In the age of the digital technology revolution, increasingly we’re seeing leadership as the defining factor in enabling transformation success. In this blog article, we’ll explore why leadership in digital transformation processes is so important.
The rapid adoption of digital technology by customers and businesses continues to disrupt the global economy. This is creating value, spurring change and encouraging innovation at an accelerating pace.
In response, we can see organisations across geographies, industries, sectors, and scales – not just startups (Uber, Spotify, etc.) but many incumbents (GE, Disney, Nike, BBVA, etc.) – increasingly pursuing digitally disruptive strategies through processes of digital transformation.
Driven by the need to reach digitally enabled customers, the fear of losing out to digital competitors, and the struggle to find growth in new markets and channels, organisations have been left with little other choice – adapt, transform, and reinvent themselves for the digital age, or perish.
In this environment, an effective response requires more than re-shuffling IT departments or implementing new technology. Rather, digital transformation is a deep, holistic and disruptive process, where new business strategies and models are developed and employed, creating organisational and operational efficiencies, transforming relationships with customers and partners, and opening new markets.
Although it is a difficult, complex process, meeting the challenge offers immense opportunity. On average, most organisations believe that half their revenue will come from digital channels by 2020. The World Economic Forum estimates the overall economic value of digital transformation to business and society will top $100 trillion by 2025. This is because accessing rapidly expanding digital markets represents the greatest opportunity for growth for most organisations.
Efforts in Digital Transformation
Unsurprisingly, transformations across industries are set to gain rapid momentum in 2019.
This is because digital transformation is at the forefront of every CEOs mind – 79% of IT and business decision makers believe digital transformation to be an urgent requirement for their organisation.
According to McKinsey, less than 30% of transformations succeed at improving performance and sustaining those gains. And only 16% have successfully improved performance and equipped organisations to sustain change in the long term.
Poor performance in transformation is seen across industries. In sectors like high tech, media, and telecoms, where success rates are 26%. And particularly in traditional sectors like oil & gas, automotive, infrastructure, and pharma, where success rates are between 4-11%.
Part of the reason why so few organisations are able to reap the benefits of transformation is due to a lack of coherent strategy.
Specifically, there is a sizeable gap between strategy and execution within transformation initiatives. While the majority (70%) of organisations have a digital transformation strategy, only a fraction (10%) have a full deployment plan.
Meanwhile, 27% of firms don’t have a clear strategy communicated across the entire business, with some departments formulating their own strategies.
This picture – of a range of decentralised, reactive, and incoherent approaches – are not just difficult to measure and replicate across a business, but firms employing them will inevitably struggle against those that have used a more coherent, formulated digital strategy.
Leadership in Digital Transformation
If a coherent, effective strategy is lacking, the missing ingredient is leadership.
Leadership has been found – by numerous studies – to be one of the most important factors in determining digital transformation success. This is because its only through strong leadership that the necessary cultural change required for success takes place.
One way in which firms find this leadership is through employing a Chief Digital Officer (CDO).
In 2008, there were no more than a dozen CDOs worldwide. In 2017, PWC found that approximately 19% of the top global firms have one.
The CDO is a digital leader who drives the transformation effort across the whole enterprise on a multi-year journey, acting as a critical leadership force in the face of the new challenges and imperatives of the digital economy. They do this by implementing digital initiatives that enable strategic innovation and business transformation. By setting and implementing digital strategy and working as a cross-functional change agent, driving digital innovation.
Those firms that employ a CDO are 1.6 X more likely to be successful in digital transformation processes.
Wherever leadership comes from, it is a vital ingredient in finding success in digital transformations.
These range from companies like Codelco – the world’s largest copper firm – who are being driven forward by an executive vision of a new type of copper mine. This vision sees humans never working in dangerous underground environments again. They are executing this by using autonomous trucks, mining control centres located hundreds of miles away, and strong collaboration with vendors to push the limitations of technology.
To others like EMC, who support their transformation through employee engagement techniques that include holding annual innovation conferences for employees to gather and share ideas for moving forward. Or The Guardian newspaper, appointing a CDO to steer issues in governance and drive digital conversations across the firm.
Key leadership practices
Across these examples, Bonnet & McAfee identified four key leadership practises that were crucial in driving success in digital transformation.
First, business leaders must have a strong vision. A strong vision describes how a firm will change. Not just engaging customers differently and re-thinking operations, but building a new strategy.
Second, it is vital to engage employees in this process. Leaders can’t change business on their own. Rather, they must work with their employees. This means explaining, through multiple channels and as part of a two-way conversation, what these changes mean.
Third, leaders must have a clear understanding of the firm’s intended governance structure. And in turn, what processes and systems are necessary to support it.
And fourth, leaders need to build strong relationships with IT departments. This is to ensure IT executives are onboard and supportive of all transformation goals and processes.
Without these dynamics of strong and clear leadership behind transformation efforts, success becomes an unlikely prospect. Line managers and employees won’t be able to invest in the broader process. Or understand what the transformation means for themselves and the organisation. This may mean, for instance, that even as there is little chance of automation taking away swathes of jobs, people will fear that such transformations endangers their livelihoods.
The ongoing challenge
In an ever-changing, increasingly complex digital world, there is no silver bullet for digital transformation success. Yet, it’s clear nowadays that a strong, effective leader driving the process forward is a vital piece of the puzzle.
Of course, finding high-quality talent in the digital world is by no means easy. Particularly those that can lead a company through a major digital transformation.
The digital technology space is hyper-competitive. As we’ve explored previously, it suffers from a chronic shortage of quality talent. What is certain however, is that without a digital leader, transformations in the digital will be rudderless. As we see around us already, those without only fall victim to the powerful processes otherwise shaping the global economy.
Digital transformation is by no means a process for the faint-hearted. But in the age of digital technology, businesses have little choice but to adapt or perish. Above all, we must look for one thing – leadership in digital transformation.