The Road to Successful Digital Transformation: 5 Steps to Do It Right

No wonder: Digital transformation is the promise of fewer silos and more collaboration, of faster growth and bigger revenue.

According to a prediction from research firm IDC, enterprises will globally invest US$2 trillion on digital transformation by 2022. But despite companies’ best efforts, a large amount of investments in digital transformation actually goes to waste.

A report by McKinsey reveals that 70% of large-scale transformation programs don’t meet the organizer’s targets. That’s roughly US$1.4 trillion which will be spent in vain.

Going about business transformation the wrong way doesn’t only mean huge losses, it also leads to unhappy customers and disillusioned employees. So how can businesses (and you) start digital transformation on the right foot? Is it only successful as a rip-and-replace of all of our existing systems? Or should you rather do it step by step, replacing or modifying our existing systems one by one?

In my different roles as Chief Procurement Officer, COO, Chief Digital and Chief Innovation Officer (a lot of Chiefs, I know!), I had the chance to speak with hundreds of customers from different industries, leading strategy consultants, professors and thought leaders in Europe and the United States who shared their experiences.

Here’s the approach for digital transformation that really works.

1. Start with a vision

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Transformation initiatives, whether it’s about digital or business transformation, require you to rethink how your business creates outcomes — today and in the future. In other words, to really transform the way you’re doing business, you need to think big.

Tech has become an indispensable part of our lives. And organizations around the globe are feeling the pressure adapt. However, we shouldn’t forget that digital transformation has to have a purpose.

Otherwise, you just throw technology at a problem instead of solving it.

Think on what you want to achieve and why you want to transform. Be it because you need new innovations to keep and gain new customers, be it because you need to catch up with competitors, or to reduce the cost base to deliver higher margins.

2. Get your processes right

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Digital transformation doesn’t work on paper. It will only be successful if you integrate digitization into your daily workflows.

Make your processes about the people that deal with them. Your processes should be focused on the needs and expectations of your stakeholders: customers, suppliers, and employees.

Ask yourself questions like: How can I improve my sales team's effectiveness by implementing a digital solution like Salesforce CRM? How do I help my accountants to prioritize the right invoices like SAP ERP? How can I automate repetitive process steps to give my employees time to focus on value-adding tasks like SAP HCM?

And if I can give you one more tip: Don’t try to rip-and-replace all of your systems and processes at once. Select the process and use case you want to tackle first, implement the technology, get your KPIs on track — and then spread the technology across your process landscape.

3. Get the right structure in place

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For a successful digital transformation, you need to define a structure that supports your business processes, your organization, and all stakeholder relations, including your employees.

From my experience, one of the most common reasons why digital transformation initiatives fail is the lack of leadership support. If the management level doesn’t define a clear goal and strategy you will simply fight a losing battle.

To give you an example: Over the last years, an increasing number of companies have installed the role of Chief Digital Officer (CDO). Their job is to generate new business opportunities, revenue streams, and customer services from the adoption of digital technologies across the organization.

But as so many businesses have started to realize, it’s not enough to just put someone with a shiny title in charge to ring in the digital era. To be successful, organizations need strong leadership focus on and company-wide adoption of new technologies. Every department from top to bottom, every member of the C-suite level, but also all managers and their teams need to be held accountable for defining and executing digital transformation. In every process. Every day.

As McKinsey states it: “Many companies are focused on developing a digital strategy when they should instead focus on integrating digital into all aspects of the business, from channels and processes and data to the operating model, incentives, and culture."

4. Invest in the right technology

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Digital transformation isn't about spending money on tech, it's about spending money right. So once you’ve defined your desired business outcomes, decide on the systems and technology that will support your goal.

Regarding the technical part of digital transformation, you will have to focus on two things:

• Build or implement a brand-new digital platform
• Iterate or change your operating model to use that platform and accelerate the time to value.

The biggest misunderstanding I see when it comes to driving successful digital transformation is that new technology alone is the answer to all problems.

Technology is an enabler, it isn't what drives true return on investment. It’s your processes that drive outcomes — if you do it the right way. Which brings us to our next step.

5. Get both your employees and customers involved

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Bringing in new state-of-the art systems and technologies alone won’t guarantee success. It’s the commitment of the people behind those processes — your employees — that will drive digital transformation.

So how do you get them on board?

The secret is…communication, communication, communication. It sounds simple but the lack of proper change management is very often the reason why the people in your company rather stick to their old workflows.

Let me give you an example from my time as CPO for SAP. When I was leading the transformation initiative within Procurement, we started with the Source-to-Pay process and established a global category management organization for sourcing. At the same time, SAP acquired Ariba (goods and services) , Fieldglass (temp labor), and Concur (travel and expense management) — the market leaders in the cloud for Source-to-pay.

No surprise: the procurement and category teams didn’t immediately switch to those tools. The reason for this was weak change management. We didn’t ensure that everyone knew how to use systems once they were made available. So the adaption of the newly deployed solutions was slow at the beginning.

Digital transformation initiatives also need reinforcement. We trained all procurement employees, made the use of the new systems mandatory, and communicated the goals and outcomes this would help deliver.

And don’t forget: Communication is a two-way street, so listen to your customers, suppliers, partners, and employees to steer and adapt your initiative.