Perspektiver

Setting the direction for a business-led digital transformation

How do organisations define and align the right direction for their transformation journey to support the business strategy?

Contributors: Maria Aunsholt Storgaard, Maya Kousholt Schmitt, and Annie Gisslen

In our experience, transformation is a critical enterprise capability for organisations to be able to navigate in their industries. Most of these transformations are enabled by digitalisation, hence our previous article “A business-led approach to maximise value of digital transformations” presents the importance of focusing on integrating business and technology disciplines to drive successful business-led digital transformations. This is the second article in a miniseries that goes through the key topics on ensuring a lasting, positive impact when pursuing a business-led digital transformation. In this article, we present our answer to the question of how to define and align the direction of a transformation journey to support your business strategy.

Sign up for our upcoming webinar on Business-led
Digital Transformation here

Sign up

KEY TAKEAWAYS

  • A successful business-led digital transformation requires an organisation-wide aligned vision and ambition where the impact is clearly understood across Business and IT
  • The choice cascade is an effective and simple framework to articulate the vision and ambition
  • The vision and ambition for digital transformation should primarily focus on:

    - The operating model, to answer the question: what capabilities must we have to deliver on our strategy?

    - The enabling-technology: what capabilities should our supporting systems and digital solutions enable? 

THE TRANSFORMATION DIRECTION IS ARTICULATED THROUGH A VISION AND AMBITION

The transformation vision defines the desired outcomes of the transformation, whilst the transformation ambition defines the scale and speed of change. An organisation is at its core, based on three concepts:

  1. its business model (how you generate value through customers, markets, channels, and products),
  2. its operating model (how you deliver through your processes, people, technologies, data, and governance), and
  3. its financial model (how you fund your operating model). 

Pursuing a transformation is the opportunity to define a bold vision and ambition that allows you to rethink your business and operating model to deliver breakthrough value. Hence, the vision and ambition for your transformation involve strategic decisions that affect where you will grow (your business model), how your organisation operates (your operating model), and what kind of performance improvements you can expect.
 

“Pursuing a transformation is the opportunity to define a bold vision and ambition that allows you to rethink your business and operating model to deliver breakthrough value.”


CHALLENGES WHEN ALIGNING ON THE TRANSFORMATION VISION AND AMBITION
Organisations often have a strong high-level vision and ambition for their transformation. However, we often observe that said organisations fail to show what the vision and ambition translates into in real-life and how the transformation is to be pursued, consequently setting off without a clearly defined and tangible direction and purpose. As a result, the high-level vision and ambition is interpreted differently by stakeholders and the alignment across departments or business units is often missing. Even if the vision and ambition are aligned across the organisation, the associated impacts and costs are often not understood.

A great illustration of this misalignment is a recent client wanting to implement one standardised, global SAP S/4HANA template across their different divisions. This would help them to enable their vision of harmonising and simplifying their operations and become a truly global organisation. As each division currently has different operating models and business models, the client was faced with making some tough decisions. One such decision was related to the capability of outbound logistics, which is a strategic capability for one division whilst a foundational capability for the other divisions and as such was outsourced to a 3rd party. Incorporating the strategic outbound logistics capability in the global S/4HANA template would incur significant costs and efforts and would only benefit one division. However, by not incorporating it and choosing to outsource, the control over the strategic capability is lost by the division that is so heavily reliant on it.

ARTICULATING THE BUSINESS-LED DIGITAL TRANSFORMATION VISION AND AMBITION USING THE CHOICE CASCADE

To mitigate the challenges observed, the key is to unfold the high-level vision and ambition defined to ensure all stakeholders across the organisation clearly understand the purpose, costs, and expected outcome of the digital transformation. Prioritising, defining, and aligning the real-life meaning of the vision and ambition is critical as they not only set the overall direction but ultimately set the direction for many subsequent decisions on what and how to implement. To aid this, the choice cascade is a simple yet effective framework for shaping a vision and ambition. The choice cascade is a tool that helps you express what your organisation’s strategy is or should be through a set of interrelated choices.

The choice cascade can be connected to the Business Architecture Pyramid presented in Article 1, which is illustrated in Figure 1.
 

Figure 1: Business Architecture Pyramid and Choice Cascade

It is essential that organisations have made conscious decisions on their strategy and business model prior to initiating a digital transformation: What is our winning aspiration? Where will we play? How will we win? Subsequently, the strategy and business model decisions feed into the vision and ambition for business-led, digital transformations to focus on transforming and future-proofing the organisations’ operating model through enabling technology. This is different from the traditional IT-led approach which primarily focuses on the goal for the technology implementation. Instead, the questions business-led, digital transformations aim to ask and define through the vision and ambition are: what capabilities must we have and what management systems do we need, to achieve our strategy and deliver on our business model?

ARTICULATING THE LEVEL AND MAGNITUDE OF THE TRANSFORMATION AMBITION

When defining the ambition level and the real-life impact of a business-led, digital transformation, organisations must decide the extent of the transformation, i.e., a full transformation aligned to future strategic business plans or a quick fix of current obstacles. For business-led, digital transformations, the spectrum presented in Figure 2 goes from the traditional system and infrastructure replacement to a fully transformed operating model enabled by technology. Understanding where on the spectrum your ambition lies will help to define the real-life impact that should be expected.

 


Figure 2: The Transformation Spectrum

The decision on how transformational the change ought to be will not only have an organisational impact but also a financial impact. Therefore, our recommendation is that you allow yourself to explore the impact across the full spectrum before finally settling on your ambition level.

For example, a recent client who was looking to do a system upgrade of a legacy SAP system to the new SAP S/4HANA could platform, was able to increase the financial benefit with 347.6% by expanding the ambition to include business transformations such as reorganisations and process optimisations.

BRINGING THE VISION AND AMBITION TO LIFE

With this article, we have presented our arguments for why organisations ought to prioritise clearly defining and aligning a vision and ambition that captures the real-life impact prior to initiating their digital transformation. However, having a clear direction is not valuable if you do not know how to get there. To bring the vision and ambition to life, it is vital to have an actionable transformation roadmap. Although building a roadmap is more of an art than a science, the next article will present how you can use the business capability model to form a transformation roadmap that focuses on closing the right capability gaps first, to effectively take you from your as-is to your to-be.

Read the remaining articles in our series on business-led digital transformation: 

Business-Led Digital Transformation one-page summary
Fandt du dette nyttigt?
$(document.head).append(''); $(document.head).append('