Written by Riva Lesonsky
The first step in digital transformation is defining a shared vision.
By now, most small business owners recognize that digital transformation is necessary for their businesses to survive in today's era of continuous disruption. Still, he is a professor at Columbia University and “ Digital transformation roadmap (available in September), 70% of digital transformation efforts fail. The reason for this, he says, is that “companies view these initiatives as technology issues rather than true organizational challenges.”
But entrepreneurs can't let these dire statistics stop them. Also, don't think that failure is a given for small businesses.
Mr. Rogers said: “The imperative of digital transformation is not well understood among small and medium-sized businesses. While some business owners have begun the journey, others may not understand exactly what digital transformation means. I don’t know.”
In his book, Mr. Rogers presents a framework that companies of all sizes can use to address barriers to change. He said, “This provides leaders with a practical toolkit to unlock the potential and drive growth of everyone in their organization.”
I interviewed Mr. Rogers (via email) about how he demystifies the digital transformation that small business owners must undertake to survive in this digital age.
Riva Lesonsky: Can you explain the importance of digital transformation for companies looking to grow?
David Rogers: My definition of digital transformation is simple. It's about transforming and growing established businesses amid continuous digital change.
This is a challenge facing every established business today. You need to continually test, discover, and experiment with new customer experiences and operating models. This is because new digital technologies are rapidly changing customer behavior, business models, competition, and new entrants in every field. Regardless of the size of your business, a fundamental challenge you face is the need to adapt to continue to grow.
Companies like Netflix show that it's not enough to have one great idea and build a digital business around it. Netflix's initial business model was to stream content it licensed from other companies, but as the service proved extremely popular with customers, licensing became prohibitively expensive. I did. Netflix needed to move to a model where it created its own content and became a film and TV producer. They then pivoted to an international network, translating content from all over the world to various markets. More recently, we've discovered that our overall subscriber growth has plateaued, so we're reconsidering ways to easily share passwords and testing cheaper ad-based services.
Companies like Netflix, Amazon, and Domino's Pizza that have continued to grow in the digital age have all found success by constantly transforming their businesses and approaching them from new directions.
Lesonsky: What are the common reasons why digital transformation efforts fail?
Rogers: I've been researching this topic for years. I wrote my first book on digital transformation.that book [The Digital Transformation Playbook: Rethink Your Business for the Digital Age (2016)] We focused on how businesses need to rethink their strategies for the digital age. But what I've learned over the years is that it's very difficult to create change within an organization, even if you're rethinking your growth strategy.
That's where many companies struggle.That's why we see [so much] Failure. That's why my latest research focuses on digging into the root causes of that failure. Where do organizations go off track?
I've discovered five fundamental barriers to change that businesses of all sizes face. These are the main barriers that prevent digital transformation and true innovation from occurring.
1. No shared vision. Everyone within the business is aligned around a single perspective of where their industry is headed, what role they want to play in it, and how they will work together to achieve that outcome. You can't keep pace.
2. Lack of discipline in prioritizing. Businesses are moving in different directions because there are always new technologies, trends, fads, or opportunities that may be relevant to your business. Most companies lack the discipline to focus on a few strategic priorities and say no to the rest. The worst part is when I see companies focus on technology first instead of starting with the customer problem they're trying to solve.
3. I don't have the habit of experimenting. Businesses are accustomed to addressing new problems and opportunities through planning. Every time they discover a new digital opportunity, they say: Show us your benchmarks and collect lots of third-party data. Then, create a detailed plan of action and give everyone their marching orders. ”
But in a dynamic and unpredictable environment like the digital world, it's a recipe for failure. Successful companies develop a real skill set to continually test, make small investments, move quickly, and experiment to learn what works and what doesn't in the market. Only companies.
4. Governance is inflexible. As a result, companies struggle to allocate capital between existing core businesses and new opportunities. They are having trouble allocating staff. And they struggle because they apply the same metrics, rules, and operating models to new ventures that they use to run established parts of their businesses.
5. There is no growth in ability. We see companies trying to keep up with rapidly changing markets and pursuing new strategies, but not investing in the right digital technology, data, talent and skill sets. And they don't focus on building the right digital culture within their organizations.
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Lesonsky: If you haven’t started your digital transformation yet, what are the first steps you should take?
Rogers: The first step is to define a shared vision that is unique to your business and understandable to all employees, investors, and stakeholders.
Sharing your vision starts with knowing where you are going and why. Start by defining a “future perspective” – a shared perspective on how the industry is changing. What do you think is the biggest factor determining the future of your business? It also means defining your “right to win.” This means understanding your company's unique capabilities and advantages that enable you to play a key role in the digital future and create value for your customers.
But just knowing your future situation and your right to win is not enough. You also need to make sure everyone has a clear motivation for change. Because this kind of change requires: everyone within the company you work with. And change is hard! It's much easier to just go to the office and continue doing the same job you did yesterday.
Motivation for change comes from two things. One is what I call the “North Star Collision.” And that's the clear answer to this question. “If you could transform, what difference would that make in the world? How would that change the lives of customers, employees, and perhaps society as a whole for the better?” That's employee motivation. important for increasing.
At the same time, we need another motivation, what I call “business theory.” This is an explanation of how investing in a digital strategy can generate financial returns for your business. And that part is critical to gaining buy-in from specific stakeholders, such as the chief financial officer, income statement personnel, and external investors. If all of these people want to align and support change, they need to agree on the theory of how investing in digital transformation drives financial growth.
Lesonsky: If you’ve already started, how will you measure success?
Rogers: The key to measuring the success of digital transformation is first establishing a shared vision. That means knowing where you're going and why and how a particular digital strategy will impact your customers and bring economic benefits to your business. Once you understand that, you'll be in a position to know how to measure things and see if you're moving in the right direction.
Too many companies try to start with measurement. They just say, “We're going to be a digital company.” Then you start looking for general-purpose, off-the-shelf assessment tools that ask things like, “What technologies are in place?” This makes no sense from a business outcome perspective, which is the whole point of digital transformation efforts.
Again, you need to know the impact you are trying to have on your customers and how you think it will generate benefits, such as revenue from new products, new customer acquisition, or reduced operating costs. There are many ways a digital strategy can generate economic benefits.
Once you know these things, [two things]Now you can start selecting key performance indicators (KPIs) to guide your investments and track your progress. I call this the definition of success. It should include metrics about customer and business impact. Defining success this way makes it much easier to measure your digital transformation.
Lesonsky: What lessons can growing small businesses learn from big, well-known brands that have successfully digitally transformed?
Rogers: In fact, it is easier to change jobs at small and medium-sized companies. They can learn a lot from all the mistakes made by large and legacy companies that tried to transform into the digital age. As a business grows, it becomes very difficult to drive change.
It's important for growing small businesses to pay attention to these five barriers to change. Having a common vision, setting clear strategic priorities in a disciplined manner, learning and mastering the process of experimentation, and flexibility in governance (both existing and new businesses). How do you manage the people you work on? And don't forget to continue investing and growing our technology, talent and culture.
But the most important thing is not to instill myopia. The longer and more successful any company is in business, the harder it is to overcome its natural tendency to let its successful products define its future. To you from the past.
While large companies struggle with this problem, small businesses also face the same problem. The more you grow and become successful, the harder it becomes to resist this mental trap. Instead of focusing on which products got you to where you are today, keep your focus on “Who is your customer?” what is their problem? And how can we continue to adapt, find new ways to solve problems, and create new value?
In the words of Intel's famous CEO Andy Grove, “Only the paranoid survive.”
About the author
Rieva Lesonsky is CEO of GrowBiz Media. SmallBusinessCurrents.com I've been covering small business and entrepreneurship for more than 30 years.Sign up with her to get more insight into her business trends free ocean current Newsletter.
Related: How to make digital transformation work for small and medium-sized businesses
