How to map out a digital transformation strategy: Key steps & techniques
During and post the pandemic, the digital transformation of businesses accelerated as many companies strove to keep pace with the rapidly changing requirements of consumers and employees. The intended benefits of digitising businesses are well-known. Done right, digital transformation can result in streamlined processes, seamless customer experience and give rise to new business opportunities. Digital transformation is also an expensive proposition. There are several costs associated with digitising a business – the cost of developing a digital strategy, migrating legacy systems to new platforms, investing in automation technology and/or cloud solutions, as well as training employees, to name a few. For effective and efficient digitisation, a robust strategy that keeps the long-term perspective in mind is a must.
Why digital transformation can fail
Several consulting companies estimate that the risk of digital transformation failures can be between 70 and 95 per cent. Shocking as it may seem, there are several reasons for this. Digital transformation needs to be aligned with business outcomes. Employees need to be trained on new technologies and modified processes to improve the likelihood of acceptance. Employees also fear that they may lose their jobs when tools and technologies are brought in for process improvements, and this too contributes to the lack of adoption of new digitised processes. Digital transformation efforts need to keep the bigger picture in mind. Technology can be a game-changer but only accounts for a percentage of the success. Having a plethora of tools and platforms that do not satisfy specific needs often results in failed transformation efforts. Companies often do not have buy-in for digitisation across the length and breadth of the company, which creates a bumpy ride. A robust digital strategy is necessary for successful digital transformation.
Creating an effective digital transformation strategy
To be successful and sustainable in the long run, digitalisation needs to be goal-oriented and meaningful. A McKinsey study found that companies realise less than one-third of the value they expected from digital transformation efforts. Organisations need to look beyond the latest tools and technologies and start thinking about changing how they do things, so that digital transformation goes beyond being transaction-oriented.
- Identify transformation goals: Companies need to have clarity about their digital goals, and keep the long-term vision in mind. For instance, are you trying to be more customer-centric? Does the organisation need to improve supply chain agility?
- Get the buy-in from all stakeholders: The digital transformation effort will amount to nothing if people are not convinced. All stakeholders, including top leadership, need to understand the benefits of transformation and understand how they will derive value from it. A top-down approach will help in a successful transformation.
- Organise funding and categorise digital investments: Digitisation is an ongoing process and goes well beyond one or two projects. Allocating a budget ensures that transformation efforts do not come to a standstill. Partnering with finance executives will help to gain an understanding of the type of investment, and the different kinds of funding available. Small and self-funded projects help see value swiftly. Bucketing digital investments into maintenance projects, core projects and exploratory projects lends clarity to the process and helps to secure funding for transformation efforts.
- Understand the existing business model: Analysing the current state of the business will help understand the organisation culture, manpower availability and the skill gaps that may be present. Mapping organisational processes, roles, and operations helps to visualise the existing model, and easily identify the gaps and pain points that can be addressed by digital transformation.
- Prioritise transformation projects: Once the transformation opportunities are identified, ranking them in order of importance based on the digitisation goals helps to break down a behemoth initiative into smaller, achievable chunks that deliver the desired return on investment. This in turn gives impetus to the digital transformation efforts as stakeholders see value in them.
- Design the transformation path for the chosen opportunity: Digitisation can be successful only if there is a holistic approach towards changing the process while enabling people and leveraging technology. People will adopt digitised processes only if they see value in them. Training and upskilling may be required, and the organisation needs to have a change management process for every digital project.
- Measure success, and continue to evolve incrementally: Every digitisation project needs key performance indicators to indicate the value derived from transformation. Additionally, iterative efforts may be necessary with a focus on the business model and the ultimate goals of digital transformation. The transformation priorities may need to be revised periodically, as some projects may give rise to new requirements.
Relooking at existing processes and business practices, and adopting a customer-centric, capability-focused and collaborative approach with a view to empowering people while using technology as an enabler will help companies achieve the true power of a digital transformation in capital markets.
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