Digital transformation: 4 key building blocks
Blog: The Enterprise Project - Digital Transformation
Digital transformation: 4 key building blocks
August 22, 2022 – 3:00am
Digital transformation isn’t just about building great websites and mobile applications. It isn’t simply about providing a better user experience. While these are certainly critical enablers for success, truly reimagining how a business operates to thrive in a digital world requires much more – and skipping or failing to prioritize the “more” is where many organizations fall short of meeting their digital transformation goals.
Over my 25+-year career, I’ve had the privilege of spearheading digital transformations for several leading multinational organizations. My experience has taught me that for an organization to deliver a holistic digital transformation, it must instill at its core the following four foundational elements:
- Prioritizing the end-to-end customer experience
- Ensuring leadership-team alignment
- Focusing on agile planning and investments
- Considering value-stream mapping
A holistic approach
Here’s a look into how companies today can successfully tackle a digital transformation.
1. End-to-end customer experience
Digital transformations must start with the customer. You must define their journey – from how they’ll first identify you, your company, your product, and your services – to how they can best understand your company and decide whether they want to do business with you.
It’s also important to think about the experience from both sides: How will you explore and learn more about the customer? Who will help them along their journey? When deciding, do they have flexibility or choices around their product and services? How and where do cross-selling and upselling become part of the journey?
[ Also read Digital transformation: How to guide innovation leaders. ]
These are just some questions before you ever get to how technology fits in.
2. Cross-functional leadership alignment
Delivering a digital transformation requires change from within. Most digital transformations at large corporations fall short because teams are not empowered to partner together as one and are not set up in a way that promotes pure collaboration across functions. Along with putting the customer first, organizations must focus on achieving cross-functional leadership alignment by breaking down silos across HR, legal, business, sales, marketing, finance, and other functions.
Easier said than done, of course. In any large organization, it can be rare to have high-level business leaders coming together and working as a team; in fact, companies have historically applied the word “team” to the lower levels of an organization – for example, there’s a team of 8 to 10 people, then a manager, then a group of managers, and then the director or vice president. For truly transformative, lasting change, teamwork and alignment must happen at the top.
This is also where design thinking at the start of the customer journey process comes into play: specifically, to ensure leadership teams are aligned to a common set of goals and outcomes. Organizations can benefit from appointing a facilitator who can, without bias, pose questions around what’s important, what the expectations are, and what leaders are willing to let go of in order to get on the same page about the customer journey.
The value that this can create for an organization and its culture is priceless. It can help establish a non-threatening space to address the tough questions, then carve out a path that is in the best interest of the customer and the company.
3. Agile planning and investments
In large organizations, the financial budget planning process typically happens once a year and is aimed at prioritizing initiatives that provide specific customer value at a certain point in time. This is when the executives decide, for example, that out of 1,000 projects, 600 will be funded. Then everyone gets started on executing those 600 projects.
In reality, however, some of those 600 projects will not succeed. And if the challenges of the last two years taught us anything, it’s that we can no longer accurately predict what our customers or our business will need a year from now.
Instead, consider a minimal viable product approach: Initially fund more ideas and have teams deliver an MVP, then decide which value proposition will make it to the next round of funding. Rather than saying you have money for only 600 projects, fund those that provide the greatest tangible value – whether it be 600 or 800 – with the caveat that every three months, you’ll reroute more funding to the projects that are succeeding and reduce or stop funding the projects that are either not showing progress or no longer align to customer or organizational needs.
This approach delivers key benefits at all levels of an organization: It enables you to support more ideas, creates a culture of creativity and innovation, and encourages teams to bring forth their best ideas without worrying that they don’t have a fully flushed-out financial business case for it.
4. Value-stream mapping
Finally, as part of a holistic transformation, aspire to get better at value-stream mapping and establish a product mindset. At the outset of each project, an organization must strive to bring business and technology resources together and appoint product managers. From here, it must utilize agile methodologies, create a value stream, and run a quarterly Program Increment (PI) planning process to see projects through to completion.
Simply put, a value stream comprises the company’s steps to deliver a product or a service to the end customer. Value streams act as a guideline and a governance mechanism across many transformation themes outlined above – customer experience, design thinking, strategic planning, investment allocation, delivery roadmap, KPIs, etc. that define the overall success of an organization’s transformation.
Each transformation theme has a clear set of best practices and guidelines. When multiple transformation themes are in motion, it can create situations where a best practice or ideal position for one transformation theme is in direct conflict with another. Optimizing value streams as a clear north star helps large teams and leaders stay focused on the ultimate prize and helps significantly reduce churn.
Barriers to digital transformation
Organizations can run into roadblocks with their digital transformation journey when one or more of the elements above are neglected. Here are two common scenarios.
Starting with tech
Many digital transformations that start with technology ultimately end up failing. Leaders become enamored with the technology, then complain that while it is working, they’re not seeing the necessary support from their business partners, who just don’t understand their vision.
What many don’t understand, however, is that digital transformation isn’t about using technology to do digital work – it’s about change leadership. It must be approached holistically, from top to bottom.
I often get questions from other leaders about how to get funding for transformation, and my answer is simple: It’s easier to get funding for a business leader than for a technology project.
Of course, you’ll need dedicated funding for your transformation, but in most cases, getting that funding is based on your ability to bring leaders together and agree on a vision. Designing the end-to-end customer journey, breaking down silos, and enabling the best ideas to rise to the top is how you get there – not by chasing shiny new technologies.
Issues rooted in talent and culture
Digital transformation requires significant change management at all levels of the organization, and you need to be intentional about laying out a path for individuals to see how their future unfolds within your vision. This is where cross-functional leadership alignment helps – if leaders are not aligned on the vision and are not communicating the same message, employees will resist change.
Providing employees an open forum to express their career interests helps establish buy-in. Through such forums, leadership teams can better understand what employees truly want and are then able to craft meaningful opportunities within the digital transformation that align with their career aspirations.
Leadership skills needed
Starting with the four elements of holistic transformation will put you on the right path, but strong leadership skills will carry you down the road to success. In every communication – whether it’s an email, virtual coffee chat, town hall, or strategy presentation – I make sure to express empathy not only in words but in actions and behaviors.
Top talent – particularly in technology – are spoiled for choice in terms of career opportunities. While compensation is important, a key determining factor in whether an employee stays with an employer comes down to feeling valued, appreciated, and supported regularly.
Having open, honest, transparent dialogues with your leadership and your team is also important because it will help you understand what’s working and isn’t. Understanding where your team and customers stand goes far beyond PowerPoints and Excel spreadsheets; opening these lines of dialogue will help you gauge whether things are running smoothly or need to course-correct.
Finally, it’s important to be bold. You must have the courage to share your thoughts, rethink your plans, and have difficult conversations. If your organization is rooted in a culture of transparency, accountability, and constructive challenge, your teams will appreciate this candor much more than having these considerations hidden under the executive or leadership façade.
In my current capacity as SVP, Technology Infrastructure at RBC, I’ve witnessed first-hand the power that aligning employees to a collective vision has on creating meaningful value for our customers, communities, and partners. Our leadership team across the bank is driven by a collective ambition and shared leadership principles that enable us to clear obstacles and navigate cross-functional alignment in pursuit of common goals.
We also understand that our employees are core to everything we do and continuously invest in their development and wellbeing. For the RBC Tech Infrastructure group, we have a “U Day – Up Skilling Day,” in which we clear an entire day for our employees to learn what they want. We bring in external speakers, offer courses and training sessions, and use the full 8 hours to encourage our employees to learn.
This has enabled us to create an inclusive learning atmosphere and environment. Rather than having training be a box employees check, we want to make it clear that we value their professional development and that we will provide the tools and resources that they need to thrive in the digital future.
[ Discover how priorities are changing. Get the Harvard Business Review Analytic Services report: Maintaining momentum on digital transformation. ]