Beyond tech: profit-driven digital transformation

Four factors you must align for success

Quadruple sculls rowing Untangle the hype Many companies are struggling to define “digital transformation” – even if they’ve already launched a transformation effort.

“The market is filled with hype about digital transformation,” said Grant Thornton Advisory Services Principal Roy Nicholson. “There are many perspectives on what it means. Many technology companies are using the term, and the definition has come to include any technology implementation or activity,” Nicholson said.

“You may call it ‘digital transformation’ if you’re upgrading your system or moving it to the cloud, but in many ways it’s not. The effort is not organized at an enterprise level, and typically not transformative. It may be expensive, and it may take a lot of time, but it’s not truly transformative,” Nicholson said.

Successful digital transformation is not just an upgrade, and it’s not just tech. It’s transforming an organization to achieve new enterprise-level goals in the future.

And a successful digital transformation begins with understanding the motives and challenges that lay ahead.

Identify your motives and challenges To align your organization for a successful digital transformation, you need to start by aligning your motives.

“There are many reasons that companies embark on a transformation journey. Given that a digital transformation may be delivered over several years, it’s likely that the priority and importance of those drivers may also evolve over time,” Nicholson said.

A lot of the tech news about transformation focuses on increased competition and escalating customer demands. However, a recent Grant Thornton survey of US organizational tech leaders showed that core financial motives top the list of drivers for transformation efforts.

Why did you begin a digital transformation

Even a change that’s focused on finance will quickly encounter some complicated issues. “Financial motives may create the impetus to change, but if you don’t address other areas within the business, in many cases the change is destined to fail,” said Grant Thornton Digital Transformation and Management Director Brian Messick. Respondents in the same Grant Thornton survey indicated that culture was an even bigger hurdle for transformation than resource limitations and legacy IT systems.

What has been your biggest hurdle in digital transformation

“What we have seen is that culture can be the biggest barrier to successful digital transformation projects,” Nicholson said. “It’s deeply ingrained within your company,” Messick said, “and sometimes that makes it the most challenging thing to change.”

So, how can you set the right focus for your digital transformation, overcome the challenges and align your organization for success?

Align four factors for success “A lot of people think digital transformation is purely focused on technology,” Nicholson said. “Technology is very much an enabler, but it is not the only factor here. It’s about business strategy. It’s about improving business process. It’s about talent and it’s about culture – and aligning those things together to form what is needed for success.”

Nicholson outlined three stages of transformation across four factors: the organization, leadership and culture, communications, and processes and technology.

Keys to a successful transformation

Organization The establishment of a Transformation Management Office (TMO) is key to the completion of enterprise transformation. It fulfills functions that the Project Management Office typically does not address, such as culture, emerging technologies, transformation metrics and innovation. “Fundamentally, a TMO is an ongoing function,” Nicholson said.

A case in point: A US mortgage servicer was seeing flat revenues and gross margins with shrinking customer and employee satisfaction and retention. It wanted to transform its organization to streamline processes, reduce costly customer behaviors and improve the customer experience. But, its challenges had been present for years with no clear solutions. Grant Thornton helped it establish a TMO and employed design thinking to work with stakeholders across siloes, establishing specific goals and problem statements. The company had smart people who knew their customers – with coordinated guidance, technical training and redefined roles, they proved that facilitating innovation from within can truly unlock transformation value.

Leadership and culture It’s important to recognize that digital transformation is an enterprise initiative, rather than an IT initiative. And, as with any enterprise-level initiative, it’s important to ensure that top-level leaders support and drive a common set of goals. “Rather than have distributed project managers running different projects, you need a collective group, guided by senior leaders, that communicates both the approach and the metrics to measure the success of the program,” Nicholson said.

A case in point: A medical supply company wanted to find new options in supply chain management, healthcare workflows and product development, so that it could engage its end customers outside of their usual channels. Grant Thornton helped leaders encourage an innovative culture and inspire supply chain managers to look at other industries for new ideas. They conceived and developed an innovative system of on-site cabinets that let customers purchase supplies directly in an entirely new distribution model. This success required strong leadership to foster an innovative idea and help drive its success.

Communication To drive a digital transformation’s success, an organization must ensure its employee communications are engaging, frequent and transparent. “Companies that actively communicate the strategy and the reasoning behind a digital transformation – and transparently share ongoing progress, success and failures – are much more likely to gain the support of their employees and reduce ultimate resistance to change,” Nicholson said.

A case in point: A B2B commercial printing company saw flattening growth and an aging technology platform that limited its scalability. It wanted to transform its business by adding new products and services while maintaining its current business and positive customer relationships. Grant Thornton helped it develop an IT platform vision and strategy that aligned with its corporate strategy, ensuring top-down buy-in and communication from leaders and board members. Communications transparently addressed the missed deadlines and false starts of similar efforts in the past. This organizational alignment and communication also helped support the development of the new skills, processes and culture required to succeed.

Process and technology Sometimes, digital transformation can place such a burden on existing processes and technologies that organizations need the assistance of external partners to help drive success. “Any transformation effort will put pressure on your human resources, and digital transformation does for multiple reasons,” Nicholson said. “Delivering a company-wide change while your company continues to execute on your existing business can put significant pressure on your existing team. And it can dilute your ability to execute the transformation effectively. Compounding that is the complexity and specialization of the new and emerging technologies that an organization might not have the skills to effectively execute.”

A case in point: A US public bank had growing business, but found that its infrastructure could not adjust to new customer demands and market changes. Regulators threatened to halt the bank’s future acquisition plans if it did not update its technology environment, governance and processes. So, the bank established a three-pronged strategy of improving its efficiency ratio, enhancing its customer experience and improving its employee experience. With challenging technical hurdles to overcome, the bank found strategic technology partners to help implement its strategy while its leaders remained focused on maintaining the bank’s growth momentum.

Continue your transformation Many motives are sparking digital transformation efforts across industries. And the ongoing drive for digital transformation is going to continue as markets keep evolving into the future. “Every single industry has the potential to be disrupted by digitally native competitors in the future. Even just a mobile app has shown the potential to disrupt many industries,” Nicholson said.

Legacy architectures, and legacy cultures, cannot support future business models that will need to employ cloud-based solutions, seamless integration, real-time analytics and data-driven strategies. “These are things that you need to have available, and they often require a complete modernization,” Nicholson said.

Nicholson added that, to stay competitive, organizations need to begin their ongoing digital transformation now. “As you consider the opportunities and challenges you may be facing in your company’s journey, it’s important to consider the benefits of a digital transformation will take time to realize.”

Roy Nicholson
Principal and Leader, Digital Transformation and Management
T +1 408 346 4397

Brian Messick
Director, Technology Strategy & Management
T +1 858 704 8009