Four Reasons Digital Transformation Should be a Core Capability
Given the prevalence of digital in today’s organizations it’s surprising they continue to have such a difficult time managing it (Boston Consulting Group, Forbes). Wouldn’t it stand to reason that by now most organizations should be well down the path to establishing digital transformation as a core capability?
As a quick reminder from my previous post, Digital Transformation is “a constant journey of the realignment of the business models, technologies and organizational culture to more effectively do business in the digital age” (Soumyasanto Sen, Digital HR Strategy, 2020).
Four reasons Digital Transformation Capability should be a core capability of your organization.
1. Avoiding Failure is certainly a good reason for organizations to develop their Digital Transformation Capability. The cost of a failed digital transformation program can easily run companies into the millions of dollars when considering sunk costs such as:
internal labour costs - actual costs and opportunity costs associated with tying up internal experts (functional & technical)
backfilling costs - actual costs and operational disruption costs resulting from backfilling internal project team’s ‘day jobs’
consulting costs - highly specialized and expensive third party resources
business disruption costs experienced during failed go lives
lost opportunity costs from programs put on hold in favor of the failed project
unrealized software licensing investments
2. Surviving with Uncertainty. Uncertainty brought on by crises (e.g., the need to de-carbonize, the war in Ukraine, the Covid-19 pandemic), the digitally-fueled Fourth Industrial Revolution, social and regulatory pressures are all wreaking havoc on today’s organizations. This is particularly the case for those organizations built for certainty; those sticking to tried-and-true operating models that depend on the status quo and stable environmental conditions. There are countless examples of organizations like Blockbuster and Kodak that filed for bankruptcy because they were unable to transform their business models and digital platforms quickly enough to survive. Netflix is one example of an organization that succeeded because it was better optimized for uncertainty.
In his 2019 book, Why Digital Transformations Fail, Tony Saldanha does an excellent job identifying the differences of organizations that are built for certainty vs. uncertainty. He makes a compelling case that organizations built for uncertainty are better situated for digital transformations. The message for organizations built for certainty (the majority of organizations) is not that their transformations are likely to fail. Rather they will simply take more time and effort to deliver successfully. In addition, the risks and issues encountered will be more challenging. Preparing in advance for uncertainty, by making the appropriate investments and accommodations, helps organizations experience fewer risks and issues, and allows them to respond more quickly to adversity during the transformation journey.
Organizations generally built for Certainty vs. Uncertainty
3. Keeping Pace. Organizations are clearly recognizing the importance of investing in their Digital Transformation Capability.
Examples of the Digital Transformation investment
To keep pace with the sheer magnitude of change faced everyday, organizations must be prepared to include Digital Transformation Capability in their strategic and financial planning, workforce/resource planning, operating models, and technology investments. Digital Transformation Capability is not a ‘one-and-done’ proposition. The technology landscape, the competitive landscape and the socio-political landscape are always changing. These changes create the necessity for organization to continually renew and transform themselves to keep pace and stay competitive.
4. Outperforming the Competition. Some organizations have taken Digital Transformation Capability to the next level. By investing in Digital Transformation Capability as a strategic differentiator, they are not only surviving and thriving in turbulent times, but they are out-performing the competition in ways that make their CEOs and CFOs get excited.
Digital Transformation Capability as a strategic differentiator
Digital Transformation Capability is a requisite capability of the 21st century. Not only does it help organizations survive the turbulence of today’s challenging times, but it also helps them achieve an unfair competitive advantage. If you are interested in better understanding your organization’s readiness for your next digital transformation please reach out for a free assessment.
-Kevin Copithorne
References:
Digital HR Strategy, Soumyasanto Sen, Kogan Page, 2020
Flipping the Odds of Digital Transformation Success | BCG, downloaded from the web November 17, 2023
IDC Analyst Brief: Current Challenges to Creating Business Outcomes Through Digital Transformation, downloaded from the web November, 2022
Why 84% Of Companies Fail At Digital Transformation (forbes.com), downloaded from the web November 17, 2023
Why Digital Transformations Fail, Tony Saldanha, Berrett-Koehler, 2019 (Blockbuster vs. Netflix)