It’s no longer really a question of when companies will transform, but how. Almost every company already has moved the needle a little bit towards a more digitized existence. Some have moved faster and more aggressively, while some have moved much more slowly. In either situation, like it or not, the vast majority of companies, in all industries, have already started down the digital transformation journey. So the question really needs to be, if your business is already on this inevitable path (yes it is inevitable), how do you travel it most effectively?
There are a few key areas that need to be addressed when navigating your digital transformation. Focusing on these first will get you to have the right conversations, answer the important questions, and force you to have real business discussions related to your transformation strategy. There will still be work to do after, but these tips will get you prepared and ready to go!
- Add trending conversations to your annual SWOT analysis
If you are not doing a SWOT analysis each year to see where you stack up against your competition, you should be. In addition, we suggest adding a current trends analysis discussion to this process. Have it right after you cover your Strengths and Weaknesses, but before your Opportunities and Threats. This will give you a strategic forum to examine the macro and micros trends affecting your business, industry, region, etc. that can alter your path over the next few years. Technology, of course, is a major area that should be thoroughly covered in the discussion. What is “tech” doing in your industry? Where is it headed? How does it play a role in protecting your margins? Creating profit? Creating product? What are your competitors doing today / tomorrow? How disruptive will technology be for you employees, your business, your industry? Are there any low hanging opportunities that your industry hasn’t picked up on yet? All of these discussions can have an impact on your future, and will almost definitely have an impact on your external Threats. Believe us, your competition is having these conversations.
- Don’t delegate the important stuff
As technology continues to become more ingrained in the business, we are surprisingly still hearing some business say things like “talk to my IT person” whenever the word technology or IT is mentioned. This is big red flag as it generally means the businesses view of technology is ONLY tactical, not strategic. Business discussions should always lead technology discussions, never the other way around. Business challenges like managing culture, revenue growth, product and service advancement, employee engagement and retention, all must drive the technology conversations. When the leaders of the business are not engaged in the high level discussions related to how your technology will play a role in solving the business issues, the result are almost always poor. Let me say that again, if the leaders of the business delegate all technology discussions, you will fail at transforming in a way that creates positive business results. This does not mean business leaders need to be technical by any means, it means business leaders need to demand business results from technology initiatives, and hold the right people accountable for the right business results. Avoiding conversations because they include technology concepts is an outdated approach that will put you years behind.
- Get real about your budget and where it needs to be
Do you know what your industry spends annually on technology? Do you know what your competition spends? Do you know how you stack up against those numbers? On average across all industries companies spend from 2.8% of gross revenue to 3.4% of gross revenue. Does that make you sweat when you hear that? Of course all industries are different, for example if you are in construction or manufacturing you could be closer to 1.5% or 2% (unless you are advanced manufacturing which is higher). On the other hand if you provide business or professional services, financial services, health services or banking securities, you’ll top out closer to an astounding 10% of gross revenue on IT related expenses. Don’t worry, we’re not suggesting you spend more than everyone else, in fact there are a million strategies to spend extremely effectively and still be a leader. The point is, if you are spending 1/2 to a 1/3 or less than your entire industry, you will not be able to compete with them and they will continue to transform at a much faster pace than you. In fact, to further illustrate the point. When we are asked to advise private equity firms on the technology strength of potential investments, we know a business grossly under spending compared to their industry is a huge red flag for any long term investment. Start compiling your numbers, and find out where you stand today, and where you need to be to remain competitive. And be realistic with your path to bridge the gap if necessary.
- Pick your team wisely
Time to ask yourself the tough questions. Do you really have the right team to tackle all of the initiatives necessary to transform your business from the inside out. This means you have the right people to come up with solid technology strategies to solve real business problems, the right team to change the conversation from tactical technology talk to business first discussions, the right team to help embed a new change driven culture into the organization that increases engagement with new systems and tools, the right team to execute complex technology initiatives that integrate cloud solutions, SaaS tools, and other up-to-date technology while also increasing your companies technical capabilities through training along the way? Most small to mid-sized business have one to two IT resources, and most need five to six to even have a chance. Take a hard look at the team you are going to leverage to get you through this transformation, and be very honest with yourself about your likelihood of success with your current players. Leading digital transformation is just as much about who is helping, as it is setting up a good plan of attack. Make sure you map out who will be accountable for each area necessary, and make them accountable. And don’t make the common mistake of believing your IT person somehow will magically learn all of the business skills to execute this plan. They will need help, a lot of it!
- Track the right metrics
If you can’t measure it, you can’t improve it. This is a popular saying for a reason. Results will come if you stay focused and committed to iterative improvements. But the results are business results, not technology results. Yes, you will be deploying technology strategies to affect those business results, but your key performance indicators (KPI’s) need to be business based. If one of your goals is to increase productivity for example, you need to create a baseline for where it is today. Will you measure a particular process, how many resources are necessary to perform a particular workload, how many hires annually you need to grow? What productivity metric are you going to select as your baseline to contrast against? Then how have your IT strategies affected that over time? The key is iterative improvement, and your initiatives should be measurable. Of course there will be a number of infrastructure related technology investments that are necessary to build the foundation for advancement, but even those can be measured. Infrastructure investment should remain flat, while IT investments with measurable return on investment’s (ROI’s) increase over time. The point is, a successful IT strategy is measured through business metrics, not tactical IT metrics. Think bigger and more strategic and force your IT teams to be accountable for results that make a legitimate difference for your business.
However simple or advanced your digital transformation needs to be, you need to have the right strategy to get there. Have the tough conversations with your executive team, ask the tough questions, be real with your expectations based on your strategy, and remember, transformation is already happening, it’s up to you to take charge.