How to Turn Your Company into a Master of Digital Transformation George Westerman, Massachusetts Institute of Technology Digital transformation is about much more than technology capability. Leadership capability is essential to guide a business through dramatic organizational change. Vision, an ability to bridge the IT/business divide, and effective governance all must go hand-in-hand. ABOUT THE AUTHOR: Dr. George Westerman works at the intersection of executive leadership and technology strategy. He is a Senior Lecturer at the MIT Sloan School of Management and Principal Research Scientist for Workforce Learning at the MIT Jameel World Education Lab. Westerman has co-authored three award-winning books, including Leading Digital: Turning Technology Into Business Transformation and The Real Business of IT: How CIOs Create and Communicate Value. His writing, teaching, and consulting focus on helping leaders make sense of complex transformational challenges created by technological and market innovations. Digital Transformation Isn't Really a Technology Challenge In recent months, much of the world has moved swiftly to confront the coronavirus (COVID-19) pandemic, which has infected and killed millions of people across the globe. The outbreak was a flare alerting us to systemic problems in our ability to adapt to a fast-moving threat that has disrupted everything in the global economy. Organizations around the world moved quickly to digitally-distanced work processes, such as telemedicine, digital learning and working from home. But, while many adopted digital methods quickly, few were in a position to do it very well. They used technology to connect people but not to change what they did. Likewise, every large business-in one way or another-is responding to the existential threat of digital disruption. The problem is that very few are doing it well. Most are adopting digital technology. But few have the capability to drive real transformation. The best companies, which we call "Digital Masters," do two things better than everyone else: They are better at putting digital technology into customer experience, operations and business models. And they are better at envisioning and driving organizational transformation over and over again. Of the two-digital capability and leadership capability- leadership is the most important. Perhaps now more than ever, digital transformation isn't about being a digital company. It's about being a better company because of digital. Driving Change from the Top The human side of the equation-the organizational and cultural aspects-are critical success factors in the digital transformation journey. In fast-moving, born-digital organizations, people are a source of continual innovation. This should be the case in every company, but it's not. In a world of Moore's Law, where technology capabilities improve exponentially, we need to remember what I call the First Law of Digital Transformation: technology changes quickly, but organizations change much more slowly. That law means digital transformation is more of a leadership challenge than a technology challenge. In our research, we observed how strategic-minded, digital leaders focused on transformation more than technology adoption. They looked at digital transformation as a capability and not just a project. And they used the following three levers to get the most out of their digital transformation strategy: 1.Create a strong vision for how to be a different kind of company because digital makes it possible. 2.Engage employees to help them understand the vision and the role they can play in helping the company move forward. 3.Implement governance to ensure the organization is coordinating, sharing, and driving transformation in the right direction. I liken this to driving a car on a journey. The Vision is your destination. Engagement is your gas pedal. Governance is your steering wheel. You need all three to get where you're going. Then, when you get there, you set a new destination and do it all again. Start with a Vision The vision is your destination. Sometimes it's perfectly clear and you want to get there right away. Other times it's more of a goal, but you'll fill in the details on each step of the journey. The vision shows how things should be and makes it legitimate to do things differently from the past. As you consider building a vision for the future, make it big enough to encompass real change-a powerful journey, not just a trip to the grocery store. Aim to make the vision clear enough to set direction, but open enough that everyone can help to fill in the details. After all, leaders in large organizations don't actually do anything. Their job is to get others to do things. If they do it well, the company succeeds. If not, then the company finds a new leader. That's why vision is so important. If it's compelling for you and your employees, they'll help you make progress. They'll even help you fill in some details or suggest new ways to go. But if it's only compelling for shareholders or leaders, you can expect little help from the people who actually do the work in the company. Company leaders at Rio Tinto, a $43 billion mining and metals company, had a vision to understand operations better than they ever did before. And so, they connected their far-flung mines to a central control center, giving company leaders better visibility into local mining activities. Then, the leaders revisited their vision to figure out what else they could do. They took a hard look at improving the dangerous, routine work being done by workers inside the mines. For example, miners were driving huge vehicles around the mines in potentially dangerous conditions. But today, many of these vehicles have been automated, which has transformed the environment for workers. Other changes, such as autonomous drilling machinery and driverless trains, soon came online. Company leaders also found better, safer work for miners to do and and made continual improvements from there. The result was a mine that was more efficient for shareholders and safer for workers. It started with a compelling vision. Next, they executed through engagement, governance, and just plain project management. Finally, they revisited the vision to see what else they could do with their transformed systems and processes. This is what leadership capability is all about. It's not rocket science, but it's often forgotten in the rush to adopt technology instead of driving transformation. The Importance of Engaging Your Employees As I said earlier, the First Law of Digital Transformation holds that technology changes quickly, but organizations change much more slowly. Yes, technology can be a useful tool. But overcoming the inertia of a large organization is a leadership challenge. This brings us back to the people part of the equation. There's no denying that the convergence of Robotic Process Automation and Artificial Intelligence has made it increasingly possible for companies to do work without human involvement. But don't make the mistake of thinking that you can use automation to push your organization to replace human workers while constantly ratcheting up pressure on the workers who remain. This is a near-sighted strategy that could turn employment into a purely transactional relationship, which would have negative implications for workers and companies alike. Digital transformation needs a heart. And it needs to capture the hearts of employees. Digital leaders create environments where technology augments the capabilities of human workers; where computers help employees to collaborate fluidly, make decisions scientifically, and manage better than they ever could without them. In the long run, companies that engage the hearts and minds of employees will outperform those that don't. The companies we call Digital Masters help their employees see a good place for themselves in the future vision of the company. They engage in a regular discussion about where the company is going, and how it can get there. They not only tell employees to change but also enlist employees in deciding how to change or identify new ideas for the company. For example, DBS Bank, one of Singapore's largest financial institutions, engaged their workers in a vision of "Make Banking Joyful." Employees are closest to the customer, and they see most of the problems that the company creates for customers-long lines, difficult loan processes, etc. By asking employees to help make banking joyful, the company identified and implemented a major transformation that took it from worst to best of the top five banks in the country. Governance Doesn't Have to Be a Dirty Word Moving at the speed of digital matters, but operating fast without compromising governance is more important than ever. In the worst-case scenario, governance can be a dirty word-a synonym for bureaucracy. In contrast,...
