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The Secrets to Digital Transformation
Read time: 4:59 minutes
Welcome to Future-state Thinking, my weekly newsletter where I give actionable content, insights and tools for business and personal growth from my experience as an innovator and entrepreneur.
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Hi Reader,
Before we jump in this week, I want to let you in on a secret.
I get messages quite a bit from leaders, innovators, change-makers and entrepreneurs like you telling me how these practical and digestible articles give them inspiration and help improve their skills and business… but they want more.
So, I’m co-authoring The DUCTRI Playbook to share all the mindsets, tools and techniques from the DUCTRI Model that has been field-tested over 5+ years. Also, it will be full of real-world case studies from global innovators and change-makers to help you right away.
Right now it’s an early-stage prototype being tested alongside of new and experienced innovators. So, I’m building a waitlist of those who want exclusive updates and a chance to help me build this and/or to be at the front of the queue when the book is available for pre-order. If that sounds like you, click here to join the waitlist.
Reach your future-state by learning today:
- What is digital transformation
- The biggest influence on change
- The five biggest barriers (and solutions) to digital transformation
- The corporate innovation stack
- The four stages of validation
Introduction
Digital transformation has become a critical discussion point for businesses today. With rapid technological advancements, every organisation recognises the need to adapt to survive.
However, 70% of these efforts reportedly fail to provide customer value.
Many established companies struggle due to bureaucracy, inertia, and outdated practices. How can they overcome these hurdles to drive meaningful change?
David L. Rogers, in his book The Digital Transformation Roadmap, offers insights based on two decades of research and consulting. He identifies five primary obstacles to digital transformation: vision, priorities, experimentation, governance, and capabilities.
This article explores these barriers, providing practical advice and steps to successfully embark on a digital transformation journey.
What is Digital Transformation
Digital transformation (DX) involves more than just implementing new technologies.
It encompasses transforming products, business models, and the entire organisational structure.
A comprehensive approach ensures businesses evolve their processes, culture, and strategies alongside technological advancements to stay competitive.
“It’s transforming an established business to thrive in a world of constant digital change” – David Rogers
This definition “surfaces 3 essential truths”-
- DX is not about technology. It’s about the business, it’s about your customers.
- DX is different from startups. You have to work in the context that already exists, employees, obligations, channel, partners …
- DX is not a project. It is a journey of becoming more adaptive and respond to constant digital change.
The Biggest Influence on Change
The biggest influence on change isn’t executive buy-in (although that is a must have).
It is complexity. Meaning the more offers, employees and operating geographies then change across the organisation is much more difficult.
The two key factors here are uncertainty (unknowns in innovation) and proximity (the more distance from your core and each other).
This means that change takes time and consistent effort appropriate for the context of the business.
The Five Biggest Barriers (and Solutions) to Digital Transformation
1. No Shared Vision
A well-defined and compelling vision is essential for successful digital transformation. This vision should align with the company’s core values and future goals.
David’s Insights on Vision:
- Businesses must transform not just products and business models but also the organisation itself.
- A clear, compelling, specific and unique vision helps align the company’s direction with its core values and future aspirations.
- Where you are going and WHY you are going there.
2. No Growth Priorities
Setting the right growth priorities is crucial. Balancing short-term gains with long-term strategic objectives can help maintain momentum and commitment.
David’s Insights on Priorities:
- Identifying and setting the right priorities for transformation is essential. What are the levers you will focus on?
- Companies often get overwhelmed by the magnitude of change required. Focus on ideas that fit your company strategy.
3. No Focus on Experimentation
Fostering a culture of experimentation and innovation is vital. This approach allows organisations to test new ideas, learn from failures, and iterate quickly.
David’s Insights on Experimentation:
- Encourage a culture of continuous rapid experimentation where new ideas can be tested and refined rather than traditional BAU planning and execution.
- Organisations should be willing to learn from failures and make adjustments as needed thereby, gathering your own first-hand data.
4. No Flexibility in Governance
Effective governance structures are necessary to oversee the transformation process and ensure accountability.
David’s Insights on Governance:
- Establish relevant expertise in governance (innovation board not board of directors or all the Senior leadership) with clear decision rights to guide the transformation process rather than a single executive sponsor to help avoid bias.
- Use iterative funding mechanisms based on evidence from iterative experimentation to select the ideas to give the green light to continue for 90 days.
- As part of the process, establish and agree on what needs to be learned next. then, let the team determine how to learn from the experiments.
- Use ‘smart shutdowns’ that celebrates a failure by focusing on the cost savings and learnings. Make them expected norms and without repercussion to your team.
5. No Improvement in Core Capabilities
Building the necessary skills and capabilities within the organisation is essential for sustaining digital transformation efforts.
David’s Insights on Capabilities:
- Organisations must develop the capabilities needed to support transformation including technology innovation skills and cultural shifts.
- Investing in training and development is crucial to build the required skills and culture.
The Corporate Innovation Stack
Layer 1: The Team. Each team is focused on one innovation deciding the composition, incentives, experiments and decision rights.
Layer 2: The Innovation Board focused on meeting each team within the innovation portfolio and making decisions on more funding or smart shut downs.
Layer 3: The structure that provides the mandate, resources, metrics and governance rules for different types of innovation (incremental, sustaining or transformational)
The Four Stages of Validation
When you are at the start of innovation you have a lot of assumptions and unknowns. So, the challenge is what assumptions should you test first. David’s answer Iies in the Four Stages of Validation.
- Problem Validation – “Are we focused on a genuine problem for an actual customer?” Have you explored the problem space with the people involved?
- Solution Validation – “Does the customer see value in our proposed solution?” You are articulating a value proposition at this stage and the customer is putting ‘skin in the game’ or exchanging something of value like a deposit or email. Here you’ll be using low-fidelity prototypes like wireframes, mockup’s or explainer videos to show what the solution would be.
- Product Validation – “Can we deliver as solution the customers use?” Creating a first version of the product that provides the baseline features. Here you are seeing actually how it would be used in the market with a limited number of customers.
- Business Validation – “Can we capture sufficient value from this innovation?” Now, with a more refined product you can evidence enough value is captured to continuing with the idea.
The key to remember is the stages are not siloed but are a good way to think about validation.
Summary
Digital transformation is a complex but necessary journey for today’s businesses.
By understanding and addressing the five major barriers businesses can develop a strong roadmap for transformation.
Leaders should take proactive steps, engage their teams, implement the corporate innovation stack and commit to continuous improvement to drive real change and achieve lasting success.
This article draws on insights from David L. Rogers’ book, “The Digital Transformation Roadmap,” as discussed on Aidan McCullen’s The Innovation Show podcast (Rogers, 2024). Podcast available here. I highly recommend David’s book and I’m a regular listener to Aidan’s podcast.
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