Starting a digital transformation? What you must get right from the start

In the very near future, every successful company will become a digital business. But not every company making the attempt will be successful. It’s hard to predict the winners, and the companies who won’t  make it, because every situation is unique.

According to Harvard Business Review, 84 percent of today’s CEOs believe digital disruption is imminent, and almost half think their business model will be obsolete by 2020 – fewer than three years away. Yet most companies don’t have a plan in place to digitally transform. They may not fully grasp the current state of their own digital maturity and what a digital future could hold for them – much less those of their industry or their competitors.

Over the years, I’ve seen a lot of companies fail in their digital transformation efforts. While there are many reasons why this happens, three big reasons stand out:

• First, they too often get stuck with simply optimizing their operations. They modernize only their business applications, data centers or network infrastructure — and then they stop. Optimizing operations and creating efficiency is just one of the core enablers for a digital roadmap – it’s not all, and won’t take them on their digital journey, where you have to rethink everything from how we work and the future of customer experiences, to products and business models.
• Second, they haven’t aggregated their data estate – or all the data from across the organization – into a single, cohesive data strategy with clear goals. This leaves them making decisions from fragmented data and can lead to disastrous results.
• The third, and most critical, element is not establishing a digital culture that prepares for micro-revolutions (rapid experimentations) by operationalizing the shared accountabilities of teams to adjust for rapid change.

To avoid these pitfalls, there are few important things you should do if you want to start a true digital transformation.

Create a digital culture

Culture is a multi-layered core at the heart of every successful digital transformation. In our increasingly digital world, a digital culture cannot thrive if your company operates in silos with disconnected or under-connected business functions. With technology as an enabler, a modern workplace needs to find that harmony between the hierarchy of a traditional org structure and the fluidity of a network; just as a modern smart building needs to find the harmony between maximizing employee productivity and environmental sustainability.

To spark a change in digital culture, you must begin thinking in a “boundary-less” way across your internal organizations. Your work needs to be measured with real data, and that data needs to be used to equip employees in ways that let them truly understand and serve their customers. Learning from this data, your teams need to operationalize their shared accountabilities with processes that help other teams become more successful.

This is where Microsoft’s own cultural journey provides an excellent example. The adoption of a growth mindset has allowed us to rethink the way we work together within the company. It starts with replacing a “know-it-all” culture with a “learn-it-all” culture – where it is okay to fail, so long as you learn from it. That growth mindset attitude begins at the top.

At Microsoft, our philosophy of rewards for employees is based not only on the impact each employee creates, but also on how he or she is leveraging the work of others, and how he or she is contributing to their success. When I sit down with my team, that’s the first question I ask: What did you do that helped other people and other teams?

It all starts with one basic question: How do you think of culture?

Have a strategy for your data

In a digital world, you have more data being captured from more sources than ever before. The opportunity and challenge is to bring all that data together, analyze it and use it in a way that’s contributing to better decision making and better outcomes. Too often data is fragmented, with limited effort going into aggregating the data estate into a single, cohesive asset.

Your data strategy must begin with the end in mind and include a plan with clear outcomes. If you don’t tie together your data in a meaningful way, there is a danger you will veer from wrong decision to wrong decision, based on a cursory look at fragmented or incomplete information. In a worst-case scenario, your data might not even be grounded in reality, leading you to become ever more comfortable while making catastrophic decisions. That’s a danger of using data that’s not connected. It’s fragmented and it doesn’t get you where you need to go.

Properly connecting data also allows you to think differently by taking advantage of the power of artificial intelligence and machine learning — two of the most effective tools for identifying connections, insights and trends that are not yet obvious. Without real measurable data, AI and machine learning are useless.

Of course, what’s true for businesses is doubly so for nations. That’s why we’re honored to work with government agencies around the world to lay the groundwork for their data estates, such as those referenced by Tufts University’s Digital Planet 2017 report. Forming a data strategy will prepare these nations to more effectively use advanced artificial intelligence and machine learning capabilities to propel their societies into the future.

Embrace micro-revolutions

The reality for business leaders today is that you can’t future-proof your business. The truth is, the pace of technological change is leading us into a period of rapid, continuous evolution. Half a century ago, the life expectancy of a firm on the Fortune 500 was about 75 years. Today it’s less than 15 years and declining further.

In a world where more disruptions are possible, there is a lot of opportunity. It’s what gives life to a Warby Parker or an Airbnb. But it also means that you’re going to have to constantly look around all four corners: How you empower your employees, engage your customers, optimize your operations and transform your products.

It starts with building your digital dream, which comes down to identifying your desired business outcome. We find that identifying the right problem to solve (or opportunity to realize) is often harder than solving a hard problem. As you ideate with cross-industry skills to build your digital dream, it’s critical to get started now. In most cases, digital transformations do not start with an organization-wide plan of change, but rather with a series of micro-revolutions. These are small, quick projects that deliver positive business outcomes and accrue to the digital dream. Once complete, the company moves on to the next. It creates digital momentum.

For instance, we created a conversational bot named Cami for Dixons Carphone to help customers and store employees research products and check stock. That was part of our Intelligent Bots Early Access Program that lasted five weeks, starting with a week of end-user design, before moving into development. Dixons now expects the bot will become an ongoing source of business intelligence, which will bring them closer to their customers, opening up new opportunities based on their buying habits and solving their needs.

In other cases, micro-revolutions drive the need for immediate action. We also helped DirectWest, a Canadian paper-based phone book company, take the first steps along a long road of re-tooling itself through continuous, step-wise innovation. Our partnership has allowed them to add new capabilities like digitizing their core business and residential directories, and unifying their sales and service operations with a single platform. In turn, this allows them to provide online and social services, including 24-hour personalized access and deeper reporting to its customers.

You’ve got to get going on this series of micro-revolutions today. Every revolution is a step that accrues to the broader goal of digitally transforming the product, changing the way you work and connecting with your customers differently. And before you know it, you’ve embarked on your perennial journey of positive disruption.

Anand Eswaran is corporate vice president of Microsoft Digital, Services, and Success.