4 Digital Transformation Health Checks For Your Business
Before you begin, conduct an organizational ‘health check’
A guest post by Kamales Lardi
As adults, we are advised to go for regular health checkups, even if we feel fine. Healthcare professionals suggest that these regular reviews of our full body health can help avoid or even anticipate problems in the future. I believe that companies should conduct regular ‘health checks’ as well, enabling management teams to have a clear view of where they stand against business goals.
According to the Digital Vortex (IMD & Cisco, 2016) as many as 40% of incumbent companies in will be left wounded, even mortally, by digital disruption in the next five years. As disruption threatens to shake the global business landscape, conducting an honest checkup on the company’s health could mean the difference between surviving, thriving or dying out.
Digital Transformation Health Check
As a strategist, I have learned over the years that the best way to determine strategic direction of where to go is by understanding the current position. As such, most strategy planning approaches start with some form of situational analysis. Similarly, the Digital Transformation Healthcheck is a starting point for companies that are planning to embark on a transformation journey to address digital disruption that currently does or could potentially impact their business.
The healthcheck does not lock into any specific technology or methodology, but requires an honest assessment of the organization, including its strengths, shortcomings, pain points and barriers. In my experience, health checks are most effective when conducted as an audit or review by an objective external stakeholder or internal cross-functional team set up for this specific mandate. There are four aspects to the health check that review the overall business ecosystem. The Outside-In and Inside-Out health checks focus on assessing the organization and its operations. Conversely, the Top-Down and Bottom-Up health checks focus on assessing the leadership teams and employees for digital transformation readiness. The organization is assessed against key control points that are defined for each health check.
The four Digital Transformation Health checks are described as below:
Outside-In health check
Before embarking on a digital transformation journey, leadership teams need to first understand the elements that are disrupting their business. Many incumbent companies tend to assume technology is the main driving force of digital disruption. As a result, they focus on invest in new technology solution implementations. Quite often though, technology is not the only element causing disruption. Evolving consumer behaviour or new competitive landscapes could also be top drivers for disruption. (In my previous post, I have described several top drivers for digital disruption in business). Traditional approaches, such as creating new mobile apps or launching social media channels to communicate with customers are insufficient, and only manage to scratch the surface of digital transformation.
Additionally, there are a myriad of new technology developments emerging on almost a daily basis. Leadership teams are constantly flooded with news of amazing technological breakthroughs, including artificial intelligence and machine learning, autonomous vehicles, 3D printing, wearables, blockchain and many more. Understanding and assessing the impacts of all these technologies could prove to be an impossible task, particularly considering the exponential rate of development.
The Outside-In health check focuses on identifying external elements that have a disruptive impact on the industry, as well as business. These groups of disruptors are then assessed against multiple scenarios to determine which are most likely to occur. By developing multiple scenarios that explore different perspectives and outcomes for disruptors, companies will be able to set the stage for an adaptive digital transformation strategy.
Inside-Out health check
An Inside-Out health check is sometimes the most difficult to conduct as it requires a brutally honest view of the company’s internal operations. This includes reviewing existing business activities and functions, process landscape, technology architecture, operating model, value chain and partnerships, as well as business assets. An assessment of the internal operations may bring to light hard truths about pain points and deficiencies, that leadership teams may not be ready to address or may feel defensive about. Unfortunately, this is a necessary step in transforming the organization to manage digital disruptions. For example, a complex internal process landscape could create a barrier against establishing innovation management within the organization.
Reviewing and analysing key pain points during the Inside-Out Healthcheck will help leadership teams prioritize changes that are immediately required. This could result in some initial quick wins for the company, even before the Digital Transformation journey is launched.
Top-Down health check
True digital transformation strategy involves organization wide transformation. It could cover any area of the business, for example customer interactions, employee engagement, product digitization, process improvements, new technology implementation or even business model innovation. As such, it is imperative that digital transformation is driven, supported and encouraged top-down by leadership teams.
A major barrier to digital transformation success is the lack of digital maturity or capabilities in the leadership team. This means that the senior management teams are unable to direct digital transformation initiatives, lack the entrepreneurial mindset to drive innovation, or are simply unsure who should own it. The Top-Down health check is a mindset and capability assessment that that determines the digital maturity of the management team and plays an important role in identifying skillsets that are required to jumpstart digital transformation journey.
In most cases, knowledge gaps could be filled with executive briefing sessions or corporate innovation culture initiatives. However, in some companies, this could result in identifying the need for a ‘’Chief Digital Officer’’ to navigate the overall transformation journey.
Bottom-Up health check
Most companies tend to focus on external facing elements of digital transformation, for example customers interaction or product sales. However, internal facing elements are also a critical success factor of the transformation journey. This relates to the way the company develops products and services, employees work together or interact with customers, as well as their readiness for digital transformation and skillsets that are available in the organization.
Digital transformation is a change journey that impacts the organization culture i.e. the company core values and how it operates. As such, it is important to help employees understand the reasons for transformation, impact and the role they play to ensure its success.
The Bottom-Up health check helps determine the organization readiness for digital transformation, including assessing employee’s digital appetite, capabilities, organizational culture, as well as skills gaps. It provides business leaders with helpful insights, for example identify change agents among employees to drive transformation or critical skill gaps.
Jumpstart Digital Transformation
Digital technologies are currently having a transformational impact on the global business landscape, forcing incumbent organizations to explore digital transformation in order to remain competitive and relevant in the digital economy. As a starting point to the digital transformation journey, companies should conduct an open and honest healthcheck of every aspect of their business ecosystem. Although challenging, this process will provide key insights on where to focus digital transformation efforts, and investments.
Kamales Lardi is a digital business transformation strategist and dynamic keynote speaker. She helps companies leverage digital disruption to create new opportunities for business and generate revenue. Kamales is also a published author, lecturer, mentor to entrepreneurs and member of the MBA Advisory Board at Durham University, UK.