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Digital transformation


DIGITAL TRANSFORMATION IS NOT ABOUT TECHNOLOGY

Strategy, culture, and customer experience are just as important.
by
 * Behnam Tabrizi,
 * Ed Lam,
 * Kirk Girard,
   and
 * Vernon Irvin

by
 * Behnam Tabrizi,
 * Ed Lam,
 * Kirk Girard,
   and
 * Vernon Irvin

March 13, 2019
Colin Anderson Productions pty ltd/Getty Images
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Summary.    Companies are pouring millions into “digital transformation”
initiatives — but a high percentage of those fail to pay off. That’s because
companies put the cart before the horse, focusing on a specific technology (“we
need a machine-learning strategy!”) rather than...more
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Ler em português
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A recent survey of directors, CEOs, and senior executives found that digital
transformation (DT) risk is their #1 concern in 2019. Yet 70% of all DT
initiatives do not reach their goals. Of the $1.3 trillion that was spent on DT
last year, it was estimated that $900 billion went to waste. Why do some DT
efforts succeed and others fail?

Fundamentally, it’s because most digital technologies provide possibilities for
efficiency gains and customer intimacy. But if people lack the right mindset to
change and the current organizational practices are flawed, DT will simply
magnify those flaws. Five key lessons have helped us lead our organizations
through digital transformations that succeeded.


LESSON 1: FIGURE OUT YOUR BUSINESS STRATEGY BEFORE YOU INVEST IN ANYTHING.

Leaders who aim to enhance organizational performance through the use of digital
technologies often have a specific tool in mind. “Our organization needs a
machine learning strategy,” perhaps. But digital transformation should be guided
by the broader business strategy.

At Li & Fung (where one of us works) leaders developed a three-year strategy for
serving a marketplace in which mobile apps were just as important as
bricks-and-mortar stores. They chose to focus their attention in three areas:
speed, innovation, and digitalization. Specifically, Li & Fung sought to reduce
production lead times, increase speed-to-market, and improve the use of data in
its global supply chain. After concrete goals were established, the company
decided on which digital tools it would adopt. Just to take speed-to-market as
an example, Li & Fung has embraced virtual design technology and it has helped
them to reduce time from design to sample by 50%. Li & Fung also helped
suppliers to install real-time data tracking management systems to increase
production efficiency and built Total Sourcing, a digital platform that
integrates information from customers and vendors. The finance department took a
similar approach and ultimately reduced month-end closing time by more than 30%
and increased working capital efficiency by $200 million.

There is no single technology that will deliver “speed” or “innovation” as such.
The best combination of tools for a given organization will vary from one vision
to another.


LESSON 2: LEVERAGE INSIDERS.

Organizations that seek transformations (digital and otherwise) frequently bring
in an army of outside consultants who tend to apply one-size-fits-all solutions
in the name of “best practices.” Our approach to transforming our respective
organizations is to rely instead on insiders — staff who have intimate knowledge
about what works and what doesn’t in their daily operations.

Santa Clara County in California (where one of us works) provides an example.
The Department of Planning and Development was re-engineering work flows with
the goal of improved efficiency and customer experience. Initially, external
consultants made recommendations for the permit-approval process based on work
they themselves had done for other jurisdictions, which tended to take a
decentralized approach. However, customer-facing staff members knew, based on
interactions with residents, that a more unified process would be better
received. Therefore, Kirk Girard and his team heavily adapted the recommended
tools, processes, diagrams, and key elements of the core software as they
redesigned the work flow. As a result, permit processing time was cut by 33%.
Often new technologies can fail to improve organizational productivity not
because of fundamental flaws in the technology but because intimate insider
knowledge has been overlooked.


LESSON 3: DESIGN CUSTOMER EXPERIENCE FROM THE OUTSIDE IN.

If the goal of DT is to improve customer satisfaction and intimacy, then any
effort must be preceded by a diagnostic phase with in-depth input from
customers. The staff of Santa Clara County’s Department of Planning and
Development conducted more than ninety individual interviews with customers in
which they asked each customer to describe the department’s strengths and
weaknesses. In addition, the department held focus groups during which they
asked various stakeholders – including agents, developers, builders,
agriculturalists and crucial local institutions like Stanford University – to
identify their needs, establish their priorities, and grade the department’s
performance. The department then built the input into their transformation. To
respond to customer requests for greater transparency about the permit approval
process, the department broke down the process into phases and altered the
customer portal; customers can now track the progress of their applications as
they move from one phase to the next. To shorten processing time, the department
configured staff software so that it would automatically identify stalled
applications. To enable personalized help, the department gave Permit Center
staff dashboard control of the permit workflow. Leaders often expect that the
implementation of one single tool or app will enhance customer satisfaction on
its own. However, the department’s experience shows that the best way to
maximize customer satisfaction is often to make smaller-scale changes to
different tools at different points of the service cycle. The only way to know
where to alter and how to alter is through obtaining extensive and in-depth
input from the customers.


LESSON 4: RECOGNIZE EMPLOYEES’ FEAR OF BEING REPLACED.

When employees perceive that digital transformation could threaten their jobs,
they may consciously or unconsciously resist the changes. If the digital
transformation then turns out to be ineffective, management will eventually
abandon the effort and their jobs will be saved (or so the thinking goes). It is
critical for leaders to recognize those fears and to emphasize that the digital
transformation process is an opportunity for employees to upgrade their
expertise to suit the marketplace of the future.

One of us (Behnam) has coached over twenty thousand employees from multiple
organizations through the digital transformation process (he has also consulted
with the organizations mentioned in this article). He often encounters
participants who are skeptical of the entire operation from the get-go. In
response, he developed an “inside-out process.” All participants are asked to
examine what their unique contributions to the organizations are, and then to
connect those strengths to components of the digital transformation process —
which they will then take charge of, if at all possible. This gives employees
control over how the digital transformation will unfold, and frames new
technologies as means for employees to become even better at what they were
already great at doing. At CenturyLink, where one of us works, the sales team
had been considering adopting artificial intelligence to increase their
productivity. Yet, how AI should be deployed remained an open question.
Ultimately, the team customized an AI tool to optimize each salesperson’s effort
by suggesting which customers to call, when to call them and what to say during
the call in any given week. The tool also contained a gamification component,
which made the selling process more interesting. Vernon Irvin, who watched this
process from the inside, observed that it made selling more fun, which
translated into an increase in customer satisfaction – and a 10% increase in
sales.


LESSON 5: BRING SILICON VALLEY START-UP CULTURE INSIDE.

Silicon Valley start-ups are known for their agile decision making, rapid
prototyping and flat structures. The process of digital transformation is
inherently uncertain: changes need to be made provisionally and then adjusted;
decisions need to be made quickly; and groups from all over the organization
need to get involved. As a result, traditional hierarchies get in the way. It’s
best to adopt a flat organizational structure that’s kept somewhat separate from
the rest of the organization.

This need for agility and prototyping is even more pronounced than it might be
in other change-management initiatives because so many digital technologies can
be customized. Leaders have to decide on what apps from which vendors to use,
which area of business best benefit from switching to that new technology,
whether the transition should be rolled out in stages, and so on. Often, picking
the best solution requires extensive experimentation on interdependent parts. If
each decision has to go through multiple layers of management to move forward,
mistakes cannot be detected and corrected quickly. Furthermore, for certain
digital technologies, the payoff only occurs after a substantial portion of the
business has switched to the new system. For example, a cloud computing system
designed to aggregate global customer demand can only generate useful analytics
when stores in different countries all collect the same type of data regularly.
This requires ironing out differences in existing organizational processes
across different regions. If the details of how a new technology will be used
are chiefly developed by employees from one country, they might not be aware of
the potential incompatibilities.

Working with Li & Fung, Behnam helped to create six cross-functional teams, each
staffed by employees from different offices in Hong Kong, mainland China,
Britain, Germany and the U.S. These teams led different stages of the digital
transformation. Since the structure of these teams was flat, they were able to
present ideas to and obtain input from Ed Lam (CFO) and heads of business units
quickly. This allowed the teams to experiment with new ideas about how
innovative data structure, analytics, and robotic processing could best be
integrated. Furthermore, because new proposals were vetted by employees from
different country offices and different functions, these teams were able to
foresee problems with implementation and were able to address them before the
entire organization fully adopted the new technologies.

Digital transformation worked for these organizations because their leaders went
back to the fundamentals: they focused on changing the mindset of its members as
well as the organizational culture and processes before they decide what digital
tools to use and how to use them. What the members envision to be the future of
the organization drove the technology, not the other way around.

MORE FROM THE AUTHOR

 * RAPID TRANSFORMATION: A 90-DAY PLAN FOR FAST AND EFFECTIVE CHANGE
   
   Book
   Buy Now

Read more on Digital transformation or related topics Process management, Change
management and Strategy execution
 * BT
   Behnam Tabrizi is an award-winning teacher, scholar, and global advisor. He
   has been teaching Leading Organizational Transformation at Stanford
   University’s Department of Management Science and Engineering and executive
   programs for more than 20 years. An expert in organizational and leadership
   transformation, he is the managing director of Rapid Transformation, LLC and
   has helped thousands of CEOs and leaders plan, mobilize, and implement
   transformational initiatives. Behnam has written nine books, including Rapid
   Transformation (HBR Press, 2007) for companies and The Inside-Out Effect
   (Evolve Publishing, 2013) for leaders. His latest book, Going on Offense: A
   Leader’s Playbook for Perpetual Innovation (IdeaPress Publishing), will be
   available for purchase in May 2023.
   TabriziBehnam
 * EL
   Ed Lam is CFO of Li & Fung Ltd.  
 * KG
   Kirk Girard is a former director of planning and development in Santa Clara
   County.
 * VI
   Vernon Irvin is president of Government, Education, and Mid & Small Business
   Division at CenturyLink.  

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 * Get PDF
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Read more on Digital transformation or related topics Process management, Change
management and Strategy execution



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