Digital Transformation is here to stay. Transformation used to be viewed as a one-time major event. Hire a strategic consulting company, work with them to map out a new strategic vision, identify major initiatives to support the new vision then execute. Once complete shift to a run or lights on status. This is not the case anymore and if this is what you are doing then think again.
Digital transformation is now part of the ongoing operating model. Many Fortune 1000 companies have set up broader transformation offices with a mandate to continuously evolve their businesses. Why is this? This is because technology is rapidly changing and disrupting some of the most stable traditional businesses. All I have to say is UBER and Airbnb and you get the idea. Uber does not own a taxi and Airbnb does not own hotels or rooms but they have not only disrupted their respective industries but they have expanded the total addressable market. They increased the market size perhaps exponentially and captured the bulk of it leaving their legacy competitors far behind.
Another industry seeing major disruption is the banking space. Who would think an API company like Plaid that connects apps to banking accounts would be a thriving and industry disrupting business? The large banks no longer have a monopoly over banking infrastructure. Hundreds of start-ups have dismantled the back end of banking and now offer it as a service. This model has enabled the onset of neo-banks – online shadow banks that work off the license of a parent bank and provide all the services of larger banks but without the fees. These neo-banks are starting to significantly cut into the market share of the larger banks. If the larger banks don’t keep up they will see their business rapidly lose market share and eventually lose their competitive advantage.
These are just a few examples of major market disruption and a few reasons why transformation and specifically Digital Transformation is a at the forefront of every business that wants to stay competitive. Setting up a digital transformation program is very straight forward. The pillars of a successful digital transformation program are as follows. Develop a strategy, identifying initiatives to support the strategy and manage outcomes and performance.
First, let’s start with strategy. This can be very simple to very complex. Some areas of focus can include operational efficiencies. Set an overall (achievable) goal to lower operating costs and operate more efficiently. Another area of focus can be customer satisfaction. This is very common as businesses are competing to attract and retain customers. Another is product expansion. How can you deliver your product faster, make it easier to use, delight customers with better customer success? Once you have identified the key areas in the business you want to impact the next step is to identify initiatives that will support your strategy.
Identifying initiatives gets a lot more involved that the strategy. All companies have limited resources. Limited capital and people that can be allocated to work on these newly identified initiatives. We recommend a prioritization process rather than a politicized one (more commonly found in most companies). This means establishing an objective approach to identifying and analyzing initiatives that considers both strategic alignment and ability to execute. We also recommend sourcing ideas from a wider group than a just few leaders at the top. The people who are on the ground interacting with the day-to-day processes, your customers and vendors are probably the best to sources to recommend improvement. Also, set up a committee to vet the initiatives and make the final selections. The committee should represent stakeholders from various parts of the business.
Lastly and even more important is the ability to measure and track the performance of the transformation portfolio. Executives are tasked with communicating the progress and outcomes of their transformation initiatives to their stakeholders. Stakeholders that includes board members, shareholders, employees and sometimes customers. Therefore, it is imperative to have a performance management process in place. How do you know if your initiatives are delivering on the intended benefits and if they are not be able to make decisions quickly to course correct?
We recommend identifying KPI’s (key performance indicators) as early as possible. Sounds obvious but it is often overlooked in practice. As initiatives are being identified and evaluated it is best to identify metrics that will measure success. Set a baseline value and a target value which will be achieved at a future date. Also, set realistic timelines for achieving these goals. For example, if your initiative will ultimately improve customer satisfaction you should know the current customer satisfaction score and set a future state target. We are often asked to provide a set of standard metrics. However, performance metrics are not standard but rather specific to each initiative. Alternatively, our customers have grouped their KPI’s into categories such as operational efficiency, customer satisfaction, cost reduction, revenue expansion, etc. This makes it easier to communicate across all levels from analysts to executives.
Identifying KPI’s alone is not enough. Having a process to track them over time is equally important. Inpensa’s transformation management solution helps identify initiatives objectively, analyze them for strategic value and ability to execute and helps institutionalize a process to track KPI’s. Our solution becomes a single source to manage transformation initiatives end to end from analysis to performance management and benefits realization.