By next year, IDC predicts that $2.1 trillion will be spent on digital transformation initiatives. Some industries embark on this journey as a competitive strategy while, for others, it’s critical for their very survival. Regardless of the motivation, almost all businesses participating in today’s digital economy will either lead, follow, or be left behind.
Digital transformation is a huge undertaking for any company of any size. While some might think of it in terms of automating manual processes and others might view it as an innovation incubator, it’s really far more complex than that. Digital transformation goes way beyond optimizing or implementing technology. It’s a different way of doing things that impacts every facet of one’s organization and is, in fact, an organizational capability. It describes how Amazon revolutionized retail; how Uber changed the taxi business and Airbnb shook up the hospitality sector. Tools and technologies are certainly very relevant and critical components to a successful digital transformation…but they aren’t central.
The A Team
Ultimately, the most important component of a digital transformation is the people involved in leading, driving, and executing the transformation. As companies across various industries establish digital organizations within the four walls of their enterprise to be the source of innovation, new revenue streams, or simply to establish a competitive advantage, they are challenged with finding the right people.
These are not the typical technologists, versed in the latest buzz words from the cyber world, who build back office or even sophisticated frontend software systems. Nor are they your experienced marketer, skilled in media and print buys, or creatives who specialize in user experience and online consumer engagements. This A Team consists of “hybrids” with all of the above skills, encapsulated in an entrepreneurial or startup mindset and a passion for building something counterintuitive to how things are done today. The Spring 2017 issue of the MITSloan Management Review showcases Volvo Cars’ digital journey and how that 90-plus year old enterprise balanced building new capabilities while preserving core competencies. It all boiled down to the people.
Isolate, Integrate, or Outsource
Companies approach building their A Team in different ways – there’s not a single one-sized solution that fits all. The strategy will depend on each individual employee’s ability to reinvent oneself, the company’s ability to invest in new talents, and the support granted by the executive suite and at the board level. There are two, maybe three, viable options that may perhaps ultimately produce similar outcomes:
- Option 1 involves isolating a group of folks and establishing a separate digital organization within the enterprise. In this scenario, companies tend to hire from the outside due to concerns that existing employees are unable to shed old habits from legacy organizations.
- Option 2 means integrating new capabilities within existing silos through rigorous training and development programs. This can take time, resulting in a longer runway from current state to future state.
- Option 3 is to outsource by partnering with incubators and startups, but may just be a way to delay the inevitable, since ultimately the company has to transfer those capabilities inhouse, either by duplicating or acquiring the startup.
Each of these three options comes with its own advantages and disadvantages.
For Option 1, Isolate, the approach allows for fresh thinking and fresh ideas since most, if not all, members of the A Team would be external hires. The new talents may even bring recent experiences from building or working in a digital organization and lessons learned that can be leveraged for this new journey. Most likely, these folks will be unencumbered with legacy thinking since they are not from this company and will have a fresh perspective. They may even be dubbed “the cool kids” who are afforded more resources than their legacy counterparts and are given more freedom in every way, thereby allowing creativity to flourish. In a May 2014 article by McKinsey & Company, Wal-Mart did just that by establishing an incubator in Silicon Valley which resulted in a 30% increase in online revenues, outpacing Amazon’s rate of growth at that time. The danger, however, is this may result in the emergence of yet another silo within the enterprise. However, this can easily be mitigated by establishing programs to initiate legacy employees into the new digital world through extensive onboarding coaching, shadowing or deliberate training initiatives.
With Option 2, Integrate, the approach assumes that the existing workforce can be transformed and that team members are willing to learn new skills and ready to innovate. For this to work, compensation packages and reporting structures need to be re-evaluated. Establishing a new incentive program will also help, especially if one subscribes to the belief that folks generally perform based on how they are paid. Unfortunately, the entire process might take longer than Option 1 since this involves an enterprise culture change. With Option 1, there’s no legacy culture to be converted since everyone is new to the company, allowing the team to focus on the “digital transformation”. Option 2, on the other hand, involves dispatching a fully integrated team from day 1. This type of transformation is a complete cultural shift and requires folks to think, collaborate, and perform differently. Additionally, it is conceivable that the existing team does not have, or is unable to learn, the required skills set.
Then there’s Option 3, Outsource. Some organizations have opted to partner with incubators or startup companies. They can be found in places such as TechNexus in Chicago, 1776 in DC, or TechStars in New York, just to name a few. These businesses are very attractive to Fortune 500 companies looking to take advantage of innovative solutions that fill a gap within their organization or will propel them on a digital journey. As in Option 1, the capabilities that are associated with these incubators and startups must eventually be integrated with the rest of the organization. Coupled with the fact that these new-found capabilities come with very different cultures, assimilation can be a challenge. For the startup to succeed within the new organization, the team must be allowed similar levels of freedom and flexibility that otherwise could become absorbed by legacy thinking.
How should the digital organization be structured? The quick answer is “whatever fits the unique nature of the business”. However, there are critical components of the digital organization that must be considered: the digital business team, the digital technology, and the digital extended team. CMS Wire published an article suggesting such a structure and critical roles as a great jumping off point and by no means the end of all digital structures. Roles will vary depending on the nature of the business, the types of customers being served, and partners in the ecosystem. The critical success factor is ensuring that the entire digital team is completely aligned with the vision and mission of the organization. BCG believes that success in this digital age begins by putting people first. There’s a lot of truth to that, given that people, not technology, are what make transformation happen. Putting the A Team — the right people in the right place — with full support from the executive suite and the boardroom will pave the way to a successful digital journey.
If you’re interested in meeting executives who’ve made the journey, there will be a panel discussion titled “The Digital Journey: A Discussion On Transformation” hosted by the Metropolitan on May 24, 2018 from 6:00PM to 8:00PM. The panel consists of executives from ConAgra, Citi Retail Services, and Impact Engine and moderated by TalentRISE. The Metropolitan is located at 233 South Wacker Drive, Chicago, Illinois 60606. Please contact email@example.com to reserve your seat.