
Mastering the art of digital transformation.
CHALLENGE 1: LACK OF A CLEAR DIGITAL STRATEGY
When it comes to digital transformation, several common confusions and misconceptions often arise among businesses and professionals. These misunderstandings range from equating digital transformation with merely adopting new technologies to confusions about the areas and the scope of transformation.
However, digital transformation refers to the integration of digital technology strategically into all areas of the business, fundamentally changing how the company operates internally and externally and how value is being delivered to the customers. It requires a shift in corporate culture, fostering innovation & adoption.
Given such more holistic meaning and structural approach, we see 4 main challenges that companies from mid- to large-scale face:
12.02.2024 - 7 min. reading time

AUTHOR
Dr. Lorenz Lucaj

CHALLENGE 1: LACK OF A CLEAR DIGITAL STRATEGY
Without a clear digital strategy, companies adopt technological changes randomly. The understanding of such strategy thus is not one that specifically refers to the digital world only. It can be understood as the inherent need for corporations to develop strategic targets that ultimately lead to a set of guiding principles helping to navigate through bumpy roads.
However, whilst a missing strategy on corporate level reveals its issues medium- to long-term, related to digital transformation, the results of a missing strategy can be observed very easily through technological implementations in both, front- and back-end systems after a short amount of time. In addition, related issues may occur further down the road as a direct effect of inadequate technological choices and missed opportunities. This is recognized above all by the employees who must deal with the decisions daily, trying to bypass where possible in a reactive mode, ultimately leading to inefficiencies, wasted resources and a lack of alignment across the organization.
Correcting the course often comes with a high amount of effort as systems and related processes, organization and governance need to be renewed. What was implemented and integrated once can be changed, but at what cost?
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SOLUTION: DEVELOPE A COMPREHENSIVE DIGITAL STRATEGY WITH A CLEAR STRATEGIC ROADMAP AND INIATIVES
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Instead of driving digitalization without a clear target, corporations need to develop a clear digital strategy and derive adequate measures out of it.
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DEFINE CLEAR OBJECTIVES FOR DIGITAL TRANSFORMATION
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The core of each digital transformation is its strategic alignment. Corporations need to ask some deep questions before they stomp into AI, data driven solutions and other trends.
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1. Why do we need digitalization at all? Is the demand externally or internally driven? Customers may request certain products and services to be more at the edge of digitalization. But is this really the case and how can corporations distinguish and prioritize these demands adequately? In addition, uncertainties may occur as internal demands may suggest additional or even contradicting needs for digitalization, making the equation even more complex.
With trends ranging from highly complex data and analytics driven solutions up to seemingly simple AI add-ons, answering these questions can be very hard. It requires the company to understand its market and digital conditions very well and, above all, to be able to classify them appropriately.
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2. Where do we need digitalization (first)? With complex corporate structures and multi-dimensional products and services, the level of digitalization and its transformational status are not set evenly. Corporations can be simply lost answering the simple question of where to first hit the goal and how to prioritize (e.g., replacing legacy and boosting efficiency vs. establishing new digital solutions; headquarters vs. subsidiaries; question marks vs. rising stars vs. cash cows).
Identifying the status quo and the necessity for digital development across multiple areas of the business is key and expands the external view of market conditions and trends significantly.
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3. What do we need to transform and digitalize? Are we talking about a complete and innovative shift of products and services, or do we want to take care of our internal processes, tool landscape and other efficiency drivers?
Corporations should take care of both, not necessarily aiming for the extreme of both ends but rather understanding that products and (related) services massively determine internal processes and thus efficiencies. The crux of the matter lies in understanding in which external dimensions digitalization should take place and how this can be achieved.
Once this baseline of understanding is reached and the questions are answered, the corporation is ready to set clear strategic goals for digitalization. This can be seen as the core of each digital transformation. However, for a clear transformational impact, corporations need to consider further relevant tasks.
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ASSESS CURRENT CAPABILITIES WITHIN THE ORGANIZATION
(TECHNOLOGY, PROCESS, ORGANIZATION, SKILLS)
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Once clear objectives for the digital transformation have been set, corporations need to undergo a first reality check. It is important to understand the organization's current capabilities and structures in place. Thus, companies must assess their technological, procedural, and organizational status quo to determine their foundational layer and catalyst of each digital transformation.
While understanding the technological backbone and infrastructure helps determine short-term possibilities and capabilities of the organization, understanding processes, organization and governance will help pinpoint areas for improvement that lie beyond digitalization. These areas will have a fundamental impact on mid- to long-term implementation success.
Some major questions to ask and analyze are: What are the processes and structures for digitalization (organization, processes, governance), how do we approach this (our understanding, methods, tools), who drives digitalization (roles & responsibilities) and how is our IT backbone and enterprise architecture built to run our initiatives?
Furthermore, the question needs to be asked if a corporation has the right skills in place and planned according to future digital ambitions. Not only will this answer skill-related questions, but rather help to get a broader view on digital mindset and the need for digital cultural change. Identifying and closing the gaps then is crucial. The involvement of the whole organization is of utmost importance.
Understanding both the foundational and the supportive layer will help to reinforce the strategic goals and gain a realistic view of the transformation ahead.
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DEFINE STRATEGIC MEASURES AND DERIVE STRATEGIC & OPERATIONAL INITIATIVES
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Since structure usually follows strategy, especially under the assumption that existing structures have been analyzed, strategic measures based on goals and the current status quo can be determined. Defining those measures should include quantifiable and trackable performance metrics that are used to gauge the progress towards the strategic goals. These might include financial metrics, customer satisfaction indices, market share targets, efficiency metrics etc.
Strategic and operational measures then should follow a pyramidal approach and be derived systematically ensuring short- to long-term targets and impact can be met. In doing so, corporations should involve relevant stakeholders and assign responsibilities according to respective (future) roles and skills.
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CREATE A PLAN/ROADMAP AND IMPLEMENT INCREMENTALLY
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Now corporations must develop a roadmap that outlines the key digital initiatives. This roadmap should prioritize initiatives based on their impact and feasibility and should be broken down into manageable phases. Each phase should have specific objectives, a clear timeline, allocated resources, and defined metrics for measuring success.
To manage the transformation hands-on and pragmatically, implementation should be done incrementally, starting with quick wins to gain momentum and demonstrate value across the organization.
Regular monitoring and feedback loops are crucial to track progress and adapt the strategy as needed. To support this approach, respective committees/boards etc. can be established specifically.
Throughout this process, ensure strong communication and stakeholder engagement to facilitate alignment and buy-in across the organization. This incremental and adaptive approach allows for flexibility and responsiveness to changes in the digital landscape, ensuring the digital strategy remains relevant and effective.
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SUMMARY
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Mastering digital transformation requires overcoming significant challenges, notably the absence of a clear digital strategy. To overcome this, companies need to formulate a comprehensive digital strategy, grounded in well-defined objectives and a thorough assessment of current capabilities. Key steps include setting strategic goals, evaluating technological and organizational readiness, defining actionable measures, and implementing these through an incremental, prioritized roadmap. This strategic approach ensures alignment across the organization, efficient use of resources, and sustained success in the digital era, ultimately enhancing value delivery to customers and securing long-term competitiveness.
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Part 1 of 4 – Mastering the art of digital transformation: 4 challenges and the solution