What companies get wrong is that true digital transformation isn’t about the technology itself, but rather the mindset of an organization and its leaders, argues award-winning technology entrepreneur and author Faisal Hoque in his new No. 1 Wall Street Journal bestselling book, REINVENT: Navigating Business Transformation in a Hyperdigital Era.
In an era of rapid technological advancements, digital investments are a do-or-die proposition for organizations across all industries. But according to a McKinsey survey, most businesses see less than one-third of the results expected from digital transformation efforts.
“From top to bottom, organizations will be compelled to change entire mindsets, attitudes, and assumptions about how they operate, how they can grow, and even about the very reason for their existence,” Hoque writes. “Change, as driven by technology, is as much an adjustment of mindset as it is a new set of tools that everyone must learn how to use.”
What Is Digital Transformation?
True digital transformation isn’t a plug-and-play tech investment; rather, it’s when companies use technology to drive and evolve every aspect of the organization.
It’s a question of Netflix versus Blockbuster, Hoque says in an interview. Netflix digitally transformed, Blockbuster did not. We all know who wins in this story.
Netflix’s mail-order video rentals disrupted the traditional video rental industry. Since then, Netflix has consistently incorporated new technologies to disrupt industries in its orbit, including TV broadcast and production studios. Today, the entertainment company doesn’t just rent videos; it produces tons of its own content, streamed directly to customers, and collects and uses customer data to inform every aspect of its business.
The Cultural Elements of a Digital Transformation
Research has shown that investing in technology is not enough to cause meaningful change—the magic happens when cultural and technical change align with business strategy, which can result in a significant increase in business revenues.
Hoque says the following are critical elements of a culture supporting true digital transformation:
No more command-and-control leadership. The old-school model of leadership, where leaders hand down directives, will sink any digital transformation effort from the outset, Hoque says. Instead, he suggests, leaders need to be open to the possibilities of digital transformation and willing to embrace continuous change—and help employees feel comfortable with change.
“If your next leader isn’t good with technology, you’ll fail,” Hoque says. “But you’ll also fail if your next CEO doesn’t have those classic soft skills, including empathy and awareness. Leaders need a deep awareness of how things are shifting internally and externally and how that impacts the people experiencing the constant changes to their work environment. They need to lead by inspiring and influencing versus the classic command-and-control mindset.”
Comfort with failure. Failure and innovation go hand-in-hand—there’s no escaping it. Leaders need to foster a work environment where it’s acceptable to mess up, Hoque advises. You must be willing to experiment, fail and try again.
By accepting failure as a part of the digital transformation process, you and your team will be more open to coming up with a range of ideas, what Hoque calls an innovation portfolio.
“Not all of your ideas are going to stick on the wall, so you have to come up with an innovation portfolio just like you would an investment portfolio,” he says. “Many of the greatest innovations in history are byproducts of a path a company was on and then had to come up with something else. Having an innovation portfolio means you can calibrate what’s working and not working based on how the market and your organization responds.”
Diverse viewpoints welcome. Digital transformation requires a vision for how technology can transform an organization—and that vision should be built and shared by leaders and employees alike, Hoque says.
Leaders must foster a culture where employees have opportunities to weigh in on business initiatives, voice concerns and share ideas freely and openly; this requires an atmosphere of collaboration and trust. After all, it’s your people who are going to be making the digital transformation vision into a reality, so getting them onboard and excited about the possibilities will help increase your odds of success.
Cultivation of trusted partnerships. For most companies, there is simply no way for internal resources to keep up with the dizzying pace of technological change. Instead, leaders must be willing to cultivate external sources of knowledge, ideas and expertise.
“As a leader, it’s not your job to understand every single technology coming on the market. It’s your job to build a collaborative resource pool to help you understand the possibilities and how to leverage them for your goals,” Hoque says, adding that universities and consulting firms are good places to start.
Take Nike’s initial foray into digital reinvention. In 2012, Nike launched FuelBand, a groundbreaking wearable device. FuelBand was initially considered a trailblazer, but its success didn’t last long. It ultimately failed in part because Nike couldn’t compete with the Googles and Apples of the world in attracting tech talent, and it didn’t know how to leverage the treasure trove of data from FuelBand users.
Tech Is The Answer—But Not The Whole Answer
Perhaps the No. 1 mistake companies make along their digital transformation journeys is to view technology as the ultimate solution, Hoque says, rather than a tool to strategically embed into the very fabric of the organization.
In other words, technology is critical to an organization’s continued success, but it’s only part of the story. As Hoque writes in REINVENT, “Transforming your business digitally also carries a meaningful culture change—by necessity. Any work setting whose culture doesn’t evolve toward one characterized by collaboration, flexibility, and comfort with experimentation and occasional failure won’t be in sync with a digital environment.”