How People Are the Real Key to Digital Transformation

Over four years, authors Gerald C. Kane, Anh Nguyen Phillips, Jonathan R. Copulsky and Garth R. Andrus surveyed more than 16,000 businesspeople worldwide about the impact of digital disruption on their organizations. The researchers gleaned numerous insights that can help guide any company to “digital maturation.” They found that technology alone doesn’t drive digitalization. Rather, a firm’s talent, culture, adaptability and leadership matter most.

The authors offer strong arguments, detailed examples and solid advice, including a warning not to copy another firm’s digital path outright but to adapt the process to your unique culture.

Content Summary

Recommendation
Take-Aways
Summary
About the Authors

Recommendation

Over four years, authors Gerald C. Kane, Anh Nguyen Phillips, Jonathan R. Copulsky and Garth R. Andrus surveyed more than 16,000 businesspeople worldwide about the impact of digital disruption on their organizations. The researchers’ insights can help guide any company to “digital maturation.” They found that technology alone doesn’t drive digitalization. Rather, a firm’s talent, culture, adaptability and leadership matter most. The authors offer strong arguments, detailed examples and solid advice, including a warning not to copy another firm’s digital path but to adapt the process to your unique culture.

Take-Aways

• Digitalization has changed the business environment profoundly and will continue to do so.
• People and culture drive digital transformation more than technology does.
• Consider digital transformation in terms of “digital maturation” rather than sudden, wholesale change.
• Develop a strategy for digital maturation. Failure to have one will diminish your progress more than any other factor.
• You don’t need a new crop of leaders to guide you through digital transformation.
• You need the right talent to achieve more than a modest level of digital maturation.
• The potential of AI to displace workers exceeds anything seen before in history.
• You can’t digitize without the right talent, but even the right talent can’t digitize in the wrong culture.
• Maturing firms embrace experimentation faster than firms in earlier stages.

Summary

Digitalization has changed the business environment profoundly and will continue to do so.

Almost 90% of 16,000 businesspeople who took a worldwide survey agreed that digitization will change their business. Despite this certainty, most believe that their firms have responded inadequately.

Employees, particularly important talents, who understand the threat of disruption but believe their organization isn’t sufficiently prepared may jump ship. This means leaders need to act. Every organization faces imperative change. Digital disruption will affect almost every industry, manifesting in many forms: mobile technology, AI, blockchain, virtual reality, 3D printers, self-driving vehicles, and more. Companies must update the skills and advantages that they are deploying to compete or today’s practices will become tomorrow’s impediments and will enable your more nimble competitors to win.

“Digital strategy is about adapting the organization to a changing environment in a way that leads to sustainable competitive advantage.”

Leaders who wait for disruption will have waited too long. Print newspapers, for example, earned increasing – even record – profits right up until the day their former business model simply collapsed.

People and culture drive digital transformation more than technology does.

Agility, flexibility and the ability to change the culture and structure of your organization matter most. Technology itself doesn’t threaten anyone. Disruption happens only when someone else figures out how to leverage technology to their advantage against your company. Agile organizations make decisions with sufficient speed to stay ahead of the competition. Assess your firm’s opportunities and threats in light of your current activities. Consider the gaps in its ability to adopt and adapt to new technology – for example, digital communications tools that connect employees and to your customers.

“While the increasing rate of technological innovation is a significant part of the challenge facing companies, it is not the problem in and of itself.”

Improve your company’s ability to conduct research; undertake new practices; and capture, process and use information. Make your organization flatter and more diverse. Emphasize continuous learning and internal communication and collaboration. Make sure employees know your organization needs to change. Explore how digital technologies already affect your firm, and designate digital pilot projects you can launch right away.

Consider digital transformation in terms of “digital maturation” rather than sudden, wholesale change.

Emphasize change as a continuum rather than a threat. A digital future doesn’t require wholesale changes in talent. Solid management practices – such as aligning people and the corporate culture toward the same goals – remain critical.

Take your time, and learn as you go. Don’t expect your employees to know what to do. Educate them, and spread the knowledge. Find exemplary parts of your organization that have made the most progress toward digital maturation. Document their processes, and use them to help lagging parts of the firm. Communicate clearly that the process of maturation will never end.

“Digital leadership is about leading amid the new business environment created by digital disruption, but it is not about mastery of technology.”

Most firms have begun their journey toward digital maturation. One-third of companies surveyed report having reached the later stages. Firms generally progress unevenly; some components of the company leadership, and some lag. Successful firms know that change continues even as new technologies and ways of doing things shift continually. Assess the components of your business to find pockets of digital fluency. Pair the leaders of those units with leaders in lagging areas where they can offer guidance and coaching.

Develop a strategy for digital maturation. Failure to have one will diminish your progress more than any other factor.

Review case studies from organizations that have successfully gone where you want to go; then tailor their best ideas and practices to your firm. Avoid having excessive competing priorities by identifying one high-impact action your firm can take in the next two months to deliver a win and move you closer to your digital goals. Repeat this process again and again. Consider how your business and industry might look a decade hence based on emerging tools like AI and 3D printing.

“Digital maturity is about continually realigning your organization and updating your strategic plan to account for changes in the technological landscape that affect your business.”

Like duct tape, new technologies often have a wide range of uses depending on organizational needs. For example, firms use Twitter for multiple functions, such as customer service and research to glean business insights. Academics speak of “affordances” – that is, capabilities – that new technologies can deliver. Digital maturation requires progressive, consistent organizational change in structures, processes, practices, and more.

You don’t need a new crop of leaders to guide you through digital transformation.

Principles of sound leadership prevail. Leaders must inspire through purpose and vision – and must persuade rather than command. These abilities become even more important given the speed and uncertainty around digital change. Leaders must make faster decisions with less information. They should encourage collaboration, risk-taking, and experimentation while engendering tolerance for smart failure. Leaders should extend autonomy and decision-making authority down the ranks in flatter organizations that encourage continuous learning. Worthy leaders do things for solid business reasons. They know and communicate the reasons for their decisions and strategies.

“The difference between early and maturing companies is not whether they have enough talent but what they are doing to develop it.”

The survey revealed that firms with visionary leaders – that is, leaders who conduct their digital initiatives properly, who commit the right resources, who take an active role in the process, and who allow employees time to learn and adjust – outpace lesser leaders in making progress toward digital maturation. Assess your leaders’ ability to adjust to the digital landscape. Find the gaps, and help each leader close them.

Strong analog-era leaders can adapt to the digital era. The great majority of those surveyed – even among the most digitally mature firms – believe that they need more digital-savvy leaders. Digital firms can develop leaders who understand digital processes, technologies, and trends to form a vision for transformation and to lead the firm through it. However, turning a data scientist into an effective leader is more difficult than making a good leader digitally literate. To create the best environment for change, empower your employees. Manifest the focus, will, and determination to get through the change process. These strategies matter more than mastering technology.

You need the right talent to achieve more than a modest level of digital maturation.

Find and develop people with a balance of hard and soft skills, a growth mindset – that is, belief in their ability to learn new skills – and the drive to learn and teach others. Hire people who embrace the pace of change that a digital economy requires – those who realize their present skills will grow obsolete and who know they will need to learn constantly to stay relevant.

Don’t think that only younger people fit that description. Most senior workers – even those older than 70 – say they want to work for leaders who drive digital transformation. Build a learning culture that grants employees access to experiential and peer-to-peer learning opportunities wherever and whenever they’re needed. Providing learning opportunities does more to retain talented people than any other step you can take. Of those surveyed, only one-third of employees expressed satisfaction with their firm’s efforts to prepare them for a digital economy. In digitally maturing firms, almost twice as many people expressed satisfaction. If you deny employees opportunities to learn, you’ll lose your best, most digitally skilled and most technologically inclined people first. You’ll likely lose them to a digitally-maturing firm which, despite its progress, knows it needs even more talent.

Look for digital talent inside and outside of your industry. Find it through partnerships with firms that connect you to freelance talent. Move people around inside your organization to give them diversified experience and exposure to new knowledge. Rotate people into the most digitally mature parts of your firm.

The potential of AI to displace workers exceeds anything seen before in history.

Digital disruption affects people and organizations. It might create more work than it destroys at first, as humans and machines work together. But in short order, machines will do it all. AI will improve empathy and emotional intelligence. Already, some people prefer to interact with chatbots and other algorithm-based tools than with humans, especially on sensitive matters. To keep up, people must keep learning and make strategic moves to stay employed. For example, some might choose to do the kind of work that AI won’t affect for decades. Others may jump in and learn data science or algorithm design.

You can’t digitize without the right talent, but even the right talent can’t digitize in the wrong culture.

Culture tracks tightly to the stage at which companies find themselves on the road to digitization. Early-stage firms try to command digital change from the top down, which rarely works. Firms in the developing stage often implement digital technologies with the expectation that employees will use them and “become digital” in the process. This mostly fails. Digitally maturing firms create the conditions for digitization and let it happen from the bottom up. They focus on building a flat, autonomous, risk-taking culture that rewards experimentation, collaboration, and constant learning. These firms poach promising talent from less progressive companies, which furthers distances them from early- and developing-stage firms that can’t seem to get out of their way.

“Great digital strategies first require great talent.

To leapfrog stages – or at least to accelerate your way to digital maturity – focus on agility and flexibility. Develop products or processes iteratively, usually with your client offering feedback at each iteration. Move or distribute decision making throughout the firm. Give cross-functional teams sufficient authority to make some decisions from the bottom up. Firms build agility by developing standby teams of talent – freelancers or part-timers – that they can tap into as required to complement core employees who anchor the projects.

Maturing firms are more likely than early-stage or developing firms to use employee collaboration technologies instead of email. Collaboration tools enable exponential gains in communication, knowledge sharing, and peer-to-peer learning and support. Establish a collaborative culture by fielding diverse teams. Empower team members to exhibit their uniqueness, speak their minds and share their ideas. Give employees reasons to use collaboration tools. Ask leaders to set an example by being the first to adopt them. Identify champions who encourage and help other employees.

Maturing firms embrace experimentation faster than firms in earlier stages.

Maturing-stage firms experiment more, follow through and act on the results of their experiments four times more than early-stage firms. Cultures in big companies naturally resist experimentation; resistance is the primary barrier across firms of all sizes and types. Firms should institute inexpensive, small, fast experiments for valuable learning results without the risk of a failure that could harm the firm. This allows you to continue your core business while testing new ideas with minimal risk.

“The time to start is now. The gap between digital capabilities and how companies operate grows wider each day.”

Take the results to your customers and stakeholders for feedback. Then iterate until your innovations are ready for mainstream use and widespread support from the rest of the firm.

Your progress toward digitization can unfold in three steps:

• Make an evaluation: Survey employees, managers, and stakeholders to determine your firm’s current average stage – that is, early, developing or maturing.
• Empower initial action: Decide what you want to achieve in the short term. Identify your priorities and their anticipated ROI.
• Achieve maturity: Implement your processes using agile, iterative methods.

As you move along in the digital maturation process and enjoy its advantages and rewards, you may wonder why you didn’t start sooner.

About the Authors

Gerald C. Kane, Ph.D., teaches information systems at Boston College and is an editor with MIT Sloan Management Review and MIS Quarterly. Anh Nguyen Phillips, Jonathan Copulsky and Garth Andrus, Ph.D., are or have been affiliated with Deloitte, a partner in this research.