4 Ways to Drive a Digital Transformation in Your Organization

Most leaders we speak with are considering how to use digital technologies to improve business and financial performance. Research shows that digitally transforming a customer interaction or operational process can significantly improve bottom-line performance and enhance competitiveness. To exploit the potential of digital technology, the optimal strategy is to identify high-potential/low-risk opportunities, find enterprise-wide technological solutions and learn as you implement.

Digital business can be a game-changer. According to a multi-industry McKinsey study, digitizing the customer experience can boost sales and profits an average 20% over five years. From an operational perspective, leveraging digital technology can drive cost reductions, leading to a 36% improvement in profits after five years.

Digital technology can impact every facet of a company’s business model. Two areas in particular can yield significant value:

• Improve the customer experience: Digital technology enables customers to get information and tools when they want it, as they want it. For example, the rapid rise of mobile computing has triggered major changes in buyer behaviour. Banks have responded by delivering their products and services through "always on" and data-driven mobile channels — and enabling more targeted and timely cross-selling of complementary products.
• Automate manual back-office tasks: Digitizing boring, repetitive and error prone tasks can reduce cost and improve cycle times. One of our clients reaped major efficiencies by automating basic-level customer service (through enabling customer self-service) and the review and payment of expense reports.

Every sector can benefit from enabling digital technology. In fact, some of the necessary ingredients are already in place. Specifically, many firms already incorporate digital technologies like Big Data analytics, ERP systems, and cloud services. Unfortunately, these tools are often deployed selectively within a line of business or functional silos with little consideration paid to the bigger enterprise-wide impact, standards etc.

Nominate champions

Digital transformation can be the most difficult business shift many companies face; it is part technology adoption, part process redesign and part behavioural/cultural change. This transformation should be not undertaken without strong leadership at the C-suite and board levels; it is vital that these mission-critical initiatives have senior champions who possess an organization-wide and holistic customer view. Some firms have gone so far as to create the role of a Chief Digital Officers to lead digital efforts.

Understand the impact

The return on your digital investment can be compelling — and difficult to accurately estimate. Firms can not rely only on aggregated numbers like McKinsey’s; they need to undertake a wide-ranging business-case analysis that considers the full range of benefits including cost savings, improvements in customer satisfaction and higher cross-selling rates. The business impact should be measured through digital targets to evaluate progress and influence future investment and roll-out decisions.

Take an end-to-end view

Maximizing the value of digital requires a consideration of scope and scale that cuts across the firm. For example, automating sales activities will have important implications for inventory availability, product design and marketing channels. Managers also need a 360-degree view of organizational issues like available skills, cultural impact and change requirements.

In the above areas, we have found that companies need a detailed view of user needs and behaviour as well as formal and informal workflows. Digital transformation will often precipitate a need to refine processes, the nature of the service, and in some cases, the operating structure.

Carefully choose your opportunity

Leaders need to prioritize what to digitize. Trying to bite off more than you can chew may ruin the business case, quickly bog down implementation, and lead to conflict over scarce resources. On the other hand, having too narrow a focus may leave significant value on the table. Whatever the choice, managers must ensure the potential business value is compelling, the selected initiatives align to business priorities and they have the right resources and partners to execute. Leaders also have to accept that over time, some lines of business, activities or jobs will be displaced by digital technologies; these shifts — often sudden — can have important organizational ramifications.

Going digital is a journey. Hype may turn transformation into a sprint but in reality it should be seen as a marathon. Starting with a digital pilot is prudent for the technologically risk averse or inexperienced. In some cases like iTunes or Netflix, digitally transforming a product may call for a totally new business model. Managers will maximize digital’s value when they: select "low hanging fruit" opportunities, prudently invest based on the right risk/reward profile, get their workflows optimized and ensure the right resources and change methodologies are employed.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1,000 organizations. Mitchell can be reached at mosak@quantaconsulting.com