According to IDG’s State of Digital Business Transformation, 89% of organizations adopted or have plans to adopt a digital-first strategy in 2018. The key technologies driving digital transformations in companies are big data/analytics, mobile, cloud, and APIs/embeddables.
More and more non-IT companies are restructuring their products and services around digital capabilities brought on by new technologies. Companies have to undergo a cultural shift and adapt Agile workflows to thrive in the new digital reality. Moreover, a digital transformation requires a lot of tactical level decision making in a constantly changing market. Project managers are some of the most important people in the organization for a successful digital transformation.
What Is Digital Transformation?
If at some point in the last five years you have been going through project manager job listings, you might have seen the role of a digital transformation PM. A lot of companies have digital transformation strategies and the term “digital transformation” is used in a lot of different situations, sometimes even being used interchangeably with “digitization” or “cloudification.” Let’s unpack this term to see what the different meanings behind it are.
Digital Transformation with an Emphasis on “Digital”
20-30 years ago, digital transformation was essentially digitizing analog processes within companies. During that time, computers were becoming a mainstream tool to carry out work in the office. This meant that opportunities arose to make efficiency gains in many areas like internal communication, data storage, contract management, etc.
This form of digital transformation is still relevant today as technologies are constantly improving, and we see improvements being made even in digital-first companies like teams moving from email-based communication to tools like Slack or collaborative document editing with Google Docs. However, in today’s terms, this is a narrow understanding of the term digital transformation, in which the synonyms like “digitization” and “cloudification” make sense.
Digital Transformation with an Emphasis on “Transformation”
For the rest of this article, when we talk about digital transformation, we will refer to the description in this section.
A more complex form of digital transformation is structuring products and services around digital capabilities. It can encompass one or more of these things:
- Redesigning the sales channels according to online user behavior.
- Introducing software development to enhance existing products or services.
- Capturing and utilizing data to create internal or customer-facing analytics.
Digital transformation presupposes the introduction of Agile practices. Becoming digital both allows and requires a company to be more responsive to customer needs, more proactive in gathering client feedback, and more adaptive to changing market conditions. Some companies provide very good examples of how they have restructured their businesses around digital capabilities in their markets.
Digital Transformation at Domino’s
Domino’s is an American pizza restaurant chain, founded in 1960, with franchises in more than 85 countries. In the 2000s, the company was not doing too great as its stock hit an all-time low in 2008 at around $3. Around that time, the company started its digital transformation journey and identified itself as an “eCommerce company that happens to sell pizza” according to Kelly Garcia, Domino’s SVP of eCommerce Development and Emerging Technologies.
Domino’s adopted a mobile-first strategy and relied heavily on A/B testing to both drive digital product development and cut down costs at the franchise level. Most recently, they introduced a new platform called Domino’s Anyware, which allows customers to order food not only on their mobile apps but also via SMS, Twitter, messaging platforms, smart speakers, and other means of communication.
Domino’s was successful in its digital transformation and its stock price reflects that—in the period between 2010-2018, it has grown more than 3000% and has outpaced such juggernauts as Google, Amazon, and Apple. According to Kely Garcia, the company is currently looking at voice interfaces and conversational eCommerce to fuel their next period of growth.
Digital Transformation at John Deere
John Deere was founded in 1837 and started off as a general repair shop and a manufacturer of agricultural tools such as shovels and pitchforks. It is now mostly associated with their tractors and other agricultural machinery, but the company has experienced an even more profound digital transformation than Domino’s.
During the last several years, John Deere started transforming itself into a data company. That doesn’t mean that they will stop producing tractors, but that their mid to long-term competitive advantage lies with providing data-enhanced capabilities to their customers. John Deere achieves this in two ways.
Firstly, the manufacturer is enhancing its machinery capabilities by using sensor and IoT technologies to deliver precision farming. By acquiring machine learning companies like Blue River Technology, John Deere can use computer vision and AI to distinguish between different plant growth stages, recognize weeds, and apply fertilizers and chemicals only when they are needed.
Secondly, all of their machines generate troves of data, which is synced to the cloud every 5 seconds. All of this data plugs into John Deere’s Operations Center. The company has taken a platform view and opened the Operations Center to third parties, from small AgTech startups to large companies like DuPont.
All of these changes required John Deere to introduce Agile processes and to hire software developers and data scientists. The company has even opened an office in Silicon Valley. Most importantly, the people producing the machines have to work in tandem with the new technology units. “We work hand in hand. They know their machine and the job it does, we know the tech, and together we build this integration,” according to Than Hartsock, Director for John Deere Precision Agriculture Solutions.
Digital Transformation at the Project Manager Level
One might get the impression that digital transformation is something that happens at the board or executive levels with no substantial decision power for other people in the organization. That could not be further from the truth—project managers in particular play a vital role during a digital transformation.
Anand Swaminathan, a senior partner at McKinsey, describes the difference between a technology transformation versus a digital transformation and why PMs are relevant in the latter. If a company decides to introduce an enterprise resource planning (ERP) system for financial operations, that does not entail a fundamental change in how the company operates and how it interacts with clients. This is an example of a technological transformation, where the senior executives make the main decision and the rest of the affected employees have to adapt to a new reality.
In a digital transformation, top management outlines the vision (e.g., eCommerce company that happens to sell pizza) but the implementation of it lies with the “executive muscle” of the organization—that is, the project managers. As Swaminathan puts it: “You are now designing a fundamentally new set of experiences, products, and services for your customers.” That puts a lot of power and decision making within the purview of the project manager.
Challenges During a Digital Transformation
Every company is different and will face different challenges. Here, we provide the most relevant ones, which are likely to affect most companies to some degree.
- Customer needs are forgotten. Traditionally, companies work in siloed departments where each of them is responsible for a particular function within the company. The risk in such a setup is that the customers’ interests are prioritized only at the highest levels of decision making. When it comes to actual work that the customers have to interface with (marketing material, customer support, product, etc.) employees start focusing more on the output rather than the outcome. The work becomes about creating a leaflet and not about conveying information, about closing support tickets and not helping customers.
- Scarce feedback from clients. Stemming from the previous point, if customers needs are not prioritized, then likely feedback from them is also not sought out or properly captured when it does appear. This makes it much harder to figure out how to improve the product or service—especially so when you are trying to restructure everything around digital capabilities. Digital transformation even for a large enterprise is a startup scenario. It is full of unknowns and requires constant feedback from clients to provide the right solutions to the market.
- Data is not used in decision-making. When you are creating custom software, it is much easier to capture and analyze data. Most companies have financial data but not a lot of usage statistics. This leads to decisions being made based on gut feeling. Using data to support one’s decisions requires a different mindset and a new set of internal capabilities to have this data ready.
How To Be an Effective PM During a Digital Transformation
When we talk about digital transformation, we most often refer to companies like Domino’s and John Deere, where the primary line of business is not related to IT. That is not to say that IT companies do not go over digital transformations. For example, in 2016, Google declared it will be moving from a mobile-first strategy to being AI-first. This is another form of digital transformation, but in this section, we will be looking at traditionally non-IT companies.
No project manager can singlehandedly make or break a digital transformation because it is a company-wide effort. Having said that, PMs can be effective in the scope of their responsibilities, which would definitely improve the chances of a successful transformation. Moreover, it can lead to better career opportunities within the company as the people who are most effective during the transformation are poised to be well-adapted for the new digital reality in the company.
Spread Agile Values
An important part of becoming digital is changing the culture of the company. As Anand Swaminathan puts it:
I think culture is underestimated, […] in most organizations when it comes to the topic of digital. Organizations believe that they can shift from where they are today to where they need to be for tomorrow without undergoing the proper cultural transformation in the organization.
Agile is currently the most widespread methodology of delivering digital projects, and it will inevitably become a key component of any digital transformation. Whether your company uses Scrum, Kanban, or any of the scaled Agile frameworks does not really matter. All of them adhere to the values outlined in the Agile Manifesto.
An effective PM should be able to communicate the principles of Agile to both their team and colleagues from other parts of the organization. You should be able to challenge the old modes of working and engage stakeholders in figuring out how to make the internal processes more agile.
Recognize and Respect Legacy Processes
While the previous section talked about being able to challenge the status quo, it is very important to recognize and respect the legacy processes currently in play. There are two main reasons for this advice.
Firstly and very pragmatically, habits don’t change quickly and people, in general, don’t like to change the way they are used to working. Even if you have some affirmation from senior leadership that the whole company has to become more agile it would not be wise to force someone. You are likely to face resistance and come into conflicts with your colleagues.
Secondly, not all teams should work fully or at all based on Agile principles. Agile is not a silver bullet, and this is even more apparent in non-IT companies. Different departments have different levels of responsibility and risk, and not all of them can behave as software teams would. Mistakes for the legal or finance teams can be much more costly and harder to roll back than a bug in a client-facing platform.
Consider yourself more of an Agile coach. Before rushing to change how a team is working, figure out what led to the creation of the current processes. Be humble, as there might be important reasons behind those decisions.
Create Feedback Loops with Clients
Take a good look at how your company interacts with clients now. And then review what exposure to clients you have yourself. Is it just customer support who are talking to users? Or just salespeople working with decision makers? Or, as a project manager, do you mostly interact with clients at the beginning and at the end of the project?
Even though it is perfectly possible to deliver projects without consulting with clients very often, many projects face problems of unmet or changing expectations when clients see the end result. While it might be hard to involve customers in the development process of non-IT products, digital opens up new capabilities. Being able to release software often allows a PM to engage the clients more and gather their feedback on a constant basis. This helps align requirements early on and avoid problems at the end of the project.
Rethink Interaction with Users
Digital opens up new ways for your company to interact with users. The most important characteristic is that users are able to access your product or service whenever they want and be able to achieve some goal almost instantly. A lot of traditional interactions make the customers wait: email reply from customer support, account setup from an account manager, etc.
If you have big volumes of repetitive customer support issues, then it’s worth considering to create help pages or community-driven forums. Another option to explore is chatbots. With respect to account management, creating self-service systems will not only create more immediacy for the users but can also save time for your colleagues as some tasks are shifted to the users.
Digital Transformation Is Not a Silver Bullet
Digital transformation should not be glorified and applied in all and any circumstances. Most local businesses might only need some digital capabilities without overgoing a digital transformation to be successful. One clear example of this is UK bookshop chain Waterstones. In 2017, the company declared it was profitable again after a long period of poor results. It achieved this through a strategy of localization and differentiation against its digital competitors like Amazon. This is becoming more relevant as consumers are looking for authentic local and physical experiences that could counterbalance their digitally oversaturated lives.
Two characteristics of a product or service can be used to assess the need for a digital transformation. Firstly, where are the customers coming from? And secondly, how would you like your customers to interact with your business?
If the answer to either one of these questions is from the digital domain, your company is most likely going to benefit from the digital transformation.
Even if this question is never asked, most global businesses will be driven to become digital by the competition as future innovations come from digital technologies.
However, most local businesses like coffee shops, kiosks, and small retailers provide local services and don’t need to think about digital channels in the same way that digital-first companies do. Secondly, the importance of the physical component in a product or service can also indicate if a digital transformation is inevitable. Dining at a high-end restaurant or buying flowers are very physical activities. Digital capabilities might improve them to a small degree, but that does not call for a full digital transformation.
Digital transformation is not just about digitization or cloudification of existing processes. It requires restructuring your products and services around the existing digital capabilities. Successful digital transformations led to John Deere becoming a data company by turning their tractors into AI-equipped data gathering machines and Domino’s to become an “eCommerce company that happens to sell pizza.”
Project managers are some of the most crucial people during a digital transformation as it requires both a cultural shift and ability to adapt to changing market conditions and new technologies. Effective PMs will use Agile frameworks to deliver their project and spread Agile values to other teams and departments. Changing market conditions and the ability to deploy working software often will require the PM to create feedback loops with clients. Lastly, reframing interactions with users will allow the company to remain competitive by creating immediate outcomes for users.
Understanding the basics
What is digital transformation?
Digital transformation is a restructuring of products and services around digital capabilities. It can include redesigning the sales channels, introducing software development or capturing and analyzing customer data.
What is a digital transformation strategy?
Digital transformation strategy outlines a plan of action to achieve a restructuring of products and services around digital capabilities.
How important is digital transformation?
Digital transformation is becoming critical for a lot of companies. According to IDG's State of Digital Business Transformation, 89% of organizations adopted or have plans to adopt a digital-first strategy in 2018.
How do you start a digital transformation?
A digital transformation can be started by analyzing the market to understand how digital capabilities have changed client behavior and then developing a strategy on how to restructure existing products and services to meet the new usage patterns.
Why is digital transformation important?
Digital transformation is becoming more and more important as new digital technologies are developed. This changes how people search for information and make buying decisions. Many traditional businesses have to restructure their products and services around new digital capabilities to remain competitive.