special music and trainer skills. Without these, organisations frequently make predictable missteps in setting up and managing such transformations. 

We have learnt seven important lessons from our work with organisations in various stages of the digital transformation journey — some like musical notes and some like trainer instructions — all designed to increase chances of success in the journey!

Prioritise ruthlessly: It is hard to pick amongst all the “cool” ideas, especially once you have unlocked the creative energy of the organisation. But no more than two initiatives in year one, and four in year two are likely to succeed. Don’t chase all 20 ideas on your road map at once, since most of them will remain half-baked and some may never see the light of day. Don’t underestimate the energy, resources and time required to drive behaviour change (using the new digital/analytics enabled process) or to drive adoption (for instance, of a new product/proposition). Building digital products, analytical models and using technology is the easy part of the journey.

CEO led: Bottom-up idea generation as a way to unleash creativity and enhance ownership is great, but large digital transformations (like any other kind of transformation) need to be driven by the CEO. This is because most require cross-functional collaboration, induction of new kinds of talent, potentially new compensation models, partnerships with eco-system players, and dynamic budget allocation, besides the obvious challenge of changing mindsets and behaviour. 

Partner wherever possible: Large companies love to build everything themselves. In a digital transformation, this can lead to delays and waste. Partners can provide components for solution building or help boost customer acquisition. Using tried and tested components helps save both time and reputation with users. This is especially useful when using an agile approach where you don’t know exactly what you want in the solution at the outset. Once you know exactly what you want, and only if it’s uneconomical to partner, it can be built in-house. 

Be truly “customer first”: This starts by admitting that corporate decision makers aren’t really the best people to opine on what customers/users need or want. Then, there are three ways to bring “customer first” into design and decision making — involve a user panel in the design process right up front, get specialists to help with the “art” of understanding customers, and organise immersions for executives to gain a deeper understanding of customers/users.

Test and learn: Managers are trained to get things right the first time, to be “perfect” and “bullet proof”. This can be a dangerous approach when building solutions that aren’t fully known at the outset. There is a lot of merit to starting with something minimal and learning through actual experience with customers/users. The concept of a “Minimum Viable Product” can be used to reinforce this. And a hawk's eye view by the CEO/sponsor that we aren’t letting this tendency creep into our design is critical. To enable this iterative approach, set up agile “garages” where cross-functional teams work with digital specialists and technology developers (including SIs) to design, build, test, launch and maintain digital solutions. 

Budget based on milestones: Budgeting once a year, as per usual corporate processes, doesn’t gel with the agile nature of digital projects. It is more prudent to allocate increased budgets based on milestone achievements and to starve those that don’t seem to be delivering impact or aren’t “learning” fast enough. 

Create a “transformation fund”: The biggest digital disruptions have been possible due to funding of years of operating losses by venture capitalists. In contrast, corporate digital transformations are expected to generate huge ROIs and be profit generating right at the outset. Corporate sponsors focus a lot on the costs of building digital solutions, which are usually quite small. They forget the money and resources required to drive adoption of new solutions, either by external customers or internal users. Decision makers would be well advised to include a “transformation fund” when they create the business case for digital transformation initiatives, which can be drawn down as required to drive adoption at pace.

In our experience, following these simple learnings can be the crucial starting point for a truly transformative digital journey — after all, once an elephant has been put on the right path, sheer momentum will carry it forward.

The author is partner and lead, digital and analytics practice, McKinsey & Company, India