Key Principles for Digital Transformation
Everywhere in the world, digital-native companies have become so familiar that they’re often known by a set of abbreviations. In the Western hemisphere, the acronym is GAFA—Google, Amazon, Facebook, and Apple. In the Middle East, the abbreviation is BATX—Baidu, Alibaba, Tencent, and Xiaomi.
For companies that are not digital-native, the phenomenal challenge is how to transform to being digitally driven. Several studies—including a 2016 article from McKinsey and a 2019 piece from The Enterprisers Project—note that approximately 70 percent of digital transformations fail.
Digitalization has shifted from being an optional strategy to a compulsory one for many businesses in today’s pandemic world. Leaders had to change their business models when customers could no longer walk into a store, students could no longer attend classes on campus, and salespeople could no longer visit clients in their homes and offices. Almost serendipitously, digitalization provided the solution.
Many of today’s leaders are dealing with increased pressure from their boards to accelerate their transformations to digital, and at the same time they are dealing with reduced working capital. How can they succeed at digital transformation when so many others are failing?
A Benchmark for Digital Success
A few traditional companies have made the digital transformation so successfully that they can serve as case studies for other companies looking for guidance—or business school professors teaching courses on digital disruption. One of those companies is DBS Bank in Singapore, which I profile in my book World’s Best Bank—A Strategic Guide to Digital Transformation. DBS Bank’s story provides principles and hard-won insights other leaders can adopt when faced with their own digital transformation challenges.
The DBS digital transformation story begins in 2014, when the bank’s senior leaders met in Phuket, Thailand, to discuss their new strategy. The leaders reflected that, at the time, nobody woke up in the morning wanting to do banking. They referred to a Time magazine article that stated that 71 percent of people preferred having root canal surgery over dealing with a bank!
The leaders did not ask, “What does the bank want to do?” Instead, they wanted to know, “How do we make dealing with DBS easy, fun, convenient, and meaningful?” The leadership team migrated toward the idea of “Making Banking Joyful.” This became the internal name for the unfolding strategy.
One of the top three reasons why so many digital transformations fail is that the company underestimates what needs to be done and considers automating processes the same as achieving digital transformation.
The bank’s leaders realized that they could leverage emerging new technologies that would make banking “invisible” to their customers. These technologies would also create opportunities for customers to have enjoyable interactions with the bank and experience peace of mind throughout their banking journey.
As I studied DBS’ transformation, I extracted five lessons that can serve as a strategic guide for companies in any industry that are looking to transform. These lessons also serve as powerful lessons for faculty to share with the business professionals who are attending executive seminars as they plan their own digitalization strategies.
1. Make sure the transformation agenda is driven by a purpose. Some organizations may need to make changes that are no more extensive than improving their websites or designing new apps. But for most traditional companies, the transformation typically means rethinking their entire business models, and this is no easy feat.
One of the top three reasons why so many digital transformations fail is that the company underestimates what needs to be done and considers automating processes the same as achieving digital transformation. A company might adopt chatbots, robotic process automation, or artificial intelligence, but not fully integrate these technologies throughout the whole business. DBS leaders realized that emerging technologies had to be incorporated throughout the whole bank in order to make banking invisible—and joyful—for customers.
2. Realize that business is technology and technology is business. In traditional companies, business leaders usually identify what they want to achieve in the next 12 months and then ask how technology can support them in achieving their business goals. This is a recipe for failure in digital transformation. Business and technology must be on an equal level, with the same goals and measures.
DBS reinforced this message by adopting the term “two-in-a-box” to describe how the tech and business heads collaborated on shared objectives. These leaders genuinely needed to share the same goals, measures, and appreciation of the challenges. They also needed a common understanding of what had to be done; they couldn’t just pay lip service to each other’s business requirements. This two-in-a-box best practice continues to play an important role in the way the bank operates.
3. Build a rock-solid foundation of core systems. A digital transformation needs to create systems that will make the company faster and more nimble when responding to customers. This is where the majority of the initial capital expenditures will go. Every company needs to identify the technological gaps, then invest in closing them.
To identify the bank’s digital transformation gaps, DBS leaders visited top technology companies. Then they designed a new architecture for the bank’s technology infrastructure on the back end and focused on making their systems cloud-native. That enabled them to improve their interactions with partners throughout their ecosystem and gave them access to the maximum amount of data. The technology in the bank transformed from an annoying bottleneck to an acute enabler, partner, and driver for the business.
4. Become customer-obsessed. New technological tools have enabled companies to offer extraordinary customer service. Companies can identify customer pain points, adopt customer mapping, leverage design thinking, and host hackathons to pinpoint areas that need improvement. Companies previously engaged in inside-out thinking—they designed the processes and expected customers to fit into their way of working. They have shifted to outside-in thinking, in which they truly listen to customers and then design processes to meet the customers’ requirements.
DBS shifted from trying to promote products and services to leveraging technology to improve the customer’s journey. DBS leaders constantly asked, “Is this change making banking joyful for our users?” They adopted solutions based on their customers’ perspectives. For example, the bank didn’t focus on selling more mortgages; instead it focused on helping individuals realize the dream of owning a home. Today the bank continues to seek changes that enhance the customer experience.
DBS shifted from trying to promote products and services to leveraging technology to improve the customer’s journey. They adopted solutions based on their
5. Create a startup culture. Another reason that digital transformation fails is that leaders struggle to change the organizational culture. Leaders need to articulate the future goals of the company, identify the barriers that block those goals, and determine how to overcome those barriers. The DBS leadership team defined five characteristics that it wanted to weave throughout the bank’s DNA. The leaders aimed to imitate the dynamic culture of startup companies, which are known for being:
- Agile. Teams in agile companies move quickly, never lose sight of customer needs, and do not operate within a rigid bureaucracy that requires many layers of approval.
- Invested in learning. Startups build a growth mindset among employees by pursuing innovation, growth, and resilience across the organization while building individual career resilience.
- Obsessed with the customer experience. Everyday operations focus on “the job to be done” for the customer. Leaders constantly analyze the customer journey to seek new solutions to challenges.
- Data-driven. Startup companies use data to scale the digital experience, create maximum value for customers, and elicit more “wow” reactions from users.
- Willing to experiment. At traditional companies, employees play it safe in order to protect their jobs and earn their bonuses. But startups encourage employees to take risks and be open to experimentation as a way to improve the customer experience.
Business executives who want to lead change within their own companies can study the lessons uncovered by DBS Bank. Then they can start their digital transformations by answering five key questions sparked by the lessons above:
- What does digitalization mean to our business?
- How can we create shared objectives between business and technology?
- How can we create a solid foundation of core systems?
- How can we become customer-obsessed?
- What needs to change in our culture so we are more like a startup?
By addressing these issues, leaders can ensure that their companies are less likely to be among the 70 percent that fail at digital transformation—and more likely to be among the 30 percent that succeed.
Speculand is co-founder of the Strategy Implementation Institute and the Ticking Clock Guys. This article is based on his book World’s Best Bank—A Strategic Guide to Digital Transformation.