How Can Organizations Succeed in Digital Transformation When One in Five Execs Think It’s a Waste of Time?

How Can Organizations Succeed in Digital Transformation When One in Five Execs Think It’s a Waste of Time?

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Late last year, I attended two events far removed from one another in space, yet very close in spirit. The first was a meeting of UNICON, the international consortium for university-based executive education (of which MIT Sloan Executive Education is a member). It took place in sunny Monterrey, Mexico, and focused on the future of executive education in the digital age. Straight from there, I flew to arguably less sunny Seattle, Washington for a meeting of the IoT Talent Consortium, a non-profit group dedicated to helping organizations in every sector—and especially business and industry—to create and grow the workforce needed to drive IoT-enabled digital transformation. The serendipitous timing offered intriguing insights, I thought, into the impacts of digital technologies on both the supply side and the demand side of leadership development.

For example, among the highlights of the IoT Talent Consortium meeting was a report on the state of digital transformation across a wide swath of industries. This was conducted by one of the consortium’s newest members, Korn Ferry, a global executive search and recruiting firm specializing in technology talent. What struck me the most in the presentation is how unprepared many companies are for digital transformation, despite knowing that they must transform to survive: “96% of organizations see digital transformation as critical or important,” yet “84% of executives believe that their organizations do not have the skills and capabilities to deliver on its digital ambition.” It doesn’t help when “One in five executives secretly think that digital transformation projects are a waste of time,” according to the report. “The ‘people challenge’ is perhaps greater than the ‘technology challenge’ in digital transformation, as there is usually resistance to the new ways of working,” stresses Vinay Menon, a principal at Korn Ferry’s global technology market practice.

The fact that business transformations are hard isn’t surprising. Change is hard, and especially so the fast-moving, all-encompassing type of change that is required to guide an organization successfully into the digital domain. Organizations dedicate tremendous amounts of thought and effort to craft detailed digital strategies to remain competitive, so it is particularly frustrating when these strategies fall flat. Whether your organization is in the midst of digital transformation or is gearing up for it, here are a few perspectives that may help you find your way forward, even when dealing with skepticism from the top.

Focus on business outcomes

As George Westerman, a principal research scientist with the MIT Initiative on the Digital Economy, points out in a recent article, “When it comes to digital transformation, digital is not the answer. Transformation is.” He cautions organizations about the dangers of getting caught up in the excitement of technologies like AI or robotics or the Internet of Things (IoT) and losing sight of their actual business goals. Westerman emphasizes the importance of designing a solid strategy that is enabled—not dictated—by digital. He supports his argument with a collection of real-world examples of companies that, while operating in very different industries, all seem to share four fundamental elements of a successful digital transformation: enterprise-wide thinking (don’t pigeonhole your strategy); judicious use of technological advances (don’t go tech-crazy); collective responsibility for driving the transformation (don’t expect IT to do it all); and a focus on building leadership capabilities that your organization will need to sustain the execution of your digital strategy (prepare for the long haul).

It is worth remembering that business outcomes are subject to forces other—or bigger — than even the most well-crafted corporate strategy. Particularly for publicly traded companies, the pressure of delivering shareholder value in the short term can undermine the long-term commitment required for a successful digital transformation. Perhaps that is one of the reasons why many executives are weary about digital transformation projects. It’s not that they are not worthy of time and effort—they might be impossible to do properly in the reality of short-term returns. Case in point, some attribute the potential GE breakup to its erstwhile CEO Jeff Immelt’s “expensive digital pet project,” as Bloomberg described it.

Commit to execution 

If you do commit to digital transformation, it turns out that for the smartest strategy to be successful, its execution requires just as much, if not more, attention and effort. In a recent Sloan Management Review article titled “Turning Strategy Into Results,” another MIT Sloan colleague, Donald Sull, and his research collaborators describe findings from their multi-year study of companies in a variety of industries, geographies and business models. The authors acknowledge the particular challenge of devising a successful strategy—and then trying to execute on that strategy—during a transition. For the latter, they stress the importance of strategic prioritization and the vital importance of sustained effort. Sull also points out that complex business environments require complex strategies, and that the human beings who must execute these strategies often benefit when leaders can translate them into a manageable set of rules of thumb, which Sull calls “simple rules.”

Sharpen your “soft skills”

To be successful, digital transformation requires certain skill sets from your workforce up and down the ladder. The “technical skills stack“ is fundamental, whether you build it internally or hire outside talent to propel your organization into its digital future. However, data suggest that leadership capabilities need an upgrade, too. As we’ve discussed before on IEEE-USA InSight, the traditional authoritarian power structure may be one of the toughest barriers to digital transformation, as business leaders struggle with inability to admit that they don’t know something. It’s hard to embrace a humble mindset when you’ve been successful as a domain leader in the past. Yet, data tell us that executives and leaders in many established traditional businesses who are not so strong on “soft skills” are having a harder time leading their businesses into digital.

Put people first

Let’s say that you’ve taken all the right steps in devising and implementing your digital transformation and are on your way to becoming a truly digital organization. As a result, your organization may look very different (that’s the point of a transformation, right?). While there certainly will be changes in your business processes, and perhaps the products and services that you offer, one of the most significant changes that will affect your organization will have to do with people. After all, chief among the underlying promises of digital transformation is optimization of work through technology and automation, which can lead to major shifts in your workforce. Being mindful of that and having a solid plan of action can help your organization make the most of your human capital. Here at MIT, we are certainly thinking about that, too.

Shortly before Thanksgiving last year, MIT president Ralf Reif took to the pages of the Boston Globe to address the grim view that two-thirds of Americans hold about the future of work. Concerns about disappearing jobs are not new—globalization and automation have been reshaping the U.S. workforce for decades. However this time around, people are worried about the types of jobs that we don’t typically associate with outsourcing or automation—highly skilled, white-collar occupations that require specialized education and training. It seems that workers in many professional fields find themselves between a rock and a hard place, as employees fear being displaced or replaced by machines, and employers worry about digitally transforming their businesses fast enough to, well, stay in business.

One of the key calls to action in president’s Reif’s address was a need for systematic and continuous training, re-training, and “up-training” of the human workforce. To that we should add that it’s important to expand those efforts to include not only the front-line workers in virtually every industry, but most especially the people who are leading the digital transformation of their organizations. To what extent, in fact, will the C-suite, corporate boards, and top-tier managers be replaced by AI, too? No one will escape it. And moreover, leaders of organizations will need to have the skills—and perhaps more importantly, the values—to make sure that we all have a sustainable and equitable future, and continue to enjoy the sense of purpose and the material benefits of meaningful employment in the age of AI.

*See previous post in the Digital Transformation Series, “You’re never done: 10 years of digital transformation at MIT Sloan Executive Education.”

Dr. Peter Hirst leads the team of professionals who partner with clients and faculty at the MIT Sloan School of Management to develop, design, and deliver innovative executive education programs for individuals and companies.

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