The critical role of Leadership in accelerating Digital Transformation

Leadership's role in accelerating Digital Transformation

How well is your company’s leadership tuned in to the disruptions around them? A lack of digital vision at the highest leadership levels can be fatal, as the demise of one-time video giant Blockbuster demonstrates.In 2000, Blockbuster executives received an offer to purchase a 49% share of a struggling video streaming company for $50 million. The deal would have given Blockbuster an established presence in the emerging video streaming market, but Blockbuster’s leadership saw no future for video streaming and turned the offer down.Only four years later Blockbuster recognized, too late as it turned out, the value of video streaming and launched its own service. By then, though, one company possessed a stranglehold on the skyrocketing market that was making Blockbuster’s business model obsolete. The company whose offer to become part of Blockbuster for $50 million was Netflix, the same company whose later dominance of its emerging technology put Blockbuster out of business.

How ready is your leadership team to lead your digital transformation?

Accelerators to Digital Transformation: Leadership

Opportunities like the one that Blockbuster failed to seize are just as present today. If anything, they are more numerous, as the pace of digital disruption accelerates. But many companies, even if they recognize that they need to transform, struggle to achieve transformation. That is why we presented our previous post, “Why Isn’t Our Digital Transformation Progressing Faster?” to help leaders recognize the common obstacles to digital transformation and help them to overcome those challenges. We revealed that the challenges that usually slow transformation are not technology-based, but people and organizational issues. That post touched on six key Barriers and Enablers that we have uncovered in our years of helping companies achieve true digital transformation. It also promised to cover each of those Barriers and Enablers in greater depth. This is the first of those in-depth posts, focused on perhaps the biggest challenge in digital transformation: leadership.

Vision

Does your leadership team have a common vision of what digital transformation means for your company? As we mentioned in our previous post, a unified vision is crucial to successful transformation, and lack of it was the quality that led to Blockbuster’s blunder. As simple as it sounds, problems can start simply from not having a common understanding of what “Digital” means as it relates to your industry and your organization. The word has taken on many different meanings for different people. Definitions range from simple technology-related changes, such as moving applications to the cloud, to full business model transformation. Ensuring that your entire leadership team has a common vision of what being “digital” really means for your organization is a critical step toward its digital future. Recognize though, that simply sharing the same understanding is only the starting point. That vision needs to have buy-in across your entire leadership and, furthermore, have buy-in from your board. Each member needs to understand the consequences if this shared vision is not achieved, so they will not waver in their support the moment your organization hits the first bump in the road of digital transformation. In other words, as shown in the previous post, digital transformation cannot be achieved merely by delegating responsibility for it to some subordinate. The entire leadership team must commit itself to developing the vision, fully buy into its merits and setting the goals and guiding development of how to achieve digital transformation for it to succeed.

Priority

From this common vision digital transformation must become a key priority so it does not get lost among other initiatives. Consider again what happened with Blockbuster. It chose to trail the market in its digital transformation only to find that playing catch-up made their transformation even more daunting. When they finally committed to it, their struggle for survival fragmented their priorities and kept them from bringing it to fruition. That same scramble to catch up with more digitally advanced competitors can derail your organization’s transformation if you let other strategic initiatives crowd it into the background. How is your digital transformation funded? Does it have its own funding mechanism, or is it merely a line item in your IT budget? True digital transformation is costly. McKinsey & Company quote around $100 million as the possible cost for a major digital transformation at a global company (Arora et al 2017, sect. 3).[1] That kind of commitment cannot come out of a mere line item expenditure. Very telling of your priorities is also the position in the organization’s hierarchy given to the person who directly leads your digital transformation. Clearly, if a digital transformation has a high priority in your organization, the CEO must be closely involved. So, under which structure will a digital transformation leader best be able to carry out their responsibilities: as a Chief Digital Officer who reports to the CEO with direct sponsorship from the CEO and the Board, or as a VP of Digital reporting to the CIO?

Diversity

Diversity can also be a crucial digital transformation element. Diversity, in this case, needs to go beyond gender, race, and sexuality. Less recognized elements of diversity, such as tenure with the company or different levels of seniority and experience can also play key roles. Although the insights of those who have lengthy experience inside the organization are valuable, they need to be balanced with insights from those who are not deeply invested in “the way we’ve always done things before.”Something as far-reaching as digital transformation can benefit from the insights of those who have spent significant portions of their career outside of the organization, those from different generations or with different experiences, backgrounds, and demographics. A wide diversity of perspectives can help established organizations better identify approaches that can facilitate a dramatic digital transformation, that lies outside the experience of those who are deeply immersed in the established culture. Innovative ways have been proven successful in bringing this kind of diversity to established leadership. For example, a team of younger employees can serve as advisors to the leadership team, or a Digital Reverse Mentoring program can be established, in which junior, digital-savvy employees mentor experienced business leaders to help them gain new insights into our increasingly digital marketplace.

Digital Leadership Skills

Disruption by emerging technologies is not limited solely to the technologies our organizations use. It also places new demands on the skills and capabilities of leaders. With knowledge and information available to anyone at any time, and Artificial Intelligence (AI) able to perform more complex analyses – and perform them faster – than the most skilled data analyst can, leaders will increasingly find that the skills needed from them tend more toward the “soft” skills. The ability to motivate employees, make leaps of creativity and incorporate the nonquantifiable elements required in decision-making into the purely data-driven business scenarios that AI can generate will become what makes leaders indispensable in a more digitally oriented world. Melissa Janis, vice president of leadership and organizational development at McGraw-Hill Education, warns that while traditional leadership skills are still critical to leader effectiveness (cited in Prokopeak 2018) [2], “leaders need to consistently demonstrate a new mindset and a new way of working if they are to continue to be effective.” For McGraw-Hill, a 125-year-old company known for textbook publishing, that meant shifting strategy to focus on learning technology by giving leaders the tools and ability to thrive in a disrupted marketplace. “Leaders must embrace an entrepreneurial approach and help to create a culture that fosters collaboration, candor, empowerment, influence and action,” Janis says.

Succession Planning

This disruption also affects the way leaders need to look at succession planning. The processes and criteria that leaders have used in the past to develop the future generation of leaders need to be re-envisioned to ensure that the next generation has the skills, capabilities and experiences needed to keep the organization ahead of the curve in an increasingly digital future. Take Walmart for example. “Metrics and objectives focused on digitizing the businesses are now in each of the executive communities for this year,” says Jacqui Canney, Walmart’s executive vice president of global people (cited in Kane et al 2017) [3]. “This year, we’re actually adding digital leadership as one of the competencies for leaders and calling out specifically that this is a new competency they must have in order to be promoted.”Words like these demonstrate far more than the lip-service that is often given to digital transformation. They are a clear call for leaders to either grow in their digital competency or expect to remain forever blocked from future promotions. Such ambitious goals are attainable only through the full commitment at the highest levels of leadership. Without such commitment true transformation cannot succeed. Walmart has support from its CEO, board, and key investors for its digital endeavors. Thus, leadership development programs, too, will need to change, and not just in the way they are delivered.  They need to develop future leaders whose core competencies include both the “soft” leadership skills familiar to today’s leaders, as well as the digital leadership skills that will better prepare organizations to be agile and competitive in the future economy.

In summary

Digital transformation cannot stop at merely adding new software or adopting a few process changes. It cannot stop at merely saying that the organization wants to experience digital transformation. To succeed, it must be a conscious and committed choice for which leadership has established a common vision and has jointly prioritized it as a primary goal instead of as one of many competing initiatives. It must reach into the core of the organization’s direction and break down silos to the point where leadership is seeking input from those who are more engaged in the digital world than they are. Leadership needs to be willing to increase their own digital competencies and be willing to steer the organization and its future leaders into an increasingly digitally reliant world. Getting leadership onboard for true digital transformation is only one of the six key issues that determine how quickly and effectively businesses can transform and become more competitive in the digital economy. See those six issues discussed briefly in our post, “Why Isn’t Our Digital Transformation Progressing Faster?” and join us in the coming weeks as we examine the other five in greater depth.

To find out how you can accelerate your organization’s Digital Transformation, contact us for a free consultation.

[1] Arun Arora, Peter Dahlström, Pierce Groover, and Florian Wunderlich, A CEO guide for avoiding the ten traps that derail digital transformations, McKinsey & Company, Available: https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/a-ceo-guide-for-avoiding-the-ten-traps-that-derail-digital-transformations[2] Mike Prokopeak, Building the Leader of the Future, CLO Media, March 22, 2018, Available: http://www.clomedia.com/2018/03/22/building-leader-future/[3] Gerald C. Kane, Doug Palmer, Anh Nguyen Phillips, David Kiron, and Natasha Buckley, Achieving Digital Maturity: Adapting Your Company to a Changing World, MIT Sloan Review, July 13, 2017, Available: https://sloanreview.mit.edu/projects/achieving-digital-maturity/