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Perspectives

Winning with Digital Requires Change from the Inside Out

2017-02-22


Can an old company learn new digital tricks? With effective change management, the answer is a resounding “yes.”

When it comes to embarking on a digital strategy, many organizations focus on external factors, such as the customer experience and new revenue streams. Internal change, however, is just as crucial for digital success, including re-skilling the workforce, changing employee behavior, updating the corporate culture and restructuring how work gets done.

In fact, traditional organizational mindsets and hierarchies tend to gum up the digital works, particularly as faster-moving and quicker-learning digital upstarts gain mind and market share. As Klaus Schwab at the World Economic Forum explains, “In the future, it will not be the big fish that eats the small fish, it will be the fast fish that eats the slow fish.”

We define digital as “innovation to connect technology, data science, devices, design and strategy to change a business process or customer experience.” But while this may come naturally to digital-native businesses, it is more difficult for long-established organizations to transform. For these companies, the need for change, the capability to change and the vision of a better future must outweigh the emotional, personal and financial cost of the change. This is where digital change management comes in.

Figure 1

Elements of Successful Change Management

Leveraging our primary research and our own experience across industries, here’s what we’ve learned about what it takes to successfully shift toward digital. 

  • Identify and communicate digital opportunities: Organizations need to define what digital means to them. A cookie-cutter approach is rarely recommended, as needs and opportunities vary dramatically.  Digital leaders need to define the “burning platform” for their organization, identify the capability gaps and define how a particular digital initiative can fill the gap. The initiative should then be communicated through a variety of means, such as vision videos, pop-up stands, microsites and participative opportunities for employees at all levels. Effective change networks are needed to distribute and disseminate the change efforts. 

  • Involve executive leadership. Digital responsibilities, when not directly assumed by the CEO, are often assigned to others in the C suite, such as the chief information officer, chief technology officer or chief marketing officer. Shared responsibilities may work for some organizations, but it’s imperative that dedicated leadership is actively engaged in outlining digital strategies, designing customer journeys, empowering stakeholders, removing organizational silos, managing skills and resources, making sense of digital data, ensuring cybersecurity, monitoring and rewarding digital value, and addressing the many other aspects of digital change. 

  • Find digital talent. Recruiting and retaining digital talent is a major challenge. In our recent research of over 420 decision-makers across the U.S. and Europe, 94% of respondents agreed that the digital skills gap was hampering digital transformation. As a result, many companies are beginning to work with smaller, nimbler clusters of talent that serve a particular market or niche. Doing so requires a shift away from rigid, hierarchical organizational models, which tend to undermine informational access and hamper collaboration-minded teams that often sit at the edge of the organization.

  • Encourage acceptance. Leaders should identify influential individuals who may be inclined to resist the proposed digital change, and be prepared to communicate the desired benefits to these stakeholders, possibly at the senior sponsorship level. Inclusive, extensive and transparent communications will help encourage adoption of the digital strategy by making interested parties part of the solution.

  • Shore up human resources. Leaders should be prepared to answer tough questions from employees, such as the impact of automation and self-service initiatives on headcount, as well as the need for additional talent resources, such as design thinkers, data scientists and more. With the continued option of sourcing talent from external providers, as well as the growth of the gig economy, new talent acquisition may not always mean adding permanent headcount.

Five Ways Forward

If organizations have not yet started to understand and embrace digital in a way that meets their needs and strategies, they may already be on the path to irrelevancy. Depending on your company’s level of digital maturity, we recommend the following actions:

  • Form a digital council, led by one or more collaborative senior leaders, to define, sponsor and implement the digital opportunity and build an innovation practice. The initial operating budget for innovation and digital transformation initiatives should be set at no less than 1% to 2% of revenue.

  • Develop a clear digital change vision. Assess both digital capabilities and change maturity, and define a roadmap to achieving the vision. Leverage the latest organizational change management methodologies that recognize the need for business agility, such as Kotter International’s Accelerate or our own OCM framework, supplemented with the latest digital tools to implement and sustain lasting change.

  • Use Agile methods, which will speed benefits and compound support for digital efforts.

  • Foster digital talent both from within and outside the organization. Incentivize the growth of digital skills, set clear digital goals, and appraise, recognize and reward stakeholders who demonstrate their commitment.

  • Build a digital culture, including open and transparent communications from top leadership levels. Leaders should leverage company-wide collaboration platforms and e-learning techniques to encourage wider engagement.

While change may be difficult to achieve, building a digital sense of urgency is increasingly easy to accomplish. As former GE chairman Jack Welch has said, “When the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight.”

To learn more, please read “Organizational Change Management: A Make or Break Capability for Digital Success," or visit our Cognizant Business Consulting Change Management Practice.

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Winning with Digital Requires Change from the Inside Out