The nature of digital transformation has been evolving for decades. We went from turning paper into digits, to optimizing processes with software, to networking, to software as a service (SaaS), to the new digital economy. Before the pandemic, it felt like we were a few years away from a tipping point when digital transformation would shift from optimizing business to transforming it. A host of external pressures, including climate change, trade wars, social unrest, and a move toward intelligent automation in factories and supply chains have been behind this shift.1 Then the pandemic arrived, and it accelerated digital investments further.2 Microsoft CEO Satya Nadella wrote in his 2021 shareholder letter that “Digital transformation that was projected to happen over the next 10 years is happening today.”3
What drove the impressive speed of pandemic transformations was that across silos people knew what needed to be done and why.4 The rush may have been error-prone, but the crisis made the “why” behind the “what” clear. They knew what they were aiming to achieve, and then figured out how digital technology could drive and enable it.
The need for transformation on the other side of the pandemic is as existential as it was in 2020. The changes required to get you there, however, are typically so broad and all-encompassing that it’s hard to get your teams to agree on what needs to be done, let alone coalesce around anything as difficult to define as “digital transformation.” What your business and technology leaders likely need is a set of universally understood business outcomes that are predefined, easy to understand, and, taken together, can become a road map to your transformation efforts.
Digital transformation used to be about foundational elements like data modernization, core technology enhancements, and back-office automation, but companies today often face new digital challenges. Now, as Nadella wrote, “Every organization is looking to digitize their end-to-end operations—from sales and customer service to supply chain management—so they can rapidly adapt to changing market dynamics.” This new work is generally orders of magnitude harder because you’re shifting from optimizing to reinventing and disrupting the work lives of a new population of employees: creatives, product developers, and sales.
Technology now has the capacity to transform nearly every aspect of every organization. It presents a great opportunity to reinvent how companies do business and expand their reach.5 It can be a great threat too, as competitors and disruptors embrace new, tech-enabled business models to unseat incumbents. These forces are driving many companies to disrupt themselves and rethink how value is created.
Can supply chains become smarter to scale up and down more nimbly? Can remote workers achieve the same level of creative collaboration as in-person teams? How can you anticipate and shape customer demand? In answering these questions, companies may attempt more subtle, nuanced, and complicated transformations that affect more of the organization and play out over a longer time. Many are tinkering with core business strategies and unique value propositions and will roll out their enhancements to the public against competitors that are ready to pounce on missteps. The stakes of these transformations are higher than ever because they can alter the lifeblood of how a company creates value, directly impacting brand perception, customer and supplier relationships, product sales and viability, and more.6
But as they look to next-generation capabilities, many companies have yet to master the fundamentals. Many still don’t have the right digital foundation in place. Many still struggle to link digital investments to strategic value and achieve buy-in and adoption from customers and employees. As a result, transformation often comes with considerable waste. Costs might be higher than projected, and too few projects can lead to the impactful change that technology promises.
This inefficiency has been frustrating and inconvenient but was tolerated during earlier modernization work because the stakes on these transformations were lower. Investing in analytics for your finance group is essential but won’t break the back of your business if the project falters. Now it’s no longer about preventing waste. It’s about seizing an opportunity before your competitors do or preventing a catastrophic stumble that could shut down your supply chain, kill a product, or even end your business. Now is the time to get transformation right.
If there’s a single reason for waste and stumbling in digital transformations, it’s something you’ve heard before: To succeed, you need to put strategy before technology. You should start with what the business needs and then find the tech that enables it. To do this well, business and technology leaders need to collaborate effectively. When they don’t understand each other, strategy can stall and transformations can become all about the tech. They might jump at the latest “what” before thinking through the “why.” This can lead to short-term benefit that requires a long-term rethink, or could lead to failure.
Take, for example, a foundational transformation project, like analytics and AI. A common problem these projects face is bad data. You can’t get the level of customer insights and prediction you need with messy data. The solution is often a better analytics operating model and a new way of thinking about data, but these are difficult projects with multiple stakeholders who must agree on shared guardrails. Often, gridlock ensues, and the project stumbles because each stakeholder is coming from different siloes with different priorities, different strategies, and even different vocabulary, so the propensity to talk past each other is very high.
When business and technology teams don’t understand each other, and their incentives aren’t aligned, the business tends to cede decision-making to information technology (IT). Without business and technology teams working in collaboration, the conversation can shift to data technology, and away from the governance needed to enable better customer insights. Once this new data infrastructure has rolled out, the lack of buy-in and understanding around why the project is necessary leads to pushback, and an adoption challenge ensues. When you’re not on the same page from the get-go, and aligned around a common analytics road map and strategy, there can be compounding misunderstandings of misunderstandings because you got the basics wrong.
So how do you get business and technology teams to understand each other and collaborate more effectively? The business could lead the way, but how can they talk about strategy or tech in a way that technology teams understand? How can IT discuss technology in terms of business strategy?
In short: Stop talking about technology. Otherwise, leaders will keep talking past each other. Instead, start by thinking of these five lenses, or imperatives: To become digitally resilient and build the right foundation for innovation, your work should be focused around experiences, insights, platforms, connectivity, and integrity. These are the building blocks that can be assembled—in part or taken together—to define the way forward for any company. Customers and employees want better experiences. The business needs new and better insights to support decision-making. Companies need better ways to bring information together (platforms) and get it to the right people faster (connectivity). And while they’re at it, they need future-proof, adaptive digital infrastructure that won’t be undone by bad actors or an ethical flaw in its design (integrity). Taken together, these are the fundamentals of digital transformation. Get your teams to understand and adopt this terminology. This can significantly reduce confusion.
Here’s why: If your team assembles to solve a data problem that’s holding back a broader transformation effort, everyone is aware of why. Each stakeholder understands that they’re not gathered to clean up data; they’re working for better customer experiences, insights, and agility. This puts technology teams into a business-outcome mindset, and lets the business speak in terms that IT will understand. But it can do more than help a diverse group coalesce around common goals. It can also help promote empathy and limit confusion, all of which help reduce high-stakes stumbling. It also promotes adoption because when everyone’s on the same page about what needs to be done and why, they can communicate to users with more clarity and precision.
Tech is expected to keep evolving at a faster and faster rate. The conditions that are producing a need for high-stakes, strategic digital transformation will likely only intensify. If you focus on building your efforts around the strategy, not the technology, you can develop a plan focused on driving long-term value, regardless of what tools enable it. In other words, you can develop strategies that are still relevant in three months or three years. Technology is transient. Strategy endures.
You’re surviving the biggest disruption that most of us have seen. You’ve learned what digital technologies can do, and you’re ready to make the leap to a reimagined future on the other side of the crisis. Go for it. Proceed with visionary boldness, but don’t lose slight of the stakes, and keep your team on the same page.
Your organization’s strategies for pressing issues shape its future. How well are they working? Deloitte’s Strategy practice helps the most influential organizations around the world generate measurable outcomes by making winning choices on their most significant strategic issues. We build long-term relationships with senior executives and work together to create effective strategies that cover a broad spectrum of issues. From defining corporate and business unit strategy, to identifying new growth opportunities, and more, we use cutting-edge approaches embedded with deep industry knowledge to develop and execute integrated, tailored strategies to meet the future with confidence.