Digital Transformation

In this article, you will see, why an Agile Transformation is needed as a first stept, to make the Digital Transformation more easy, which enhances the success of a company.

Digital transformation definition – What is digital transformation?

In general terms, digital transformation describes a social and economic change process triggered by digital technologies. For companies, digital transformation means consistently integrating new technologies into their business model and taking a holistic approach to digital change as an organisation. To put it somewhat casually, digital transformation in a company means consistently ‘digitally rethinking’ the entire organisation.

Digital transformation as a response to challenges

Digital transformation in a company is not an entity in itself, but a response to real challenges:

Disruption of value creation steps and structures through digital technologies.
Customers want everything quickly and easily; they predominantly buy and obtain information digitally.
Intense competition due to global access to providers, start-ups and the aggressive penetration of large digital groups into established industries.
New customer requirements and intense competition lead to margin pressure and pressure to innovate; ‘more of the same’ is no longer enough.
Employees, especially creative knowledge workers, want to work digitally and from any location.
Hierarchical and analogue organisations are too slow to deal with the complexity and speed of change.

According to a McKinsey study, only 8% of managers surveyed believe that their business model will survive the digital transformation unscathed. 92% believe that their business model will change fundamentally as a result of digital transformation. And even if digital transformation writes its own story in every company, it is always important to find answers to these new challenges.

Digital transformation vs digitalisation – caterpillar or butterfly?

Digitalisation and digital transformation in a company are not the same thing, but are nevertheless used synonymously:

Digitalisation refers to the networking and automation of processes and takes place predominantly at a technical and procedural level. The goals of digitalisation are efficiency gains and a better customer experience. Digitalisation is therefore an important ingredient, but is not sufficient on its own for a successful digital transformation in a company.
Digital transformation in a company refers to a fundamental system change at a strategic, organisational and cultural level. In other words, digital transformation is a comprehensive change process that involves the entire orientation of the company, the people and the organisation. The aim of digital transformation is to fundamentally improve competitiveness.

You can also illustrate the differences between digitalisation and digital transformation using the metaphor of a caterpillar and a butterfly. With successful digitalisation, the caterpillar becomes faster. But it is only through digital transformation that the caterpillar becomes a butterfly with completely new abilities, prospects and degrees of freedom.Goals of the digital transformation

The aim of digital transformation in the company is to develop your business model and organisation in such a way that your company is an active shaper of the overall digital transformation in society. Instead of your company running behind competitors, good employees and new customer requirements.

Strengthening (digital) competitiveness
Increasing organisational agility
High-margin, growing (digital) business models
Good prospects in the ‘war for talent’
IT and digital expertise is a strategic core competency

Digital transformation management – the six fields of action for digital transformation in the company

For digital transformation to succeed in your company, you need to tackle a few key areas of action. From the list of these, you can already see that digital transformation in the company can only succeed with the involvement of the management and owners. You can find out which other protagonists and ingredients you need below. Here are the six fields of action for successfully shaping digital transformation:

Strategy
IT / digital units
Organisation
IT systems and technology
innovation
Culture

Every business is a software business now.

Dean Leffingwell

(VW? 🙂)

IT / digital units

Mastering digital infrastructure and digital technologies is becoming a strategic core competency. This is why digital transformation in the company also requires the development of strong IT and digital skills and corresponding organisational units. A few thoughts on this:

IT organisations need a high level of maturity and must not just see themselves as ‘administrators of computers and printers’.
IT and digital are two different things. While IT is focussed on technical infrastructure, processes and core systems, digital experts are more focused on the customer, digital platforms and business models.
Companies need their own digital expertise. This typically requires the establishment of a digital unit; small and medium-sized companies that cannot afford to build up their own digital expertise rely on a trusted network. rely on a trustworthy network of external partners.
Powerful IT and digital expertise in analogue business models requires 5-8 FTEs per 100 employees.

It is essential that these IT and digital experts do not muddle along as ‘departments’. Instead, IT, digital and technical experts work together on relevant problems to successfully shape the digital transformation in the company. For this cross-functional networking to succeed, new process models and ideas are typical

Organisation

The third field of action for successfully shaping the digital transformation in a company is the structure and design of your organisation. This is because functional, specialisation-oriented organisational models with their ‘departments’ are regularly unable to cope with digital transformation in the company. What you need instead are organisational forms that focus on a high degree of autonomy combined with a high degree of networking and that work on the stable operation and transformation of your company with both hands. There are various options available to you for redesigning your organisation.

A complete redesign of your organisation with scaled agile frameworks or holacracy. This approach is particularly recommended for companies that provide services related to software and IT.
Setting up a dual organisation in which one side is responsible for the stable operation of the current business model and the other for the transformation and implementation of strategic initiatives. The dual organisation goes far beyond a pure project organisation. For example, a critical characteristic of a dual organisation is that employees work permanently and exclusively for these initiatives.
An agile project organisation, with consistent prioritisation of strategic initiatives, operationalised with frameworks such as Scrum and the OKR method.

Essentially, all of these options are about focussing attention on things that are not ‘business as usual’. To do this, your company needs clear guidelines so that operating the current business model, i.e. ‘business as usual’, does not absorb too much energy. Because this status quo exerts a magical attraction. Redesigning your organisation also requires you to think fundamentally about management systems and incentives in your organisation and ensure that these old performance benchmarks do not stand in the way of the desired digital transformation in the company.

IT systems

Digital transformation in a company means using modern technologies, IT and software systems to automate processes and harmonise data. In other words, doing what you understand by digitalisation in a narrower sense. However, this field of action, like all others, requires the utmost attention for several reasons:

Strategies and target images for automated and data-based corporate management. In other words, the first step is to develop a target image of what your technical and digital ecosystem will ideally look like.
Investments: Modern IT and software systems are a strategic decision that entails corresponding investments and will tie your company down for years to come. A decision should always take many aspects into account and not be purely an IT decision.
Feedback with the organisation: Thinking digitalisation consistently has an impact on the design of your organisation, also known as Conway’s Law. Digitalisation therefore affects the design of your organisation. This in turn requires holistic decisions.

Modern technologies, IT and software systems are the basis for speed, an excellent customer experience, high efficiency and a new form of corporate management. They are also often an essential prerequisite for new digital services and digital innovations to flourish on this basis.

Innovation

The fifth area of action for successfully shaping the digital transformation in a company is to systematically promote and demand innovation instead of just pushing ahead with marginal improvements. After all, one of the reasons why digital transformations regularly fail is an excessive focus on the digitalisation of today’s core business. After all, digital technologies are changing value creation and entire business models. And as Peter Drucker once aptly put it: ‘There is nothing so useless as doing efficiently that which should not be done at all.’ That’s why digital transformation in the company also means fostering a spirit of innovation. There are various strategies available to you:

Contextual: Allow employees time to drive new ideas forward. This can be a limited time budget per week or, for example, a whole week once a quarter. This approach is also known as ‘contextual ambidexterity’.
Establish intrapreneurs who move freely as ‘companies within the company’ in order to develop new digital products and business models.
New units: Establish new digital units or digital labs that focus exclusively and specifically on building new products and business models. This approach is also known as ‘organisational or structural ambidexterity’.

In order to successfully shape the digital transformation in the company, it is firstly important that you also allocate appropriate budgets and resources to the development of new projects. Secondly, when implementing these projects, you should focus on rapid prototyping, permanent customer involvement and minimally viable products instead of losing out on large projects. To do this, you use methods such as hackathons, lean start-ups and design thinking. And thirdly, you maintain a backlog of promising projects. This is because there are almost always more ideas than resources for potential realisation and they don’t get lost in the backlog for the time being.

Culture

The sixth and final field of action for successfully shaping the digital transformation is to promote a new culture and a new mindset. After all, digital transformation in a company is always a process of change that works best when there is an openness to trying new things and making mistakes along the way. Here are a few points that I believe are essential for the cultural organisation of digital transformation in the company.

Transformation means change and change also encounters resistance. Resistance is a completely natural phenomenon in the context of transformation.
Appreciating and honouring the ‘old’ because the ‘new’ cannot exist without the ‘old’. However, this is always accompanied by a willingness to cut away old habits.
Courage and openness to try new things and a good learning and error culture.
IT and digital are strategic drivers and not just an ‘extension of the business’.
A high level of transparency so that progress can be monitored and adjustments made as a result.
Consistency and discipline in the management of your initiatives and projects, the willingness to discontinue unpromising projects.
Conflicts and a healthy degree of ‘aggression’ in the struggle to reach a good decision, instead of always seeking ‘consensus’ and not changing anything in the process.
A strong focus on outcomes, focussing on concrete customer and business benefits instead of just getting lost in activities.
Trust instead of control, especially when it comes to location-independent work and the granting of a high degree of decision-making autonomy.

This new approach requires new competences from each individual. Above all, however, this culture for successfully shaping the digital transformation in the company starts with managers.

Shaping digital transformation in the company – the protagonists and good ingredients

Who or what do you need to successfully shape digital transformation in your company? Let’s start with the protagonists of digital transformation in the company.

Management, because digital transformation in the company affects the entire organisation.
IT and digital experts to make good strategic decisions and bring technical expertise to the organisation.
Personnel / HR, because digital transformation in the company is also a task for personnel, management and, above all, organisational development.
Specialist experts from all areas to contribute their expertise and make it clear that digital transformation is a joint task.

Ideally, these stakeholder groups should work together on the areas of action outlined above. In addition, digital transformation in the company requires the following ingredients:

Time and priority. This starts with finding dates for individual workshops. It also takes time for your entire company to successfully complete the digital transformation.
Good communication: Clear and open communication about what digitalisation in particular and digital transformation in general means for your company and how your organisation is approaching digital transformation within the company.
Common process models: Digital transformation in the company requires a great deal of synchronisation and ongoing review and adaptation. To do this, you need a suitable programme and project organisation, e.g. based on Scrum and OKR.

Appropriate budgets. This should go without saying, and yet I see again and again, that digital projects are chronically underfunded.