5 Steps to a Successful Digital Transformation (Evolution)
We've seen too many digital transformation programs that cost a lot of money but don't reap the promised benefits.
You have legacy technology that you want to evolve into the digital market. You want to reduce the technical debt and rationalize applications in your workforce. But 25% of your workforce is about to retire in the next ten years, and you haven't brought in any next-generation staff because you have not had the leaders in place to develop young people. Staff that is in the middle of their careers that are potentially in the AVP to VP levels may not have advanced along with the leadership or new technology paths. Therefore, you find yourself at the point where there are issues across your workforce.
People often blame the market factors: new regulations, COVID-19, Brexit. We say that the real issue is the lack of skills. The skills shortage in the market is very real, especially considering the great resignation happening in the US. But this is purely because the people in leadership positions haven't focused on the actual underlying issues and invested in their current workforce.
If that's the case, we should really start a conversation about how to be successful in this new landscape. I've seen too many digital transformation programs that cost a lot of money but don't reap the promised benefits. The focus is always on technology first, then the regulatory changes and new client requirements. Then, at some point, there is a consideration about the people. I don't believe it's right.
So, how do you succeed in digital transformation (or, as we like to call it, digital evolution)?
1. Don’t look at evolution as a cost optimization effort
Don't ever look at the digital evolution as a cost optimization effort. Even better, don't ever build anything as a cost optimization effort. As soon as you use this as a lead project benefit, it will create fear amongst your teams. It will create anxiety and concerns about redundancy among employees. If you're doing things right, cost optimization will happen anyway, in various ways. Simply reducing the operational costs isn't necessarily where you need to be looking. Your focus should be on getting more bang for your buck.
Let's say that your goal is to have a significant increase in the capability maturity of your workforce. By not investing and not understanding the people you've got, the costs you pay are doubled or tripled - because you're not using the full capability of your people. Rather than looking at how much you can reduce, apply a different benefit factor. If you think your employees are at 25% of their capability right now, then with a small investment, some time, and effort, you can get to 50% in a year. Then, in theory, you've reduced cost and quality because you're getting more for your money.
The focus is too often on reducing the operational cost rather than on what you can actually achieve with the capable people you already have on board. Try to look at evolution in a completely different way. Build a 3 to 5-year plan with a focus on the people first. Do this, and see your projects go quicker and smoother by your second year of the process. Why? Your employees will understand what evolution looks like by then, and they won't fear losing their jobs anymore. Most importantly, they'll stop spending most of their time on support and maintenance because of technical debt reduction. Maybe they'll even have a chance to try and work on new technologies.
Stop treating your workforce as if they don't understand business. Ask the questions. More often than not, someone in your organization already knows the answers. Give them a platform, absorb the information, and make them part of the change. By doing so, you will identify new leaders and new champions. You'll find people that need to move to a different job family to be more successful. Inevitably, you'll find places where you need to say goodbye to some people. But you should never say that your organization needs to lose a % of its workforce just to get a tick in the box.
Start with your own champions, bring some experts in from the market, and integrate them. Make sure the newcomers are empathetic and that they understand the company leaders as well as the juniors. What you want to achieve is a mix of individuals with very different focuses: people who understand the risks of transformation, people who understand how to be inspiring leaders, and people who understand the evolution of technology.
Find your champions! There will still be a requirement to invest in a small group of people to run your transformation. The most successful evolution efforts I've worked on were the ones where I was able to visit every single office and meet every single IT member in a 950 FTE strong organization to understand who they are, asking everyone the same set of questions for consistency. Out of that, I was able to advise the CIO where the talent sat, who were the people we didn't understand yet, what individuals we should definitely know more about, and what cultural differences and concerns we had in each location. Based on that, we were able to build an internal evolution before we even moved to the market to see what we were missing. Everybody felt part of that, and we didn't bring anybody external in until everyone inside understood what we were trying to achieve.
2. Focus on communication
We follow that up with communication and as much transparency as possible. If you're not focusing on cost optimization there is no need not to be transparent. Talk to the employees about evolution, so they can be proud of it. If they don't know what's happening, they'll talk about the changes without you, scared of losing their jobs. These are not the things that you want your staff to be worrying about.
It's good to designate somebody in your transformation team who can only focus on communication. A comms person attached to the program is really important. They will do your internal marketing and be a culture carrier. They will run the town halls and make sure that your champions and your staff remain informed. Communication is key.
3. Think about the future leadership model
Ensure that you have thought about your future leadership model because you will be undertaking changes not only in technology but also in your workforce. Without the right leaders, the digital evolution won't work. You'll deliver into an environment that’s not ready. Your organization needs leaders who will:
- be the culture carriers,
- understand the company direction,
- nurture junior staff and seniors moving into their own directorships alike.
Use personality tests if you have to. Don't just look at CVs or somebody's university degree and where they went to school. Technology is a vocational job. Some amazing people are not going to university but instead are coding in their bedrooms. It's more about understanding the personality of those people and why they prefer to code in their bedrooms than being out in front of 4000 people leading organisations.
4. Then look at technology
The fourth point is technology. Once you've spoken to the people, you have your risks and issues logged, and you've done your assessment, you will also understand what systems need to change, and what you can or need to automate. And with this understanding, you'll find yourself in a position to run and deliver a very successful technology transformation.
5. Understand the benefits
People do a two-year transformation and then come along and say they've done everything they needed to do. They reduced their cost, they've engaged their employees, and they've changed their technology. But it all falls apart when you start asking questions.
- How many of the employees that you started with are still here? "Just 10%."
- How many new employees have you onboarded since then? "Maybe half."
- How much of your technical debt did you get rid of? "About 20%..."
So you're running a reduced workforce with new employees that require a year to get up to speed with the organisational culture and how to navigate and still have a lot of technical debt. When you think about those questions, the benefits don't add up and you may have created more problems for yourself. If you can, review your benefits every six months. Ask these questions:
- How far have we moved the needle?
- Did we move the capability maturity of the organization as a whole?
- How much technical debt did we remove or replace?
- What are we planning to do next year and how does our transformation support that?
- Are we still supporting our clients at the rate and quality that is required?
Sometimes you’ll need to have a difficult conversation with the client base to explain your company evolution and that you may not be able to deliver less client change during that period to allow you the focus to change the organisation and the technology. But when you come out of the other side, you will be a much more capable organisation. You will have moved your business forward, which in turn moves their business way ahead of the market.
But not only that. By delivering this evolution, you've addressed key workforce issues, like diversity and inclusion in technology, the retiring workforce, and lack of digitally aligned skills. You plan to create an environment with the right mix of people with different personalities and various thought processes. You will also give them a platform where they can succeed and help your company thrive.
Saying no to the client can be difficult. But if you explain to them what your outcomes and benefits will be, then they will support you. And at some point, they may even turn to you for some trusted advice since they might need to go through the same kind of transformation themselves. Your successful evolution will make you a better partner to your clients. You were a service provider on day one, but now you've moved to a trusted advisor on day two. After all, your clients bring their business to you for a reason. Not just to cut costs, but because you know their business better than they do!