Understanding the how of digital transformation: part 1 – planning and assessment

If you thought digital transformation was “so 2015,” – think again.

Sure, many companies may be well along their way to being fully digitally transformed. But you might be working for one of the many companies still struggling to fully transform their ways of digital product development, digitalization, or aiming to become a fully digital business.  

We know it can feel huge, complex, and overwhelming.

Digitally transforming a company (big or small) was never going to be easy, was it? But there are some ways to do it right (or better), so that you don’t have to backtrack. 

In this four part blog series, we take you through the practicalities of how to do digital transformation. We include some suggestions for planning, execution, implementation optimization, and measurement.

Think of this series as a compilation of best-practice recommendations based on the most successful large-scale digital transformations. 

According to the Everest Group, digital transformation efforts fail for 73% of enterprises worldwide due to leaders not adding value to the strategy, companies overlooking their core business goals, and a lack of decision-making capabilities to adapt quickly. 

Businesses often misjudge the resources, time, and budget needed for successful implementation, even when they scale back initial goals. This leads to rushed decisions and compromises.  

They often fail at digital transformation by trying to change too much too quickly. The allure of new technologies can lead to attempts to implement them all at once, causing resistance, delays, or failure.

While these innovations can improve efficiency, true transformation involves changes in both people and processes.

Rapid adoption can overwhelm employees and disrupt operations, reducing productivity and morale. 

Unsuccessful digital transformation can result in severe repercussions across various business sectors. It can hinder digital scalability, create inconsistent training, lead to inflexible staff, and impair knowledge sharing and retention, all while incurring high costs and wasting company time. 

First things first.

Before you actually start a transformation initiative, by understanding the “why” behind digital transformation, as a leader, you can build a strong foundation for your initiatives and align your strategies with the broader goals of your organization. 

According to BCG research,“despite the differences in industries, starting points, and goals, management teams wrestle with a very similar group of questions at the start of a transformation.” 

Thus, before starting a successful project, executives should ask themselves and the business a set of questions.  

As per the abovementioned BCG research, they are: 

1. Why are we undertaking this initiative? Do we need to become more adaptable to rapidly changing customer demands? Is there a need for a substantial improvement in our productivity? Are we falling behind in our ability to innovate? 

2. What actions should we take? The scope of digital transformations can vary, ranging from concentrating on people and processes (such as implementing agile methodologies at scale) to revamping technology and infrastructure, replacing outdated IT systems, and transitioning to the cloud.  
   • Many companies aim at achieving specific business outcomes, including personalization and digital marketing, comprehensive customer journeys, digital supply chains, and digital shared services. 

3. How do we execute the transformation? Many questions arise concerning leadership, governance, resource allocation, focus, and approach (like pilots, incubators, or lighthouses), as well as sequencing.  
   • How do we ensure that product, channels, and support functions collaborate effectively with the technology teams and how do we engage middle management in the process? 

Start there.

Thereafter, you are in a better position to start implementation, which starts with – planning!  

Stage 1: planning and assessment 

Digital transformation is an ongoing journey that redefines organizational strategies in order to thrive in the digital age. The first crucial step in this process is the planning and assessment phase, which sets the stage for all subsequent transformation activities. 

A common mistake is jumping into implementation without sufficient planning, leading to unclear goals, internal misalignment, and uncertainty about project scope and requirements. Without a strong foundation, projects face increased risks of encountering obstacles and delays. 

Develop a thorough and achievable implementation plan by first assessing your current state, including processes, systems, and organizational readiness.

Use this evaluation to define your project scope in line with your organization’s capacity, resources, and company goals. Set clear milestones and deliverables for each phase and establish metrics to track progress. 

A carefully crafted plan can prevent pitfalls that may derail a project. Setting realistic expectations from the start helps avoid resource limitations or timeline extensions.

Additionally, feasible planning builds trust and support from stakeholders, as they are more inclined to back a plan they view as achievable. 

Conduct a thorough assessment of your current state 

An essential starting point is to conduct a comprehensive assessment of the current organizational landscape.  

This involves: 

• Analyze current systems and processes: Evaluate existing technologies, infrastructure, workflows, and processes. This analysis helps identify outdated systems and inefficient workflows that could hinder digital transformation.  

• Understand data and information management: Assess the quality, flow, and governance of data. This includes identifying data silos, inconsistencies, and integration challenges. Understanding these elements is crucial for developing a strategy that emphasizes a single source of truth (SSOT). 

• Engage stakeholders and building consensus: Involve key stakeholders from various departments, ensuring that their insights and requirements are factored into the assessment. This collaboration fosters a shared understanding of existing challenges and future opportunities. 

EXAMPLE: Consider a healthcare provider evaluating its patient management system in-line with a corporate objective of improving patient care and experience by 13% over five years.

The assessment would involve reviewing patient data management, identifying inefficiencies in the current processes, and recognizing integration challenges across multiple healthcare touchpoints. 

Define the vision for transformation 

Once the assessment is complete, the next step is to clearly define the vision for digital transformation: 

• Articulate strategic overall objectives: Define clear and strategic goals that align with the organization’s overarching mission. These objectives might focus on enhancing customer experience, operational efficiency, or innovation. 

• Create a compelling future state vision: Develop a vision that outlines the desired future state of the organization. This vision should highlight key transformative goals, such as adopting cloud technologies, enhancing data analytics capabilities, or improving digital customer engagement. 

• Align cultural and technological transformation: Understand that digital transformation is not just about technology—it’s also about cultural change. Cultivate a culture that embraces innovation, agility, and cross-functional collaboration. 

Identify key areas for improvement and set clear objectives 

With a vision in place, the next step is to identify areas where digital initiatives can generate the most impact: 

• Optimize processes: Identify processes ripe for reengineering or automation to improve efficiency and effectiveness. This could involve streamlining customer service workflows or automating data entry processes. 

• Customer-centric enhancements: Leverage digital tools to create better customer touchpoints and experiences. This might involve deploying new digital channels for customer interactions or personalizing services using data insights. 

• Upgrade tech: Prioritize upgrading legacy systems or adopting new technologies that align with your transformation goals. 

EXAMPLE: For the healthcare provider, key areas might involve implementing a patient-centric digital solution that integrates electronic health records (EHRs) and telehealth services, thereby enhancing patient engagement and service delivery. 

Set clear objectives and metrics (KPIs) 

Finally, establish measurable objectives and key performance indicators to track progress: 

• Define success metrics: Set specific, quantifiable metrics to track progress and measure the success of digital initiatives. For example, metrics could include the reduction in process cycle times, improvement in patient satisfaction scores, or enhancement in data quality. 

• Regular review and iteration: Establish mechanisms for ongoing review and adjustment of strategies based on performance data and feedback. This ensures that the transformation remains on track and responsive to emerging challenges and opportunities. 

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Examples of metrics – KPIs and analytics frameworks 

Measuring the success of digital transformation requires a nuanced approach that encompasses both quantitative and qualitative metrics.  

Here’s a breakdown of how businesses can develop KPIs and analytics frameworks to gauge their progress and incorporate both quantitative and qualitative outcomes: 

KPIs for digital transformation: 

1. Customer experience metrics: 

1. Net Promoter Score (NPS): Measures customer loyalty and willingness to recommend. 

2. Customer Satisfaction Score (CSAT): Assesses customer happiness with a product or service. 

3. Customer churn rate: Tracks the rate at which customers stop doing business with the company. 

2. Operational efficiency metrics: 

1. Process cycle time: evaluates the time taken to complete specific processes. 

2. Error rate: measures the frequency of errors or defects in processes or products. 

3. Resource utilization rate: analyzes how effectively resources (e.g., Employees, machinery) are used. 

3. Financial performance metrics: 

1. Return on Investment (ROI): Calculates the financial return for investments made in digital initiatives. 

2. Cost savings: Assesses reductions in costs due to process improvements or technology adoption. 

4. Innovation and development metrics: 

1. Time to market: measures the speed at which new products or features are launched. 

2. Adoption rate: tracks how quickly and widely new digital tools or processes are used within the organization. 

5. IT and infrastructure metrics: 

1. System downtime: measures the duration of unexpected outages. 

2. Infrastructure scalability: assesses the capacity of systems to handle increased loads. 

Analytics frameworks: 

1. Balanced scorecard: Integrates financial, customer, internal processes, and learning/growth KPIs to provide a comprehensive view of strategic performance. 

2. Data envelopment analysis (DEA): Evaluates the efficiency of decision-making units within the organization, allowing for comparative analysis across different units. 

3. Customer journey analytics: maps and analyzes customer interactions across various touchpoints to identify areas for improvement and innovation. 

4. Predictive analytics platforms: utilize machine learning and data mining techniques to forecast future trends and identify potential challenges in digital transformation efforts. 

Quantifying qualitative outcomes 

Quantifying qualitative outcomes involves transforming subjective experiences into measurable data. Here’s how businesses can approach this: 

Customer satisfaction: 

• Surveys and feedback tools: regular surveys (e.g., CSAT surveys) with structured questions can quantify satisfaction on a scale (e.g., 1-10). This data can be aggregated to produce average scores. 

• Sentiment analysis: utilize text analysis tools to assess customer sentiments in open-ended responses, reviews, or social media mentions. Quantify positive, negative, and neutral sentiments into percentages. 

Employee engagement: 

• Engagement surveys: conduct employee engagement surveys with Likert-scale questions. Aggregate scores to generate an overall engagement index. 

• 360-degree feedback: use structured feedback tools where employees rate leadership and teamwork aspects. Analyze the data to quantify engagement levels. 

Linking qualitative to quantitative metrics: 

• Customer retention as a proxy for satisfaction: high retention rates can indicate strong customer satisfaction and loyalty, making it useful as an indirect quantitative metric. 

• Performance appraisal data: correlate engagement survey results with performance appraisal scores to measure the impact of engagement on productivity and efficiency. 

• Cost-benefit analysis of initiatives: for initiatives focusing on qualitative improvements (e.g., culture change), calculate predicted financial benefits (like reduced turnover costs) to quantify qualitative results. 

These strategies can help translate qualitative insights into actionable data, allowing businesses to make informed decisions and fine-tune their digital transformation strategies.   

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Action steps: 

• Organize workshops involving senior leadership to pinpoint strategic objectives. 

• Convert these objectives into distinct digital targets, such as improving customer experience and boosting operational efficiency. 

• Establish key performance indicators (KPIs) to evaluate the effectiveness of the digital transformation efforts. 

The planning and assessment phase is a strategic endeavor that lays the groundwork for successful digital transformation. By systematically assessing the current state, defining a clear vision, identifying enhancements, and setting measurable objectives, organizations can navigate the complexities of digital transformation with clarity and purpose.  

If you find this useful, don’t miss our next blog post! The next blog will be about execution and implementation.

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