In a recent blog, I detailed how to address common digital transformation challenges. For this blog, I’d like to get a bit more granular and discuss the three steps organizations should implement as part of a digital transformation strategy to start their journey: assess digital debt, define a future state digital vision and pave a digital roadmap.
Assess digital debt
Before a digital transformation can begin, you must clearly understand your digital debt — areas where a lack of digitalization cuts into profits. In some cases, this is directly tied to your product offerings, and in others, digital debt is found in your internal processes that inhibit innovation. And often, digital debt is evident in both.
Assessment starts with assembling a core transformation team. This team is responsible for identifying the key drivers for change and the goals you want to achieve by taking on such a massive transformation. The team leads the process of conducting executive interviews and SME surveys to understand the areas that could be improved via digital transformation.
This team will help to determine a number of insights:
- Internal operations and how under-duress processes and KPIs could be improved via digitalization
- Market pressures imposed by technology and/or competitors
- Identification of specific digital debt and its impact on revenue, cost and risk exposure
- Hypothesis generation and identification of low-hanging fruit and quick wins
Most companies work with a consulting firm to define their transformation strategy. The core team should get the firm to deliver benchmarks (industry and/or competitors).
Define a future state digital vision
While it’s impossible to predict the future with 100% accuracy, a successful digital transformation must be driven by measurable aspirational goals that can be attributed to specific products and or process changes. For example, if the transformation will result in a 20% growth in revenue, you should tie that growth back to a specific new digital product or specific digitalization of the internal processes. Some details may evolve, but the overarching goals of your digital vision should remain defendable.
Start by refining a hypothesis on digital revenue or lifting existing revenue streams through a digital experience. Conduct a market analysis that documents the total addressable market (TAM) and serviceable addressable market (SAM). Steps for this analysis include:
- Working with service and product owners to develop a practical digital vision for products and services. This includes identifying customer personas/needs and the pain points you’re attempting to solve. It is important to get buy-in from the product owners and have them explain the vision to their departments and the market.
- Working with business process owners (product development, supply chain, procurement, partnership alignment, manufacturing, etc.) to identify opportunities that impact the top and bottom lines via digitization or digitalization.
- Creating a backlog of all the opportunities (list of projects and product enhancements).
- Value creation
- Cost optimization
- Risk mitigation and resilience
Then, defining a more concrete future state digital vision is possible. You can rewire and automate processes via innovative technology and document the high-level requirements and the value and impact of changes on KPIs. After these components are locked in, product owners and process owners are responsible for socializing the future state vision with operations to get feedback and buy-in.
Pave a digital transformation roadmap
Once you’ve established a vision, organizations need a high-level blueprint to achieve it. The best way to visualize and communicate that plan is through a digital transformation roadmap. In my experience, the following is necessary to deliver a viable roadmap:
- Define a portfolio of products, services and processes that will be transformed in the future state vision.
- Define discrete projects for each product, process or service to achieve the change. For each project, it is imperative to capture the following:
- Key deliverables/assets needed to achieve the benefits
- High-level estimates on dates – milestone plan
- Develop cost-benefit estimates, including value, cost and owners for delivering value and managing cost. It’s also vital to identify dependencies, risks and mitigation strategies.
- Agree upon and document the Transformation Program governance model.
- Agree upon and document the high-level organizational change management plan.
- Select a platform to manage the transformation.
These early digital transformation steps will require a great deal of work. But, as we know, with any project, strategic diligence on the front end will more likely yield the intended results on the back end.
Learn more about successful digital transformation projects in this Sopheon webinar.
