When digital transformation fails, focus on the why and how of change, not just technology and transactions
As consumers flock to digital channels for everyday shopping, education, and entertainment, as employees are relocated for work from corporate to home offices, as teachers, children and parents turn to distance learning, and as connected technology and real-time data become the lifeblood of relevance and resilience, digital transformation is taking on an entirely new sense of urgency. Yet, before the pandemic, it's estimated that four out of five digital transformation (DX) efforts failed.
Which begs the question: What were organizations getting wrong and how can they make up for the lost time to succeed moving forward? The answer, ironically enough, is that digital transformation placed too great an emphasis on 'digital' and not enough on people and purpose. To make digital transformation effective and successful, it must evolve through relationship transformation (RTx) and center on escalating human-connections through digital.
Before COVID-19 (BC), DX was less about business transformation and more of a codeword for digitization. Roadmaps largely focused on updating and upgrading aging and disparate systems. By most estimates eight out of every 10 of these types of transformation initiatives were failing, sometimes spectacularly. So, what's going wrong? Wipro Digital, McKinsey, and others have identified a number of failure modes, which include:
- Lack of alignment and clear understanding among leaders about how to execute against a digital transformation strategy
- Lack of CEO engagement and sponsorship
- Concern from leaders that their digital transformation project is a waste of time
- A focus on backend benefits, with Product Development, Marketing and Sales seeing the least benefit from the initiative
- A fear of the overall complexity of the initiative and uncertainty of its success
- Understanding of how employees and customers are evolving, especially in a time of COVID-19
- A perception that the initiative is owned or led by IT (not by the CMO or CDO)
The race to digital transformation prioritized digitization over the soul of any business, people
Yesterday's DX framing and focus were off because it missed the dynamics of core business value, people, and relationships. Executives placed greater importance on digital as a means over the betweenness of businesses and people, using digital as conduits for engagement and relationship-building.
Digital transformation, without centering on customers and employees, simply doesn't resonate with business leaders or provide them with a purpose, direction, or goal that they or the organization as a whole can get behind. To them, it risks sounding like just the latest in a long line of high cost, highly distracting IT initiatives that over-promise and under-deliver on business benefits. To borrow Simon Sinek's "Why, How, What" construct, DX has placed too great an emphasis on the What (modernization) and never about the Why or How.
A better framing reflects the real transformation that was well underway across society prior to the emergence of COVID-19, namely the transformation of the relationships between people. Driven by a combination of technological innovations, demographic shifts, and changes in social and cultural norms, we, as digital citizens, were already firmly en route to becoming more empowered as individuals, more autonomous and yet also more connected. As a result, all our standards and dynamics around relationships, in every context, were changing, including those with family and friends, employers, brands, retailers, communities, and experts and authority figures.
Then the virus struck and these changes only intensified and accelerated. With global shutdowns and shelter-in-place decrees the new norm, and with people concerned with their health and the health of their loved ones, digital transformation was the answer more than ever. It's the question of why and how that will define how businesses respond.
Digital-first is the new norm and as people shop and work from home over time, these behaviors will only stick and intensify. Now, everyone has to learn to become digital in their personal and professional lives. Employees need immediate support to work from home, at a time when remote working was far from mainstream. At the same time, as shops closed or were limited in capacity and fear of contracting COVID-19 rampant, customers en masse flocked to their smartphones, apps, and sites to find new and capable services and solutions. McKinsey estimates that ecommerce experienced 10 years of growth in just three months.
Those organizations that weren't already digitally optimized for employees and customers found their way of doing business disrupted overnight. Digital native organizations, however, were in prime position to serve employees and customers, introducing new possibilities and standards for remote work and real-time customer engagement. The game had changed and it was never going back to yesterday's normal.
But, it wasn't just digital transformation that was disrupted. The very core of business, relationships with employees, customers, and partners, was also disrupted. Everything was suddenly distanced, transactional, and in need of humanization to restore connections and ultimately relationships.
Business is about relationships, making digital transformation a human endeavor
To survive in this era of accelerated connectedness, companies need to be more intentional than ever about managing their relationships. To thrive and achieve sustained growth and success, they also need to transform and re-humanize those relationships, all relationships, including employees, partners, and communities.
The effects of digital in our lives, accelerated and amplified by the pandemic, only continues to spark new behaviors, sentiments, and standards. This places relationships at risk as people gain increasing control of the experiences they seek online.
When asked to what extent people conducted everyday activities compared to before the COVID-19 pandemic, the scope of behavioral disruption was starkly visible.
Things as trivial as browsing the internet, using social media, or streaming videos, saw greater volumes of activity than before the pandemic with swaths of users going online more than usual (54%, 45%, and 45%, respectively).
For example, in a snapshot between May and August 2020, Salesforce spotlighted COVID's impact on digital and human engagement.
Salesforce Snapshot Research Series: Insights on how consumers and the workforce are navigating change.
How do people feel about business actions during the pandemic? Salesforce identified huge opportunities for human-to-human engagement and RTx.
Salesforce Snapshot Research Series: Insights on how consumers and the workforce are navigating change.
When asked if they expected businesses to do the right thing, one-third of customers said they do not trust businesses. More than one-third don't believe that businesses are doing enough to support employees or their communities. In fact, 36% said that social initiatives by businesses were superficial. And almost half (42%) believe that businesses are taking self-interested actions in these times.
DX + RTx gives technology and transformation its 'why' -- Human-centered purpose
These are not only times of great disruption, they are opportunities for positive change with relationships at the center of transformation.
All companies should, therefore, focus their DX efforts on relationship transformation, placing RTx at the core of everything, particularly in the following three aspects of their business.
First, on earning customer trust and fostering engagement. Customers are becoming more demanding of the people and organizations with whom they do business. COVID-19 is only making this reality more profound. But when they trust them and are fully engaged, they buy 90% more frequently, spend 60% more, and are 5X more likely to indicate exclusive loyalty (Rosetta Consulting, 2015).
Second, on living their values and purpose. 80% of customers and employees believe businesses have a responsibility to make a positive impact on society and are more likely to want to be associated with them than those that are purely profit-driven. If there was ever a time to demonstrate purpose, this is it. Remember, one-third of customers don't believe businesses will do the right thing, 36% feel that social initiatives are superficial, and 42% feel that businesses are taking self-interested actions. It should then serve as no surprise that purpose-driven organizations outperform the S&P 500 by 303% (IDEO Creative Difference).
Third, on building connections not only with their customers but also with all their business partners, employees, other stakeholders, and their communities. Connected businesses, also known as ecosystems, create explosive growth in this era. Seven of the top 12 largest companies by market capitalization -- Alibaba, Alphabet (Google), Amazon, Apple, Facebook, Microsoft, and Tencent -- are ecosystem players (McKinsey Quarterly, January 2018 "Why Digital Strategies Fail").
Even before the pandemic, these three focal points articulate the importance and value of centering DX and RTx around people and enhancing relationship dynamics, thus becoming a P2P (people-to-people) business.
This reframing of digital transformation around relationships is more inclusive and purposeful as it embraces all corporate functions and puts humans and human outcomes first. Relationships are the responsibility of everyone in the organization and are also the principal means by which organizational culture and business ecosystems get built. COVID-19 is only magnifying the need and opportunity. By shifting the focus of transformation away from entities like business, technology, people, or even culture, and instead focussing on the connections between them, it avoids the implication that they are somehow faulty or to blame for the current state and that they, therefore, need to be fixed or changed.
Everyone agrees that companies need to improve the ways they do business, and the stakes have never been higher. If they're going to succeed they have to adapt both to the evolving digital age and a world completely reset by the coronavirus. But the stars in any contemporary business transformation are the people, and what drives the action is not the people themselves but the relationships between them. Companies must reimagine and refocus DX initiatives to include RTx, a transformation that places human understanding, behaviors, aspirations, and connections as the "why" in digital transformation.
By placing people and RTx at the center of DX, we then can visualize 'how' to move forward on a more purposeful roadmap to change and modernization (what). Technology plays a critical supporting role but is not the lead. And that is the secret to success is not only the Fourth Industrial Revolution but life itself. In this regard, perhaps the pandemic was the best thing that could have happened to businesses.
This article was co-authored by Henry King, an innovation and transformation strategy leader at Salesforce and author of Flow by Design, a new paradigm for the design of customer experiences and business processes in a connected world. King is a former CIO with over 35 years of consulting and executive experience, both in the US and internationally, with expertise in innovation, design thinking, and information technology. He has been published in Fast Company, Huffington Post, ZDNet, and Businessweek. King studied Classics at Oxford University and teaches postgraduate innovation and design classes at the School of the Art Institute of Chicago and the Institute of Design.