Digital Transformation Requires Five Critical Success Factors

Over the past 24 months, Constellation’s clients have experienced closer collaboration between clients and their software vendors and service providers to craft solutions that may not have existed in the past.  This level of collaboration reflects the need for not only strategic differentiation, but also the desire to transform business models.
From over 100 client conversations, presentations at Constellation's Connected Enterprise event, and at various Constellation innovation summits and design sessions, Constellation sees five success factors required for digital transformation among the client, software vendors, and service providers (see Figure 1):
Figure 1. Five Critical Success Factors To Digital Transformation
 

1. Craft a cultural renaissance. Successful organizations drive digital transformation from the board level on down. Innovation must not come to a halt after a project has been completed. Organizations who have mastered digital transformation build a continuous pipeline of innovation and a deep bench of execution. While most organizations start this process by hiring a chief digital officer to lead the charge, the long term goal is to infuse a digital DNA among all executives and digitally enable CXO’s for success.
2. Start with design thinking.  When leaders unlock solutions to questions that never would have been asked, they start the process of design thinking.  By taking an empathetic approach, organizations can think outside the box. To accelerate the process, leaders must build diversity through digital artisans.  If there are too many left brain folks, balance out the team with right brain folks.  Got a lot of architects, balance out the team with an ethnographer or UX designer. When leaders build a diversity of thought processes, sparks of innovation serve as catalysts to enable transformation.
3. Commit to business model disruption.  With 52% of the Fortune 500 merged, acquired, and bankrupt since 2000, success requires a rethink of the core mission and business model of the organization.  In 2015, 55% of the Fortune 500 failed to make a profit.  The reality – digital darwinism is unkind to those who wait.  The winners have built digital business models.  In fact, this is not a digital divide but a winner takes all market.   In this post-sale, on-demand, attention economy, digital transformation is more than a technology shift, it’s about transforming business models and how organizations and brands engage.  Success requires building trust and authenticity of the brand, designing business models to support the brand, and then building products, services, experiences, and outcomes that support the business models.
4. Apply a form follows functions approach for technology adoption.   Digital technologies play a role in transformation. However, leaders should apply disruptive technologies that support the business model, not the other way around.  Given the rapidly shortening life cycle of new technologies, market leaders and fast followers must build both agile frameworks and disposable technologies to address the pace of change.
5. Institutionalize and incentivize concept to commercialization.  With roughly one-third of pilots succeeding and one-fifth of those pilots entering commercialization, moving beyond the pilot requires significant commitment to change. Why Business leaders with profit and loss responsibility often take the safe path despite the successful proof of concept and pilots. They fear failure from loss to their bottom line, potential cannibalization of revenue or market share, and political fallout of a failed project.  Successful organizations provide the guard rails to improve the percentage of projects that succeed from concept to commercialization.

Your POV.

How are you preparing for digital transformation?  Would you like to hear what other organizations have embarked on?  Would you like us to present to your boardroom?  Learn how non-digital organizations can apply a road map to disrupt digital businesses in the best-selling Harvard Business Review Press book Disrupting Digital. 
Add your comments to the blog or reach me via email: R (at) ConstellationR (dot) com or R (at) SoftwareInsider (dot) org.

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