Learnings And Lessons Around Digital Transformation - Pitfalls And Best Practices

In my years of experience working with leading Manufacturing companies, I've seen that Digital transformation is more than just adopting new technologies; it involves a fundamental rethinking of business operations, talent, and customer engagement. It's about overhauling processes, strategies, tools, and human capital to make businesses more agile, efficient, and customer-focused. This transformation is not just a technical upgrade but a strategic imperative in today’s fast-paced business environment.

The Changing Business Paradigm

In the digital age, the rapid technological advancements require agility and innovation, yet many companies are hindered by a "legacy mindset." Throughout my career, I have observed companies struggling with digital transformations by either setting too limited a scope, resulting in marginal improvements that confine thinking to traditional boundaries (thus preventing true transformation while still incurring the costs and risks of change), or by failing to secure the engagement and commitment of C-level leadership that try to balance and prioritize a big number of conflicting priorities. For that reason, a successful digital transformation must be approached on three levels: establishing top-level alignment on value and planning, developing and refining delivery capabilities, and executing effective change management.

Creating the Transformation Roadmap

Every successful transformation begins with 3 elements: vision, alignment, and commitment, and that is because it is a long journey to make. Without vision, it would be difficult to create a shared understanding of what the ultimate goal is. Alignment is needed to make everyone understand their respective role, and what they need to do. Commitment is crucial because every transformation is a long journey and everyone in the organization should be individually and jointly accountable for delivering the vision and the outcomes. Failing to engage even one of these elements the transformation is at risk.

The Domain-based Approach

Determining where to begin can be challenging. Companies should identify and prioritize domains* for transformation through a two-dimensional analysis of value potential and feasibility. This approach ensures that efforts are focused on areas with the highest impact and practical implementation potential. The following example from the book "Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI" illustrates this prioritization framework.

Value Potential

Assessing value potential involves a blend of "outside-in" analysis and consultations with leaders and industry experts. Key factors to consider are customer experience, financial benefits, speed to value, and cross-domain synergies. Customer experience is paramount, as successful digital transformations usually revolve around fulfilling customer needs. Thus, evaluating the financial benefits of domain transformation should prioritize operational KPIs such as customer growth, increased value, and lower service costs. Additionally, synergies play a vital role in value assessment and can be divided into three main areas: (1) data reuse across solutions, (2) tech stack reuse across solutions, and (3) consolidated change management efforts.

An important aspect of designing a change management effort is to consolidate all relevant solutions into a unified change intervention program** for end users. For instance, if a salesperson needs to learn how to use both a CRM and a product configurator, it is more effective to integrate these into a single training program.

Feasibility Assessment

One common pitfall I've observed among professionals in IT Business Analysis, Enterprise Architecture, and Project Management is a narrow focus on technical and data readiness when assessing the feasibility of a digital transformation project. However, digital transformation extends beyond IT projects and their integrations. Feasibility assessments must also consider change management efforts and the domain leader's ability to understand and commit to the transformation. Therefore, before initiating any domain transformation project, it is essential to: (1) ensure that executives in the domain are fully onboard and committed with no competing priorities, (2) evaluate data and technology readiness, (3) understand the scope, intensity, risk, and ease of adoption of the change effort, and (4) determine the scalability across the enterprise, including the complexity of change management and the number of different data environments the solution will operate in.

A common observation of mine and the authors of the book "Rewired" is legacy technology and the demands of large, existing business-critical applications, such as ERP upgrades, are frequently cited as reasons for delaying domain transformation. However, it is often the legacy mindset that poses a greater challenge than the legacy technology itself.

Domain Reimagination

Once domain prioritization is complete, with two to five domains identified for transformation according to McKinsey, the next objective is to identify the business problems to be solved and develop a robust business case for each domain. This can be achieved through two main approaches: using design thinking to define end-user personas and their unmet needs along the experience journey (zero-based journey design) or breaking down the core business into a set of processes to identify pain points, missed opportunities, and inefficiencies in value delivery (end-to-end process mapping). The subsequent step should align these business problems and unmet needs with value levers, identifying the digital solutions that will deliver value for each lever. For instance, a specialty heavy vehicles manufacturer aiming to improve its personalization capabilities along the buying journey might link an e-commerce platform, a Configure, Price, and Quote system, and agile personalized marketing solutions to the value lever of "developing a highly competent salesforce and providing outstanding customer experience." To enhance shared understanding and stakeholder buy-in, each solution should include use cases and supporting data.

Important note here is that at this stage it isn't required to go deep into identifying the the specific technology vendors and tools but as in the example above, understand the type of solutions needed to address each value lever.

Understandably, it can be tempting to start looking at software tools and vendors at this point, but that can be distracting and arguably unnecessary, if you haven't completed the exercise of linking solutions to value levers. Once this exercise is done one should go deeper into the technology, the target architecture and the assessment of the technology stack, and the tools available in the market. In my experience, often this is the moment that companies go out in the market to look for digital tools and solutions, and engage with the technology vendors.

A common mistake I see in many early engagements I've had with interested companies, they had specific projections and ROIs but didn't have drawn a clear picture on what is the investment and fundamental elements that influence these outcomes.

This tendency toward false precision provides a misleading sense of accuracy. Without a comprehensive understanding of the key factors such as solutions and use cases, data and technology requirements, such estimates are likely to be significantly inaccurate.

Implementation Planning

The last step in planning for a domain transformation should be developing an implementation plan with clear definitions of resources, change management efforts, and organizational structure required to deliver the full value of the transformation. Building delivery capabilities and managing change are crucial and will be explored in upcoming articles.

Conclusion

In summary, digital transformation extends far beyond the mere adoption of new technologies; it necessitates a fundamental rethinking of business operations, talent management, and customer engagement. A successful transformation hinges on a strategic overhaul of processes, tools, and human capital, focusing on agility, efficiency, and customer-centricity. This shift demands alignment and commitment at all organizational levels, particularly from top leadership, and requires a clear roadmap based on vision, alignment, and commitment. Prioritizing transformation efforts involves evaluating value potential and feasibility, with an emphasis on customer experience and cross-domain synergies. Despite the challenges posed by legacy technology and mindset, a well-executed domain prioritization can help identify critical business problems and align digital solutions with value levers. Ultimately, precise planning and realistic financial projections, grounded in a comprehensive understanding of influencing factors, are essential for achieving successful and sustainable digital transformation.

Acknowledgements

Big inspiration and source of knowledge for this article has been the book I've recently read from Eric Lamarre, Kate Smaje and Rodney Zemmel "Rewired". This has been an excellent practitioners guide and I highly recommend it with the warning that's not going to be an easy read. So get yourselves a pen and a notebook as you will need them.

Index

*Domain is a customer/user journey or a core business process or function that is sizeable enough, such that the value from transforming it would be meaningful.

** Change intervention program refers to a structured plan or initiative designed to facilitate and support organizational change. These programs are implemented to ensure that the changes are successfully adopted and integrated into the organization's processes, culture, and daily operations.