In many large companies, digital transformation efforts are failing. Even before the epidemic, the gap between the digitally savvy companies that understood the dynamics of the digital economy and the traditional industrial age companies was widening. The epidemic accelerated the adoption of digital tools and widened the gap further.
Winning in this digital age requires more than digital technology. It requires agile delivery and more tech-savvy top leadership. It requires fresh thinking about innovation and strategy with total support from top leadership.
Most companies undertaking digital transformation are focused on internal processes and the existing product portfolio. However, experience shows that most benefits from the digital economy come from new customers, new products and new business models.
The digital transformation efforts usually fail when it is focused on improving the past. What is required is a new approach that meets the evolving customer needs. Firms need to develop the capabilities to generate products for new markets.
Market creating innovations.
These products or services open up new markets where none existed before. many times these transform complicated products into more accessible, convenient and affordable products that consumers can understand and buy as well as use them.
Sometimes, the new product meets the needs of the people, they didn’t realise they had, and create a strong desire though it may be expensive.
Sometimes, it involves reorganising ecosystems or platforms, managing data as an asset. New digital technologies are creating new opportunities for market creation and benefit from rapid scaling.
Need for a different approach.
many top leaders may be puzzled by the slow pace of digital innovations. these are normally under the responsibility of business heads which generate ting incremental innovations. There are many reasons why the existing practices discourage market-changing innovations.
- Existing operation units focus on making current things better.
- New innovative products may involve eliminating or streamlining existing features that cannot be taken at the division level.
- New innovative products may lead to cannibalising existing products which may face resistance within.
- Corporate incentive structures normally favour immediate results rather than long term, big projects.
- New initiatives may require big investments that require top leadership approval and budgets.
Structural corrections are not the solution.
Senior leadership teams may opt for a series of structural corrections. They may assign this responsibility to a new business unit or a new ventures division or have a senior leader head the division.
Instead, the whole organisation must be focused on creating value for the customer. Everyone has a responsibility to innovate and there is no need for permission to innovate.
Steps to be taken.
CEO must take steps to create the dedication necessary for the digital transformation to be successful.
- CEO must focus on the primary goal of increasing value to the customer. Everything else comes next.
- The individual and division goals are secondary to this primary goal of creating increasing value to the customer.
- CEO must withdraw from the legacy business that does not add value to the customer and save resources for the company.
- Compensation must be aligned and in line with the primary goal of increasing value to the customer.
- Top leadership must support a value creation process that works backwards from the future, which requires forums that nurture value creation throughout the organisation.
- Top leadership should shift the hierarchy from a traditional ladder to a network of teams or micro-enterprises with complete decision making responsibilities.
Six Steps CEOs Must Take To Save Their Digital Transformation
Steve Denning Forbes 2021/10
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