Digital Transformation Success Factors and Watch-outs 2023

In today’s fast-paced business environment, organizations must keep up with the latest technological trends to remain competitive. Digital transformation is a term used to describe the process of integrating technology into all aspects of a business, and it has become a critical strategy for companies looking to stay ahead of the curve. However, there are key aspects that make a digital transformation successful, and there are also key mistakes and obstacles that organizations must watch out for.

Change is a given in our current environment and often we are in reactive mode dealing with a supply chain disruption, natural disasters and cyberattacks just to name a few.

What I wanted to share in this article is the conundrum that a lot of companies are facing where we are planning for a change such as a digital transformation programs only to see stalled efforts, turning back to the old ways, implementing ineffective processes in the new software solution.

Right off the bat it is important to understand why a digital transformation program is necessary and why now.

McKinsey laid out the phases of early adopters and laggards in the graphic below:

At some point there is a tipping point that where individual drops of water into the bucket will become a soaring river.

In that case not changing your business model negatively affects your business and your capability to keep up with the change in markets and in customer demands. Especially, during times of economic disruption harvard business review pointed out that not investing into R&D and adjusting your business model can be enough to make the bucket of water overflow and put you out of your business.

So how is digital transformation done right and what are early warning signs that a program is in trouble?

The interesting bit is that there are key indicators that show if an initiative is doomed for failure and John P. Kotter has a formula for that and guiding principles to over come them.

He lays out 8 phases to help manage effective change and brining people and your organization along for sustained change reaping the rewards you are trying to achieve:

1. Create a Sense of Urgency

2. Build a Guiding Coalition

3. Form a Strategic Vision

4. Enlist a Volunteer Army

5. Enable Action by Removing Barriers

6. Generate Short Term Wins

7. Sustain Acceleration

8. Institute Change

The problem is that many companies are jumping right to the “management” part in steps 4 to 6 focusing on the “How” of the transformation program and skip the “leadership” part of the equation which focuses on the “Why”.

Furthermore, he highlights something I have personally experienced where victories are declared pre-maturely moving on to the next project or program.

This is where there is a danger that we fall back into doing things the old ways once the expensive consultants left the organization when the change is not sustained and institutionalized.

The change has to become part of a companies DNA and culture.

I found applying a product management mindset of owning the solution on an ongoing basis is a way to counter that and implementing continuous improvements.

Another change management model has been laid out by Kurt Lewin is a helpful concept to break down barriers to change with the 3 phases as depicted below:

The focus on this approach is to analyze in depth and from multiple angles during the “Unfreeze” phase. What is the problem to be addressed and why the change is needed which overlaps with the urgency mandate of Kotter’s model.

During the Movement phase the focus is on learning, support, feedback and communication which overlaps with the vision, empowerment and quick win phase of Kotter’s model.

The Refreeze phase is again overlapping with Kotter’s sustaining and institutionalizing phase.

The idea is to get from the current “as-is” state to the target “to-be” state after the change is done and refreeze at that time:

Lewin’s model is most helpful for large scale changes in that there is a focus to get detailed input which then can be used for the communication and support in the “movement” phase.

Combining both models addresses some of the weaknesses of executing these models in isolation.

1. The Kotter model while seen as the bible for change has been criticized that it is more of a guideline vs a step by step model e.g. a company might want to start with the vision to create the urgency
2. The Lewin model focuses on people, the importance of change and acknowledges that resistance is inevitable whereas it might be too detailed for smaller process change

To capture the most out of the 2 models I create the chart below that I use when I analyze, plan, build coalitions, implement and sustain change for the companies I work for.

In summary both models are helpful tools to have a complete approach to change from the discovery, vision to execution and institutionalizing of the change. Companies that are skipping these phases or don’t see it to completion and institutionalize change are bound to fail in their change efforts.

One key aspect of a successful digital transformation is leadership. According to McKinsey, “Leadership is the single most important factor in a successful digital transformation.” Leaders must be able to understand the potential of technology and the impact it can have on their organization. They must also be willing to take risks and make bold decisions that may not have been made in the past. This requires a certain level of agility and adaptability, as well as a willingness to learn and change course as needed.

Another important aspect of a successful digital transformation is a clear vision and strategy. Gartner reports that “by 2025, 70% of organizations will have a formalized digital transformation strategy in place.” A clear vision and strategy help organizations to focus their efforts and resources, ensuring that everyone is working towards the same goals. This also helps to align stakeholders and ensure that everyone understands the rationale behind the digital transformation.

One key mistake that organizations often make when undergoing a digital transformation is focusing too much on technology and not enough on people. According to Harvard Business Review, “the success of a digital transformation depends on how well the company can shift its culture to embrace new ways of working.” Technology is just one piece of the puzzle, and organizations must also consider how they can train and upskill their employees to work in a digital environment. They must also be willing to listen to feedback from their employees and make changes based on that feedback.

Another common mistake that organizations make is failing to measure the success of their digital transformation. Gartner reports that “through 2024, 80% of organizations that fail to establish clear digital transformation KPIs will not achieve the desired business outcomes.” Without clear metrics to measure success, it can be difficult to determine whether the digital transformation is having the desired impact. This can lead to a lack of direction and a loss of momentum.

Finally, one key obstacle to watch out for during a digital transformation is resistance to change. According to McKinsey, “resistance to change is the single biggest obstacle to a successful digital transformation.” People are often resistant to change, and this can manifest in a number of ways, including a reluctance to adopt new technologies, a lack of buy-in from stakeholders, and a general resistance to new ways of working. Overcoming this obstacle requires strong leadership, effective communication, and a willingness to listen to feedback and address concerns.

In conclusion, digital transformation is a critical strategy for organizations looking to remain competitive in today’s fast-paced business environment. However, there are key aspects that make a digital transformation successful, as well as key mistakes and obstacles that organizations must watch out for. By focusing on leadership, clear vision and strategy, people, measurement, and overcoming resistance to change, organizations can successfully navigate the digital transformation process and achieve their desired outcomes. One fact that is not obvious, but important for a successful digital strategy, is the need to involve employees at all levels of the organization in the process. This includes not only upskilling and training, but also listening to feedback and addressing concerns. By involving employees in the digital transformation process, organizations can ensure that everyone is invested in the outcome and working towards a common goal.

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