Seven guiding principles for effective digital transformation
Partner message from Monstarlab.
By Christian Nielsen, director of strategy at Monstarlab.
Digital Transformation (DX) has been part of our business lexicon for about a decade now, and yet it remains a buzzword to most people. And that’s really too bad, because underneath the buzzword lies great potential for businesses to generate new value, as well as revitalizing existing sources.
A key reason why digital transformation remains poorly understood is primarily because there’s no blueprint – there’s no one-size-fits-all solution. It’s much more about the art of the possible. I find it useful to think of it as a modernization of a company’s infrastructure, because of its foundational influence on culture, structure, and processes.
The good news is that despite its elusive character, it turns out that some approaches are far more effective than others when it comes to DX. Based on my experience helping clients through difficult digital transformation efforts over the years, I have identified a set of useful guiding principles. I know it’s a bold claim, but from implementing these across different contexts, I’ve come to believe that these seven points provide universal and enduring guidance regardless of circumstance, goals, strategies, and industry.
1. Make it about people
Like any change process, digital transformation is first and foremost about people. Only when people are personally motivated to change their behavior is there hope for transformational change over time. To significantly increase your chances of success, it’s instrumental to involve people genuinely by enabling them to influence how your strategy should be implemented. If you have children, you know how effective it is to give them a choice. People want the freedom to execute, and given employees’ hands-on experience, management is better off delegating instead of giving detailed instructions. This approach isn’t to be confused with letting employees freely define the what and why (strategy), because leaving such decisions to people who don’t have general business overview and influence will only cause analysis paralysis, and a consensus approach to strategy will jeopardize your progress.
2. Onboard people before you fly
It might sound like common sense, but you’d be surprised how many change-management projects kick off without first ensuring a strong buy-in from people in an organization — even key stakeholders. Based on my experience, the most effective way to ensure buy-in is to identify a clear sense of urgency for change, widely recognized by numerous people throughout the organization. It often ends up revolving around a competitive reality in the external environment, but internal factors such as low employee satisfaction or attrition — which people can personally relate to — are often more effective in my experience. The COVID pandemic created some good examples, such as legitimizing an open dialogue about work culture and mental health. The point is to identify a topic where people recognize that the status quo is more dangerous than the unknown reality of change, because this will help you get people on board your transformation “airplane”. Giving people an opportunity to genuinely influence the way forward is immensely powerful.
3. Make it strategy-led
People tend to think that digital transformation should be led by technology, but it really shouldn’t. Instead, you’ll achieve much better results and avoid wasting resources if you make DX strategy-led, because only strategy can provide real reason to both people, resources, and technology. Please don’t get me wrong — technology definitely matters. Digital technology has played an instrumental role in developing society and the way we do business ever since the digital revolution began in the later half of the 20th century, with the transition to computers and digital record-keeping. What’s critical to acknowledge, however, is that actual change is a result of human acceptance and adoption, not the existence of technology itself. Technology only enables and facilitates change. While technological advancement has picked up, this principle hasn’t changed.
As tools, digital technologies are great enablers of both improving existing ways of creating value, and creating entire new ways, but only when it’s aligned with the strategic objectives of your organization will it generate value effectively. Technology-led digital transformation in contrast happens when companies make technology investments first and make business objectives an afterthought. The better way is to clearly define the business objectives and work backwards from there by identifying enabling technologies. In different words, put strategy in the driving seat of your digital transformation, while bringing technology along in the backseat.
4. Make it a cross-functional Olympics
People often refer to digital transformation as a marathon, not a sprint. In my experience it’s much more complex than that. It’s more useful to think of it as a team competing in a never-ending Olympics across multiple disciplines where they’re forced to use different skills across their team to compete most effectively. Similarly, you need to make digital transformation cross-disciplinary by involving people both vertically and horizontally across your organization, because not only will they be able to use their different skills, but more importantly their relationships to colleagues in key positions. The tendency is often to optimize only for functionality and title (political power), but in my experience you’ll fare much better if you instead optimize for relational factors. This means identifying and engaging “change champions” who are people with combined strong social influence (connectors), can get things done, and have a positive attitude towards change.
5. Make progress tangible
Few things beat tangible results when dealing with change, so take advantage of this by focusing on a series of low-hanging fruits: powerful results within six to 12 months that can be achieved with the least effort. Real transformation takes time — it’s effectively a never-ending process — so it’s instrumental to provide and celebrate results with compelling evidence of success to avoid losing momentum over time. Rewarding people with genuine recognition and promotions are effective ways to this end, in my experience.
6. Approach it as art
This can be a really hard principle to follow in a lot of organizations, because “art“ is often perceived as a negative – a “fluffy” thing people can do in their spare time. As a consequence, digital transformation is treated mostly as a science that gets employed with a "tell 'em, bribe 'em, then force 'em"-mindset to facilitate compliance. Besides paying more attention to how people feel about the unknown reality of change and guiding them through the fact that human beings are naturally resistant to change, management must relinquish their usual control processes and instead embrace a far more experimental approach where truly empowered employees are encouraged, supported, and recognized for taking calculated risk. Leveraging agile work principles is a great approach in my experience, because it empowers people to create results pragmatically as an art of the possible. Enabling thoughtful risk-taking is key.
7. Zero in on value creation
The purpose of digital transformation isn’t to become digital – it’s to create value for your business. This is key. With that in mind, you’ll want to define what success for your business looks like, because it’ll focus your attention and resources while also enabling you to measure progress. You’ll also have to work hard to define your success metrics, because of the arbitrary nature of value. While financial measures are mandatory for a business, I strongly encourage you to also include some “value-based” measures, because only with these will you be able to capture the true quality-dimension of your efforts. While the measures for you to use will naturally depend on how you have defined success, here are some examples of value-based measures that I’ve seen companies benefit from, besides the classics such as return on investment, cost-benefit, productivity, and digital maturity:
Success with digital transformation won’t come easy, because it’s a complex and continuous long-term process. The challenge has only become more acute over the past two years, when companies’ adoption – and the strategic importance – of digital technologies accelerated dramatically. Hopefully these seven guiding principles will resonate with you and help you on your journey.
As much as I’d like these seven principles to be exhaustive, I know that my experience on such a complex topic isn’t complete, so please reach out with any questions, feedback, add-ons, comments, and more.
Please help me evolve the framework further — comment below: