The dynamics of digital transformation every leader and project manager should know and master
The successful transformation initiative depends und an understanding of key dynamics in the business and organization. This includes mainly new product development, organizational change and market dynamics but also supply chains and safeguarding your existing customer base. The dynamics in these areas are already challenging, but taken together and interrelating with each other they can create either a vicious or a virtuous cycle.
“Digital Transformation is a top priority for us“.
You can hear this statement from almost every leader and read it in most annual reports of companies and organizations in the public sector. And if you have not yet embarked on the digital transformation ship for your company or organization then you are already some steps behind the curve.
The risk of falling behind the digitalization curve has several implications. It is not only about the competitiveness in the market place and about keeping existing customers. It is also about facing a skill and experience drain from the organization and challenges in attracting and digital talents from the market.
What many companies do not yet realized is the increasing scrutiny they will face from their banking and insurance partners. Most financial service providers have already changed their assessment of clients and are surfacing risk factors based on digitalization progress and capability. As a result, the views about a company’s risk profile is changing. And this has consequences for the flexibility, cost of doing business, valuation and ability to secure funding for projects and trade transactions.
Another important change and risk is how the market and ecosystem is responding to quality issues such as product quality issues or even product recalls. The customers are more aware and less forgiving. Their digital attention span has increased dramatically. More importantly, the good and the bad news are amplified in the increasingly digital and exponential world. When the message goes viral the feedback effects have impact on many areas.
What does it mean?
For example, a midsize company which has seen solid business for decades and who has been a supplier to large companies may see a sudden disruption from competitors who are moving faster and provide better services, driven by their digital capabilities. And the points of attack could be in several areas: product, services, supply chain, organization and integrated analytics and insights.
The pain points
But with all the talk about “digital first”, what you don’t hear often are many success stories. Where are they? And what is making it so difficult to get started and to transform the business?
Apparently, it is not about the technology or funding. The stated challenges are in the areas of organization, project and change management and adoption of innovation in the market place and ecosystem.
How to lead successful transformation initiatives?
There are several key dynamics which each leader and project manager needs to understand. Each of these sectors has an own inherent strategic feedback structure which drives the dynamics.
- Project dynamics
- Market and product adoption dynamics
- Organization dynamics
- Customer base dynamics
- Service dynamics
- Supply chain dynamics
And because these areas are interrelated the feedback between these sectors can create even more challenging situations for management and the stakeholders. For example, the priorities and demands of the legacy core business requires more staff. As a result, the new product development schedule is slipping. This creates a competitive risk: the market could vanish or be taken over by competitors. And in the organization a product which is delayed again and again creates an unfavorable impact on perceived progress. The lack of support for the innovation by managers and employees is a natural consequence. And this impacts the progress of the new product. A vicious cycle. Or, a virtuous cycle if you understand the dynamics and set the right course.
The starting point for any organization, no matter what size or stage of the digitalization, is to conduct a self-assessment for the organization. And likewise, the managers and employees can take a personal self-assessment about digital capabilities. This provides a first part of the picture and can point to learning maps. As a first step, the team can conduct a strategy workshop which reveals the performance scenarios and surfaces opportunities, risk and possible key strategies and tactics. Understanding what is and what is not possible is important to build the new capabilities and t select and deliver successful transformation projects.
Example: “Productizing” services
Many service oriented organizations are facing a disruption for digital products. And for some industries the arrival of machine learning and artificial intelligence can make the know-how and services obsolete. One possible response is to “productize” the know-how and augment the services with digital products and services.
“Wouldn’t it be great if we would provide this service with digital Software-as-a-Service solution?”
But for an organization which has delivered services it is not easy to pull off a complete new product development projects, especially when it competes with the requirements of the ongoing core business.
Let’s take the example of a marketing services company. The company is delivering services to the clients based on their acquisition of new customer and their order rate. In the business-as-usual scenario there are fluctuations in demand which the service company does not control.
The good news and opportunity here is to develop a product with the excess capacity which is underutilized when the backlog is going down.
This strategy can work out under certain conditions. But it can also lead to a vicious cycle which leads not only to project and product failure but can harm the organization.
From this example of transformation dynamics, you can see already the interaction between two important sectors of the same business and organization. The key is to find a good and feasible path for the company and its stakeholders to create success stories with projects, campaigns and change initiatives.
The project managers and leaders need to create the conditions and the environment for successful innovation and transformation initiatives. This involves selecting and scoping the projects, advancing the management system, building effective KPI dashboards to track progress and finding the right growth strategies and tactics to accelerate the adoption of innovation.
The fundamental feedback structures in these areas will determine dynamic behaviors. The same system can create very different change profiles and outcomes. The difference between success and failure depends on understanding the forces and levers which can be pulled.
The related course “Transformation Dynamics” provides a learning opportunity for you and your teams.
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