Digital transformation presents organizations with immense opportunities, but seizing them requires a strategic approach and careful selection of appropriate technologies. A recent study conducted by Deloitte that examined financial disclosures from over 4,000 global organizations, spanning a decade, revealed that “the right combination of digital transformation actions can unlock as much as $1.25 trillion in additional market capitalization across all Fortune 500 companies. However, the wrong combinations can erode market value, putting more than $1.5 trillion at risk.” This highlights the importance of more than just ambition and bold investments in achieving digital transformation success.
So, how can boards ensure they navigate this complex landscape successfully? In this article, we delve into the crux of this million-dollar question, aiming to provide valuable insights and guidance.
Focus on Go-to-Market (GTM) Strategies
To leverage the benefits of digital transformation, it is crucial to recognize that while the IT department may provide advice on potential solutions and lead implementation efforts, the board must help the management define the digital transformation strategy.
Leadership teams need to determine whether their program aims to reshape the market demand for their current products and services or if it involves a more fundamental question about innovation and the creation of new offerings driven by digital automation. Boards must help the management team assess whether the strategy should focus on untapped market segments or geographical areas.
Digital transformation also entails empowering your workforce to adjust to the demands and possibilities brought about by digital technologies, tools, and innovations. This may involve training and fostering a culture of self-sustaining innovation, ensuring the business continually evolves alongside digital advancements.
Given the dynamic nature of markets, increasingly demanding consumers, the growing influence of sustainability, fragile supply chains, and constant disruptions across sectors, a comprehensive digital transformation strategy may need to address these factors and more. Establishing clear goals, defining desired outcomes, and setting budgets and realistic timeframes from the outset are crucial for success.
Prioritize Outcomes
While digital transformation can deliver numerous essential business outcomes, alignment with overall business goals and the company’s strategy is paramount for success. Lack of awareness within the organization about the purpose, implementation, and ownership of the digital transformation program, as well as its impact on every team member, can undermine outcomes. Investors and employees may question the rationale behind investing in such a program.
It is the responsibility of the board to address these concerns. They should ensure that the management clearly understands the measurable outcomes tied to digital innovation within the organization. These outcomes may involve increased revenues, improved cost management, enhanced business efficiency, agile processes, or an enhanced stakeholder experience – or a combination thereof.
Employees often feel apprehensive about changes they do not comprehend. The loss of familiar work practices and established routines can be disorienting and unsettling. Irrespective of the goals of the digital transformation program, effective communication with management and staff, tailored to their needs and addressing individual concerns, is vital for gaining employee buy-in.
Evolve Interaction Models
Digital transformation has the power to reshape interactions between internal and external stakeholders. There are three key aspects: publish, interact, and transact. Publishing is one-way communication. Interaction addresses queries, ideas, or challenges, while transactions encompass business-related activities like payments. Boards must ensure that the management implements a digital transformation strategy that effectively manages these interaction models.
Leverage Business Insights
Given the challenges of the existing economic landscape, boards across all sectors require comprehensive insights into the company’s business operations. Digital transformation tools can process vast amounts of structured and unstructured data, ranging from equipment sensor data communicated via the Internet of Things (IoT) to customer conversations via chatbot, phone, and e-mail. Boards must ensure that the management selects and implements the right digital transformation solutions not only to collect and analyze substantial data but also convert it into valuable information that provides timely, actionable and accurate business insights to the board and to the management.
Be Vigilant About Risk Management
As organizations embark on their digital transformation journey, they must remain vigilant about potential risks. While digital transformation presents exciting opportunities to address business challenges, it also introduces new risks we aren’t even aware of. The board of director’s risk committee must play a pivotal role here, ensuring the management establishes a robust risk management framework to identify potential threats and develop suitable mitigation and contingency measures.
As technology advances rapidly, digital transformation holds immense potential for companies and their employees. However, it can only yield the desired benefits if executed correctly. The board’s leadership is crucial in helping the management define the right digital strategy, select the best products and services, and ensure their successful implementation for fruitful digital transformation outcomes.