It is a mistake to think transformation is just about the tech, says Thomas Pippos.
Like many business concepts that achieve buzz word status like "disruption" or "agile" — this year's Deloitte Top 200 Awards theme — "the power of purpose" — is not new.
Having a strong sense of purpose and the courage to embrace change has always been a central part of achieving business success. And change, often incremental but compounding over time, has always been necessary and inevitable as a key driver of the adjustments and innovations that can provide companies with competitive advantage.
What's new is the overlay of digital technology, or more broadly what's called the Fourth Industrial Revolution. This is the combination of the digital and physical with the interplay between technology and people.
It is a mistake to think digital transformation is just about the tech. It's even more about the lasting and age-old fundamentals of business — strategy, culture and most importantly people. It's also still about customers and customer expectations which are now increasingly influenced by digital technology.
So digital is transforming business. If an organisation isn't "born digital", it's "becoming digital" with most companies somewhat behind the eight ball on this matter.
Many still focus on the digital instead of the organisation — the technology instead of the company.
Technology might be hard, but culture, people and transformation are even harder.
Digital transformation doesn't happen in a vacuum. It's not a case of implementing technologies and letting them run. Though "there's an app for that", there isn't an app to take care of your business fundamentals.
Becoming digital has profound implications affecting business models, organisational design, talent acquisition and retention, and learning and development.
Many are aware of these concepts that surround digital transformation and understand the importance of them, but many are also not sure where to begin on the journey toward achieving digital maturity.
Herein lie a number of paradoxes with digital transformation. Deloitte research, which has included surveying hundreds of business executives across the globe, shines a light on some of these, in particular around strategy, talent and innovation.
The vast majority of business executives identify digital transformation as a top strategic objective. But just because they appear to understand the strategic importance of it, this doesn't necessarily mean they are fully exploring the strategic possibilities presented by digital transformation. In fact, many fewer (68 per cent) see it as an avenue for profitability. And on average, companies report planning to invest a median of 30 per cent of their operational/information technology budgets, and only 11 per cent of their research and development (R&D) budgets, on digital transformation initiatives.
This defensive mindset — a focus on digital transformation for operational investments, coupled with a relatively smaller emphasis on profitability — suggests that though most leaders associate operational improvements with strategic growth, they do not necessarily associate them with revenue growth resulting from R&D-driven new products or business models.
At the same time, 85 per cent of the executives surveyed indicate they have a workforce with the right skillset to support digital transformation. But when asked what operational and cultural challenges are most commonly faced by their organisations, finding, training and retaining the right talent is cited as the number one challenge by 35 per cent of respondents.
The fact that responses to the survey expose multiple paradoxes suggests that though the will for digital transformation remains strong, organisations of all shapes and sizes are largely still finding a path that balances improving current operations; with the opportunities afforded by digital technologies for innovation and business model transformation feeding into that.
Achieving a clarity of purpose around digital transformation, and embracing change, will go a long way toward resolving these paradoxes. Counterintuitively, focusing on the people aspects of change — for example by providing a clear organisational purpose and supporting adaptive abilities through continuous learning — can bring the best way to support digital transformation.
A crucial element of digital transformation therefore is the continuous loop of action between the physical and digital worlds. Many struggle to complete this loop, especially the last and most important stage. This is how the digital can support the human to make better decisions to drive deliberate action.
People crave purpose. A strong sense of purpose that correlates through a digital lens drives talent engagement and retention, and can be the basis for innovation within an organisation. The right talent, aligned and acting on such a common purpose, more than the technology, will carry an organisation into the future.
Thomas Pippos is chief executive of Deloitte New Zealand