Leadership Role In Digital Transformation

Leadership Role In Digital Transformation
3 Areas Leadership Should Focus on Before Executing Digital Transformation

Digital savviness is essential for business leaders in today’s hyper-competitive, digitally-enabled world. Most company leaders lack the knowledge, skills, and structure to succeed in the digital transformation of their company. Having strong digital leadership matters and Figure 1 shows how Digital Masters exceed in revenue and profits margins. With strong digital leadership, any business can excel, regardless of size, budget, or industry. Leaders can follow simple steps to guide their company through a smooth Digital Master journey.

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Figure 1 (Source: Harvard Business Review)

Digital transformation has already hit every industry, as shown in Figure 2, however, there is still lack of urgency in many businesses today for digital transformation due to leadership's failure to sense the need to change. Leadership in most companies react to threats instead of being proactive about the future and start the process now. One reason for this approach is that leadership is unaware of the challenge, knowing where the company stands today, where it needs to be, and how to get started. As a leader in the company, you need to create the sense of urgency and appropriate momentum around the digital transformation. This can be done by addressing three areas early in the process:

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Figure 2 (Source: Harvard Business Review)

Building awareness: The leaders of the company need to educate and engage senior leaders on the impact of digital transformation on present and future businesses, and teach them the potential threats and opportunities that can come from digital technologies. These can be addressed by asking the right questions such as; How can new digital technologies disrupt the competitive advantage of the company? How can these digital technologies help improve the performance of existing processes? How can it create a better experience to the customers? What are new possibilities that can be enabled today and in future?

Leaders need to understand how to pace and scale the digital transformation. Based on the organizational culture that exists today, decision making is centralized, or decentralized; which can demonstrate how well the company collaborates and shares today. They need to understand that if the present profitable operations and assets need to be protected forever, or they need to be replaced or enhanced in the future. (Yellow pages sales example) Look into other industries and what they are doing, as disruptive digital innovations often come from outside of the industries verticals.

Digital means different things for different departments like marketing, operations, HR, and so on. It is the leadership’s responsibility to create awareness and unite the senior team on the purpose of the digital transformation and steer them in the right direction.

Defining your starting point: Once senior leadership understands the purpose of the digital transformation and are on board, it is critical that companies understand where to start the process. It is not by replacing old with new technologies. So, to understand the starting point, companies need to know where they stand in their digital maturity. Companies need to identify their current strategic assets, such as physical assets, core functional skills, core competencies, processes, and technologies. Companies need to identify their intangible assets like brand value, company culture, and the ecosystems of their vendors and partners. The critical asset in the digital transformation is the data; companies need to know how to master analytics as insights from data will give them a competitive advantage. All these assets are the most important and extrmely relevant in the company’s digital transformation journey. Also, companies need to assess their digital mastery level (Figure 3), figure out their strengths, weaknesses, opportunities, and threat of their digital capabilities and leadership capabilities. It takes thoughtful analysis to identify which assets will help make digital transformation successful. You should view strategic assets through the lens of a digitally transformed world and identify those that have value.

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Figure 3 (Source MIT CDB and Capgemini Consulting)

Once the capabilities are identified, start with the path and speed of the digital transformation. This is not same for every company. Different companies might choose different paths but all would like to move directly from Beginner to Digital Master. Companies need to simultaneously develop the leadership and digital capabilities to make strategy a success. Or, companies might want a more Conservative approach— favoring prudence over innovation. This approach involves a foundation of strong leadership capabilities before experimenting too far with new digital technology. Or, you might be like the Fashionistas— having already launched a multitude of uncoordinated digital initiatives. If this is the case, the company should focus on developing a coherent vision and a robust governance model and then streamline or harmonize digital initiatives across all business units. Understanding these differences is important as the company crafts a trajectory that will work and be successful.

Next, challenge the existing business model and see how it will be impacted by the digital transformation journey. Understand what the current business model value proposition is and compare it with what additional value will be delivered with the digital transformation. Think about the new profits, what problems the new value is solving, and what new opportunities the company can create. As you assess this, prioritize the options that generate the greatest value to customers, are difficult to copy, and provide good profits.

Creating a shared vision: Leadership should set a vision focused on enhancing the customer experience, streamlining internal operations, or a combination of both to transform your business model. The focus of the vision should be on the business and the customers, and not on the technology. Your vision should recognize where you are starting from, taking into account your existing competencies and culture. It needs to be built around strategic assets, or a combination of strategic assets, that will be relevant in a digital future. It needs to be transformative, not incremental. Once the vision is set, it should be shared all the way from senior leadership to the frontlines. Most companies fail digital transformation because the vision is not shared with the whole company, including other the leadership. Digital transformation only works when your top team is actively engaged and owns the digital vision. Digital transformation ownership cannot be the responsibility of middle management or frontlines, it has to be owned by the top management to be successful. Digital transformation does not just involve IT or operations, it is an effort of cross-disciplinary teams at various levels from top to bottom to innovate and drive change.

A good test to see if the company is ready for a digital transformation execution is when all members of senior management recognize the urgency of transformation (awareness of the challenge), understand their strategic assets and level of digital mastery (starting point), and can share what the digital future looks like (shared vision).

As we conclude, understand that in digital transformation, technology adds a new dimension to the traditional business challenges. So, businesses need to rethink their traditional assets through a digital lens and see how it creates new possibilities. Some assets will still be useful and some will not. Data and insights will be sources of new value in a digital world. Where a functional approach sometimes works in a traditional transformation, digital transformation respects no organizational boundaries. You need to have aligned executives who, as a team, have the authority to drive the change across silos

Memphis Partners

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