Digital Transformation: It's About Strategy and Culture. No surprise!

Abhimanyu Verma, Lead - Applied Technology innovation, NovartisEvery where around us, we see the transformational impact of digital technologies. The impact of digital is rising from the technology and innovation play grounds to become a boardroom topic pan industry. Digital transformation is viewed as a significant opportunity and threat at the same time.

Digital transformation is much more than using the latest technologies to solve a point challenge. Such approaches while innovative and seemingly solving specific problems at a point in time do not go beyond creating a temporary impact, a kin to creating ripples in a pond. Companies and talented executives have invested much effort and resources in such digital initiatives via various avenues like incubators, partnerships, M&A, digital innovation teams etc. but struggle to harness the true benefits and making a meaningful impact - be it in top line, bottom line or societal effect. Surely then,this lack of impact is not for lack of ambition or effort. What gives then?

No doubt, while the impact of digital is industry and context specific, there are two common themes for any digital strategy to be truly transformational. These themes resonate across industries, geographies and contexts. None of these themes are about the latest technology buzzwords - no, it's not about IoT/ Cloud/Blockchain/Automation/ AI/your favorite buzzword. It is something more fundamental and dare I say, more timeless.

The first theme: For meaningful transformation that harnesses digital technologies, one needs to integrate digital in the core of the organizational strategy. The second leg that digital transformation rests on is cultural transformation. Let’s dig deeper.

Digital Should be Integral to the Organization's Strategy
Digital is not any different from the industrial and technological revolutions preceding it, only that the rate of change is exponentially greater. The changes, opportunities and challenges that come with the digital revolution should be closely integrated and be central to your enterprise strategy.

Thus, it turns out to be a classic exercise in competitive strategic analysis.

Start with understanding the impact digital has on each sphere of an organization - how the organization operates, serves its customers, conducts product research and development, performs sales and marketing, services supply chains and distribution channels.
Based on this understanding, as the organizational leader, you can then start to decide what are the opportunities and/or threats - does digital help you create new markets, define new categories, expand the customer base or a tool to lower customer acquisition and servicing costs or creating efficiencies in the value chain. Layer this with a competitive scan of your industry, including players from adjacent industries and analyze if ‘digital-native’ organizations pose a threat to incumbent business models and lower/obliterate existing entry barriers. Very often, these insights are available with your frontline employees who are closest to customers and are able to identify value gaps and opportunities waiting to be exploited. An additional outside in view from customers and the start up community often helps in identifying opportunities that can be completely disruptive.

A successful execution of the digital strategy for realizing a transformation needs to be founded on bedrock of a ‘digital’ culture

This strategic decision is really about where and how to engage across the digital leverage continuum– are you going to leverage digital to create new markets and business models or use digital to create efficiencies within the organization’s operations. The goal here is to identify the most value adding sweet spots for your organization and industry along this continuum and to rapidly follow that up by devising the execution to get going.

Digital Transformation Rests on Adapting the Organization Culture
A successful execution of your digital transformation strategy stands on bedrock of a 'digital' culture. Successful management constructs of the past are not well suited for successful digital transformations. Elements like siloed and specialized departments executing a top down strategy with incentives geared towards success do not work well in an arena where success requires multifunctional and cross-collaborative teams, rapid experimentation, failing fast, co-opetition and continuous learning .

Understanding these cultural elements and weighing them in balance against an incumbent culture, with the self reflection on the readiness of the organization’s current leadership to drive the necessary culture should become the cornerstone of organizational, resourcing and execution decisions that make or break the digital transformation.

For example,if your current workforce does not lend itself to such a change, a greenfield approach with established bridges to the mothership is a starting point but with a gradual plan of pulling the two together, where results (higher revenues, lower costs)from the digital unit start to become embedded. Alternatively, if the culture is already one that lends itself to a digital way of being, nurturing these green shoots via a strategic governance, prioritization and enablement is more likely the way forward.

The business outcomes that are treasured like wining customers, achieving lean operations, KPI driven decisions, focus on ROI are still the same while the tools and paths to achieve these are drastically different in a digitally transformed organization. Going beyond technology to core culture, it’s a transformation that leads to digital being embedded in the DNA of your organization.

As a leader, your challenge is to create this cultural transformation without tearing apart the current fabric which makes your incumbent business so successful. Leaders should identify and groom future digital leaders who can be effective bridges between the two realms and can play the role of the transplant surgeon who crafts their scalpel in an artful way to replace vital organs without damaging the whole.

In conclusion, digital transformation is not different in terms of earlier transformational eras - it is and will always be about setting the right strategy and creating the culture to execute. It’s about the people, not the technology.