Of all types of change, a digital transformation can be the most daunting. Often expensive, they are full of jargon and can represent serious upheaval in people’s day-to-day working lives. They dangle great rewards, but all too often end in failure.
In this blog, I’ll be looking at why digital transformation is different to other changes, why it’s important, and what the risks are and how to mitigate them. Along the way I’ll offer examples of companies I feel have done digital transformation well and explore Lane4’s two ongoing digital changes. I hope you enjoy it.
‘Digital’ is a lazy word
I’m not a huge fan of the word ‘digital’. It can be ambiguous and where one person thinks of computers, another might think of the internet, or virtual, or even just related to technology. ‘Digital’ has many connotations.
Instead, it’s simpler to consider why businesses do digital transformations. The first reason is to improve internal process and reduce friction within an organisation; this might mean installing a new back-office system. The second is to use technology to overhaul the business’ product offering, like when the supermarkets started offering online shopping as a core part of their proposition to customers.
Lane4 is currently undergoing both of these changes, and they make different demands upon me as a leader. Internally, we are in the midst of moving to a new Enterprise Resource Planning (ERP) system that will oil our wheels better, freeing up time for our client services team.
On top of this, we are developing our offering to clients to ensure it takes advantage of the latest technologies. In a management consultancy like Lane4, this generally means finding ways to allow customers to access our learning & development content anywhere and at any time. Obviously, this is a transformation that never really ends, but that doesn’t mean it can be ignored.
Consider a digital transformation in your business, internal or customer-facing. Where would you say it falls on the change momentum model below? Each has pros and cons that are discussed further in this white paper.
French and Rees, 2016
Why is a digital change different to other changes?
Digital change necessitates further change
Unlike an organisational restructure or physically moving office, a digital change often comes hand in hand with other changes. It could require a culture change – you don’t want to stick digital in the heart of your organisation only for there to be an ‘organ rejection’ because your culture is closed to it.
This was a hurdle for Lane4 a few years ago when we first started to deliver for clients virtually. For 20 years we had thrived by doing face-to-face leadership development, and some people in the business were understandably reluctant to let that go. But what they were really worried about was losing the human element in what we do, and I had to convince them that we could achieve that without being in the room.
About 15 years ago, I did a workshop in Singapore for a pharmaceutical company, and they flew people in from all over the region, like Indonesia and Fiji, and put them up in a hotel for four nights. That’s a huge cost, financially and environmentally, and one that businesses are increasingly reluctant to pay when they could run the same programme virtually for a fraction of the cost. The key is to ensure that you put that saved resource into making the programme as human and compelling as a non-virtual one.
In the end, we adapted as a company, and today we have some clients where not a single piece of content is delivered in person. Pearson was a purely digital success story; it was all enabled through an online learning platform that people accessed remotely, but still delivered great results.
The other unique challenge of a digital transformation is that it brings a whole load of jargon with it. It’s like lifting up the bonnet of a car and showing people what each part is called. There will be some things that people knew existed but didn’t know the name of, and there will be other parts that they had never even thought of before!
All of this can sometimes lead organisations into a kind of ‘acronym-mania’ where terminology is being thrown around but not everyone shares it. People who understand it will get frustrated that things aren’t moving faster, and those who don’t will feel out of their depth and afraid to ask “stupid” questions. As a leader, it’s your job to support people through what can be a confusing time. You’ll need to do more handholding than you might expect, especially if you do understand the jargon because you’ll assume everyone else does too.
If it’s so hard, why bother at all?
When you hear that over 60% of changes fail, and that only 5% of digital transformations meet or exceed expectations, it can be tempting to think “I’ll just sit this one out.” But digital change gets to the very heart of what keeps a business afloat – relevance.
You want new technology to enable you to do your job more easily and with less friction, in order to enhance the service you provide to the customer. But even more important than enhancing your offering is ensuring your underlying proposition remains fit for purpose in light of changing customer needs.
When technology advances, businesses must advance behind it. The classic example is Blockbuster: they could have had the best ERP system in the world, and the most efficient supply chain, but their VHS and DVD-based business model was fundamentally flawed at a time when Sky were sending films down the tube (that’s a technical term!).
For us, if Lane4 refused to deliver virtual workshops and ignored digital because we like being in the room, it could easily lead to collapse, and rightly so! The key is to recognise that people like people, and completely removing the human from the customer interaction would be a step too far.
Ocado have got this right: they are a ‘digital-only’ business in the sense that they have no stores, but you still have an incredibly warm interaction with your delivery driver when he drops off your shopping. They aren’t delivering your potatoes by drone for a reason!
What should leaders do to make a success of a digital transformation?
Remember that all change is psychological
As Mary Shelley said, “Nothing is so painful to the human mind as a great and sudden change.”
One risk of a back-office change is that you do something that demands a behaviour change but the behaviours stay the same. An IT system is only ever as good as the human using it, so don’t neglect the human side of change: upskilling, FAQs and conversations to understand people’s concerns are all hugely important to a successful digital change.
Set up your own competition, or someone else will
Autotrader Magazine set up a team whose job it was to gobble up the revenue of the main company and ended up with a very successful website. This team operated separately from the rest of the organisation so that they could imagine radical new solutions to customer needs, untethered from what came before. However, I’d argue that this wasn’t a totally successful change, because in undermining the existing business, some people did end up losing their jobs.
Instead, you should aim to be more like John Lewis. That company has been on a fascinating journey from bricks-and-mortar stores to online shopping hubs, and the impressive thing is that they have enhanced their original offering, not destroyed it.
They were paying rent and upkeep and staff for their stores, and losing out to online-only competitors, so they decided to set a website up on the side. But this didn’t totally solve the problem, and now they have this interesting amalgamation of online and in-store. If they don’t have the item you want in stock, the shop assistant will grab a tablet and go on their own website in front of you, talking you through what it’s like compared to what they do have in stock.
Online shopping says “You can have anything” whereas a store can only ever have limited stock. But what stores do have is shop assistants who can offer expertise and warmth. John Lewis has brought the two things together so that one isn’t killing the other.
Don’t get bogged down in details: communicate benefits
I am not a hugely technical person, and so there is always a risk that I become an anchor on any digital transformation. But I employ technical people for a reason, and I trust their knowledge in those areas. What I can do is really boil the change down to two things:
• What are the pressure points for people?
• What are the benefits we expect?
By understanding these aspects, I can offer support to my people in the places they need it most, and I can present a guiding vision of why we are doing this when times get tough.
Change is scary, but good too
You never know any change is going to work. I could put a digital system into Lane4, or restructure the company, with the best intentions, but I don’t actually know if it will make things better. That’s the scary part of change. After our last restructure we saw revenue go down the following year; it wasn’t until 18 months later that we saw the benefits we’d expected. It was tough.
But I don’t regret taking that risk because I want Lane4 to become a more successful, more sustainable organisation, and to get there we’ll have to adapt. If you have any questions about change let me know in the comments below, or read our white paper All change is not equal.