Digital transformation starts from within

After a long absence from this blog, I finally have the time to come back and share some, I must say quite unexpected, trends that emerged during the summer.

In a report titled “The Role of Digital Transformation in European Organizations “, IDC presented key priorities and needs, collected among business consulting operators in late 2014, around the transformation under way in Europe.

Some surprises below:

  • Digital is certainly at the center of the evolution of the business. The survey conducted by IDC was not really limited to digital. Despite only three options out of 13 included digital in some way, 77% of participants assigned a value of 4 or 5 (top score) to at least one of them. The introduction of digital tools into processes comes even before strategic issues such as growth and efficiency.
  • The priority goes to internal transformation. Although all attention (and budgets) in recent years seemed to go the digitization of customer-facing areas (experience, product,  service), the priorities declared by participants to study felt around the redesign of internal operations and, in second position, to cost reduction.
  • Rethinking operating processes will become even more critical in the next two years. This level attention on internal improvements won’t go away in the near future and it will be further reinforced by a surge of investment towards increased operational efficiencies.
  • The digitization of products, services and experiences lags behind. The creation of digital products and services comes last (13th) and it will gain only one position in 2015 – 2016. The use of digital media for a better customer experience doesn’t score better, merely going from tenth to eighth place.
  • Innovation and risk management growing. Innovation, an area typically impacted by digital, will go up from 9th to the 4th place, followed by an evident need to understand, evaluate and anticipate the risks related to digital (compliance and mitigation).

Are such trends positive? Yes and no, if you ask me:

  • An increasingly holistic picture. Understanding how digital cannot or shouldn’t stop to customer-centric initiatives gives hope to a holistic rethinking of the organization, its internal mechanisms, together with the role individuals and communities will have in it.
  • The hype is not over yet. To consider internal digitization even more important than some of the reasons organizations exist for should raise a doubt about the awareness decision makers really have about digital transformation dynamics.
  • More experience and courage needed. On the contrary, a higher maturity of digital approaches is often correlated to a stronger ability to exactly articulate how digital will support revenue-generating outcomes such as delivering experiences, products and services to customers. Similar paths, sometimes perceived as more disruptive and therefore dangerous than the evolution of internal processes, risk to be postponed to a later date.

What does lie behind this gap between a customer-oriented perception of digital from the market and internally-focused priorities shared by the organizations participating to the study?

A first explanation is connected to the role customers assign to consulting companies. At least in Europe, organizations don’t seem to be keen to use consultants for activities that are considered strategic priorities. Consulting support mostly goes to the digitization of products and services, customer experience improvements and talent development. This is undoubtedly due to the extra visibility such customer-oriented initiatives generate among end users and the market overall. You simply cannot avoid to invest here and necessary skills are not yet available internally.

A further reason could be the relationship between cost, value, complexity and urgency perceived in internal transformation. Changing culture, processes, strategy and systems requires a long, complicated and expensive work. Based on personal experience, similar projects have been largely targeted more to slow and incremental improvements than to dramatically disrupting the business. While still helpful in terms of additional resources, reduced risks and higher speed, outside help wasn’t strictly needed to bring results back home.

Today is a different day. Is this safe, almost no-budget, incremental approach still enough in a time of great discontinuity, where many leadership, management, engagement, motivation and innovation paradigms get completely up-ended in the matter of a few months (think the usual suspects such as Uber, AirBnb, Zappos, Valve, etc)?

I think traditional transformation projects are simply gone. The market (both customers and consultants) are in search of a better way of delivering transformation. I’d suggest a new contract where the focus of consulting support doesn’t fall so much on prompt responses (“I have the answers and come to tell you what to do”) as on the facilitated co-creation and dissemination of new operational models (“I’ll use my experience to accelerate your ability to learn and change) that will make the firm fluid enough to thrive in the growing uncertainty we are all immersed into (changing change).

Only under this condition digital transformation will be made agile and pervasive.

[Image based on Stephan Ridgway‘s work ]

This post is also available in: Italian

Emanuele Quintarelli

Social media enthusiast and Social Business Leader in EY. Research, reports and reflections about the introduction of web 2.0 inside the enterprise.

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