Digital Transformation: The Three Steps to Success
The hardest part of a successful digital transformation is the cultural piece. Like the proverbial journey of a thousand miles, it begins with three small steps.
1. The power of words
One of the areas we focus on with clients is around the power of words. The language that’s used internally in the organization—around products, around the customer, around opportunity—and how you translate that externally to your customers or clients can have a very powerful impact on how you conduct your business and the outcomes you can deliver.
For example, at a financial-services company, the kind of language that’s used internally to talk about the customer experience is often peppered with three-letter acronyms that are just “management speak.” There’s an opportunity to completely change the game and to think differently by focusing the language around what you’re actually delivering for your customers and then rethinking the way the business operates along those lines. It can be a very powerful shift in culture and in the way people think about what they do.
2. Building a culture of constant change
You need to be in a state of constant revolution. You don’t make a change and then just sit back and wait for the next five years of business as usual. I think you need to build a new momentum and rhythm in your business that reflects the new reality of the industry in which you are operating.
Many companies already have a strategy of continuous improvement in their businesses and in their operations globally. You need to instill, even in that kind of organization, a culture of continuous change and evolution in how things work.
Some changes are gradual and evolve toward an end goal, which becomes clear over time, and you need to make a number of small steps to do that. Sometimes you do this through external actions, such as acquisitions, investments, partnerships, or other external activity or statements. Or sometimes you do this through internal activity, such as the people you promote or the way you talk about the company and its customers and mission. Some people will be taken a little outside their comfort zone, but that’s OK, so long as you give them the permission to take small risks and fail quickly if they can.
3. The board’s role in the digital age
The role of the board in a digital business is quite different from the role of the board in a legacy business. One of the challenges many legacy companies face today is that their boards are not really ready to challenge them and to support and encourage their digital transformation.
If you think of the average age of most board members around the world—and, frankly, of their backgrounds as well—they are not digitally ready. A recent Russell Reynolds survey suggested that only 4 percent of global 500 companies truly have a board that’s digitally ready, even fewer in Asia–Pacific, and under 25 percent in the United States. So there’s still a long, long way to go.
To make a digital transformation happen, you need complete alignment—from the board through the executive team through the whole organization. Without that “air cover” from the board and from shareholders who understand the change that you’re taking the organization through, it is very, very hard to do it successfully.
For example, many board meetings are backward looking in their approach. The data they’re looking at is often a little old. They’re not looking at live data. Many board members are often not active customers of the company’s products or services. There’s a new generation of board director emerging that is much more hands-on, with a more entrepreneurial background. You mix that with some of the more traditional board profiles and you get greater diversity on the board.
Article provided by PartnerOn and mckinsey.com.