Heading into this year, a growing number of organizations were pondering the perceived benefits of a digital transformation effort—kicking the tires, as it were—and weighing those gains against the certain business disruptions such an effort would bring.
In the new business environment brought about by the COVID-19 pandemic, however, digital transformation may no longer be a "nice to have" strategy, but the very key to an organization’s survival.
That fact will be hard for many organizations to accept, since a successful digital transformation effort requires a major change in corporate culture. Many will wonder if they must make those changes at the same time that they must mandated by COVID-19.
Just how much change is too much? Peter F. Weis, principal at WeisAdvisors and a strategic advisor and digital transformation expert, said transformation is defined as a dramatic change in form or appearance.
"So culturally, digital transformation for any organization is the 800-pound gorilla that leadership knows is right, but dreads taking on."
—Peter F. Weis
Transformations are inflection points both for companies and the careers of its leaders, Weis said. "For better or worse, almost nothing is the same after a transformation."
Here's why you should accelerate your digital transformation efforts.
Significant benefits await
The news is not all doom and gloom. When done right, a successful digital transformation effort makes your organization much more competitive, and better able to delight and keep customers. It differentiates the leaders from the laggards.
You'll also rack up wins beyond the financial benefits of a transformation, "which can be spectacular," Weis said.
"Successful digital transformation builds organizational courage and confidence."
—Peter F. Weis
This new organizational muscle, along with the refreshed technology from the transformation, creates a new starting line from which companies can further and more quickly innovate.
Companies burdened with legacy and technology debt, full of doubt and short on talent and leadership, won't be able to succeed at transformation. "Their very existence will be threatened in the long term," Weis said.
"Transformation feeds sustainable innovation."
—Peter F. Weis
Few success stories before COVID-19
Before the pandemic, there was already plenty of transformation work being pondered and a lot of early-adopter activity, Weis said. "But few companies of any scale have successfully completed transformation for many reasons—comfort zones and complacency, fear of complexity, the demands of existing day-to-day business, and importantly, the lack of abundant success stories to guide the mainstream."
Larry Wolff, founder and CEO of Wolff Strategy Partners, a management consultant and digital transformation expert, said a big reason many organizations were slow to embrace digital transformation is that they didn't really understand what it is all about, or how to proceed.
More than 80% of digital transformation projects fail, Wolff said, and his research and evidence points to six leading culprits:
- Not understanding the customer
- Not understanding the state of project completion
- Thinking that digital transformation is an IT project
- Not paying attention to the culture of the organization
- Not clearly defining what digital transformation means for the entire organization
- Trying to go it alone
"The pandemic has forced many companies to begin a digital transformation but, in my discussions with business leaders, few are thinking about how to differentiate. Most businesses in a given industry are doing the same things. Those that differentiate will emerge stronger."
—Larry Wolff
Digital transformation is more critical than ever
It may be tempting for many organizations right now to simply hunker down in survival mode and wait out the pandemic. That would be a big mistake, Wolff said. Digital transformation simply can't wait.
If an organization waits until the effects of the pandemic are over, it "will probably be disrupted by known or unknown competitors," Wolff said. "An organization that takes an immediate, holistic, strategic approach—and recognizes that digital transformation impacts the entire organization—will emerge sustainably stronger."
These companies will retain and grow customers, operate more efficiently, reach more quickly to future market dynamics, and probably identify new sources from the data they use, he added.
Walking the walk
One organization that's banking on it is Richline Digital, the direct-to-consumer arm of Richline Group, a Berkshire Hathaway company and one of the largest jewelry manufacturers in the world.
"We are undergoing digital transition right now," said Lee Senderov, president of Richline Digital. Traditionally, Richline's primary channel of distribution has been brick-and-mortar retail stores, which are currently closed or conducting very limited business.
As Richline looks into the future, it believes that an omni-channel approach to offering goods and services—a combination of brick-and-mortar and digital marketing—is "essential for retail survival," Senderov said.
"We are helping our existing retail customers launch more of our jewelry products on their respective websites while also carving out certain products for our direct-to-consumer sites."
—Lee Senderov
Senderov believes that smart business leaders are finally waking up to the demands of, and need for, digital transformation.
While many were interested in pursuing a digital transformation prior to COVID-19, she said, it was viewed as an initiative that could be executed over the course of many years, in a piecemeal fashion—via a project, an innovation lab, a dedicated team—rather than something to execute immediately and holistically.
This has changed, however.
"Now more than ever organizations are viewing this transformation as the key to their survival and thus attempting to move faster than ever."
—Lee Senderov
Change brings new opportunities
As more organizations embrace digital transformation, Senderov said, there are four key areas where they need to consider how DX can help them succeed in a post-pandemic world:
- New distribution channels: "Can an organization leverage channels it has never distributed through?"
- New ways to reach customers: "Consider an organization heavily reliant on the phone now using text to reach their customers."
- Access to new talent: "An organization that may have never considered hiring outside of their specific industry may now do just that in order to digitally transform. Access to new talent could bring new insights into their organization."
- Costs: "Restrictions put in place in response to COVID-19 have made working from home a new reality for many companies, and it has been proven that this model can work. Will this lead to the closing of office spaces? What about travel? How much can be reduced now that, societally, we are accustomed to videoconferencing and calls?"
Finally, business leaders need to understand that "digital transformation is an enterprise strategy that balances culture and technology," Wolff said. It starts with understanding the customer experience, identifying how to improve that experience to create a sustainable competitive advantage, and then applying the cultural changes and technology to make it happen.
"[Get it all right, and] a successful digital transformation results in a business that delights its customers in ways that the competition can't, and should provide at least a tenfold return on your investment."
—Larry Wolff
Keep learning
Get up to speed on digital transformation with TechBeacon's Guide.
Download this free IDC white paper, "Enabling End-to-End Digital Transformation".
See IDC's Futurescape: Top 10 predictions for digital transformation.
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