“Technology changes quickly, but organizations change much more slowly,” says MIT Sloan Professor George Westerman, whose recent research focuses on the leadership challenge posed by digital transformation.
“The relentless march of technology is very good for companies that sell technology, and for the analysts, journalists, and consultants who sell technology advice to managers,” writes Westerman in a recent article for MIT Sloan Management Review. “But it’s not always so good for the managers themselves.”
He claims that while computing power grows exponentially (Moore’s Law), organizations do not, making digital transformation more of a leadership challenge than a technical one. “While it’s relatively straightforward to edit a software component or replace one element with another, it’s nowhere near as easy to change an organization,” he says. While people make organizations, they can also make organizations move too slowly.
People don’t have to be a source of inertia, however. In fast-moving born-digital companies, people are a source of continual innovation and energy. They know where the company is going, have a healthy dissatisfaction with the way things work, and constantly suggest ways to make things better. This can and should be the case in every company, whether born digital or not. The key, says Westerman, is converting digital transformation from a time-limited project into a capability.
To make this necessary conversion, leaders should focus on three major areas:
Change the vision. Help people see a reason to change and how they can play a role in making it happen. Great visions paint a clear picture of a better company—one that is better for customers and employees. He cites the compelling example of DBS Bank, which once had the lowest customer satisfaction ratings among Singapore’s top five banks. Leadership set out to radically change the situation and created a vision to “make banking joyful,” and promoted the vision widely. They set a goal to save customers 100 million hours of wait time by fixing processes and introducing new features at typically bottlenecked touchpoints. They empowered employees to suggest innovations that would reduce wait time. A few years later, DBS had saved more than 200 million hours of customer wait time … and it soon thereafter became the highest-rated bank by customer satisfaction.
Change the legacy platform. In many organizations, outdated business processes and tangled webs of intertwined IT systems are the chief source of inertia and cost for digital transformation. Companies must often invest in fixing their older technologies. “Building a data warehouse or data lake can be a decent short-term solution, but at some point you’ll need to address issues in the legacy platform itself.” Nearly every digital master Westerman and his colleagues studied invested in a legacy systems cleanup either before or during other waves of transformation. The results are leaner and faster business processes and wave after wave of new digital innovation.
Change the way the organization collaborates. Westerman explains that the difficulties GE faced in transforming to a digitally powered internet of things dynamo weren’t due to technology. The company was not able to solve the problem of working across the silos between its digital and traditional units, among other organizational challenges. In many companies, traditional and digital staffs do not work well together. When technology is moving too quickly for IT units to keep up, some companies choose to pursue digital without including their IT leaders, which proves to be a mistake. The best companies have found ways for business and IT leaders to work closely together in driving transformation.
Westerman encourages leaders to focus on these areas in order to create a capability to transform, instead of just investing in a set of transformation projects. “When that happens, digital transformation never stops,” he writes. “Instead, it becomes an ongoing process in which employees and their leaders continually identify new ways to change the company for the better.”
Essential IT for Non-IT Executives
This course is intended to help organizations develop a language shared by managers from various backgrounds and areas of expertise, so they can work together efficiently and productively, propelling the company toward future success.
Internet of Things: Business Implications and Opportunities (self-paced online)
Explore the opportunities for your business with IoT, from demystifying and defining IoT to creating a roadmap for its real-world application. The program aims to help people envision and lead IoT-based transformations, not just understand the technical elements. The goal is to demystify IoT jargon so that managers can start to achieve the strategic advantage IoT makes possible.