A CEO’s Take on Modern Digital Transformation

Transformation is …

Here are a few things we know.

Digital transformation is important. PWC research indicates that 60% of top executives say digital transformation is their most critical growth factor in 2022. According to a recent BCG survey – 80% of organizations intend to accelerate the digital transformations they have planned.

Digital transformation is expensive – IDC forecasted that global DX spending will hit $1.8 trillion in 2022, going up to $2.8 trillion by 2025.

And it is hard. 70% of digital transformations fail to meet their objectives.

But, it’s also worth it. Digitally mature companies significantly outperform their digitally immature counterparts – research indicates that digital leaders achieve 1.8 times the earnings growth over digital laggards. Digital transformation’s beneficial hit on the bottom line is well established, but it’s only one indicator. Organizations that get digital transformation right innovate consistently, can pivot quickly, and are better prepared to compete in the market.

Defining Digital Transformation

We know if you get digital transformation right the ROI is incredible, but how do you ensure your organization ends up in that successful 30%?

That’s the trillion-dollar question, and the tricky part is there is no one right answer.

To really comprehend the depth and breadth of what digital transformation can mean, let’s take a peek back for a moment. Digital transformation has been evolving as a term and concept in the business world since the late 1990s. In its infancy as a term – digital transformation was very literal. Organizations either digitized their core system – moving away from mainframes – or replaced paper-based and manual processes with digital alternatives. In 2001 that might have just meant converting a paper ledger into a macro-heavy spreadsheet.

In the early 2000s through the 2010s organizations moved onto more holistic digitalization – eliminating any manual work in entire departments or functions. Spreadsheets and databases were then being replaced with cohesive, adaptable digital workflows. Organizations chased the operational efficiencies, cost savings, and improved customer experience that resulted from successful transformation projects.

The global pandemic impacted digital transformation efforts on a massive scale. In a remote-only world, so many organizations that had been getting by on the status quo suddenly found themselves floundering in a monumentally disrupted landscape. Not only did the pandemic accelerate the adoption of digital technologies by several years, but it’s also drastically changed how – and where – we work. Even with a sizeable portion of people around the globe returning to the office in a more regular capacity, 73% of workers expect flexible remote options to remain.

And here we are in 2022. The supply chain is still recovering. Organizations are competing to recruit and retain top talent in an ultra-competitive labor market. And consumer expectations are more digitally focused than ever.

Digital transformation is so expansive and has meant so many things over the course of so many years – the term and concept are so open to interpretation that the real first hurdle in any DX project is defining what digital transformation means for your organization. You have to narrow the aperture and know what needs to be done and why. And your framework for measuring success should align with that definition as well.

Plot the right path for your Digital Transformation

While there’s no perfect formula or single path to repeatable digital transformation, there is a way to create a more tailored path that will achieve what your organization needs to do. Mendix is going through an era of hypergrowth and to thrive in a changing world we have to evolve and transform and I’m at the helm, doing everything I can to lead us through to the other side.

Once you identify your own how and why of digital transformation, then the real work begins. You actually have to go out and get it done. There are three things I think are crucial to any successful DX plan.

1. Lead from the top, empower throughout

Digital transformation must be a core part of any modern CEO’s vision. Once DX is right-sized to the organization’s needs, that concept needs to surface in the strategy, how you set targets, and how you operate as an organization and make decisions. Interweave that vision throughout the entire organization – you need buy-in from the c-suite all the way down to individual contributors.

Successful DX needs momentum and ownership, so it’s important to empower leaders to execute transformation projects throughout your organization. Don’t let initiatives – regardless of size – get bogged down in decision by consensus.

2. Manage the change

Change is challenging, especially for long-standing organizations that weren’t born in the accelerated landscape of the digital age. Altering the way things are done is a lot harder when things were done that way for decades and the technical debt runs deep.

Digital natives might have an edge – companies born in a disruptive landscape may be more apt to accept change, whether an organization is a year old or a hundred – change management is a critical and often underappreciated aspect of digital transformation.

Technology is often the focus of conversations around digital transformation – and there’s no doubt that it matters. But it’s the people who implement and use those new technologies who really make or break digital transformation.

Making sure your talent feels informed and included will inspire them to get behind the vision set by the CEO. And a word of caution – maybe not everyone will want a part of that vision. People who have been doing the same job the same way for 20 years may not have a massive appetite for risk. Part of managing change is understanding and supporting an evolving workforce.

3. Disrupt from within

If you focus playing catch up to changing external factors, you’re always going to be coming up from behind. According to McKinsey, 64% of enterprise executives think that building out new digital businesses is the key to economic viability.

Disruption leads to innovation and the creation of those vital new digital businesses. Internal disruption can be difficult – even awkward, but you have to break things in order to come out stronger. And if you’re not bold enough to do it – your peers in the industry will be.

Establishing digital transformation as a continual practice will ensure you have the flexibility to disrupt from within.

Expand your appetite for risk…or else

How you define digital transformation is just the beginning. Establishing a change-ready culture, where right-sized DX motions are led by capable innovators throughout your organization is also vital, but that’s not the true long-term goal. Neither is the big win ticking off an endless to-do list of digitalization tasks.

The overarching goal of modern DX is to enable transformative change as a perpetual practice. It’s to be ready to adapt to a sudden shift in your industry. It’s to be able to develop and launch new digital businesses that meet the needs of your customers. It’s to support an engaged and creative workforce to get disruptive and stay disruptive.

If you think the cost of changing to attain this level of adaptability too high, consider the risk of complacency.

I think this quote from Thomas M. Siebel makes what’s at stake if you hold too dear to the status quo in sharp perspective; “Since 2000, over 50 percent of Fortune 500 companies have been acquired, merged, or declared bankruptcy, with no end in sight. In their wake, we are seeing a mass ‘speciation‘ of innovative corporate entities with largely new DNA, such as Amazon, Box, Facebook, Square, Twilio, Uber, WeWork, and Zappos. Mass-extinction events don’t just happen for no reason. In the current extinction event, the causal factor is digital transformation.”