The technology fallacy: Embracing the human face of digital transformation

Introduction

When their organisations embark on digital transformation, finance executives typically consider evaluating and investing in a multitude of evolving and interrelated technologies, including the Internet of Things, artificial intelligence (AI), robotic process automation, and augmented reality. They also must figure out how digital capabilities can be embedded throughout the business, reshaping the company’s operating model and how it delivers value.

As daunting as that may sound, it’s not the toughest part of the transformation. The difference between a company that harnesses emerging technologies to establish a competitive advantage, and one that commits random acts of digital, isn’t the selection of the technology. Nor is it the implementation.

Culture, as it turns out, can advance or inhibit digital transformation. And if companies can lay the groundwork by building a culture that is more adaptable to change, then implementing new technology and business processes can proceed more smoothly.

In this issue of CFO Insights, we’ll examine how finance executives can contribute to remaking the culture to facilitate digital transformation and thereby advance the company’s "digital maturity"—the extent to which a company can exploit the opportunities enabled by digital transformation.

Casting a bold vision

Based on the Deloitte/MIT SMR study, it’s clear that companies are moving in a digital direction—just not all at the same pace. In 2018, 30 percent of respondents described their digital status as "maturing," up from 25 percent the previous year. More significantly, only 25 percent said their company was in the "early" stages of the digital maturation process, a steep drop from the previous year’s 34 percent.

What’s also clear is that respondents recognise what is at stake. An overwhelming majority (87 percent) said that digital technologies will disrupt their industries to either a great or moderate extent. Yet, only 44 percent believe that their companies are adequately preparing to respond effectively. The substantial gap suggests that while most organisations may be talking about digital transformation, most may not be taking the right steps to address it.

Those steps are foundational: Companies should consider changing how they do business, finding ways to respond more quickly and effectively to ongoing technology shifts and developing institutional and individual skills, as well as leadership styles to suit the new environment. And since a company’s culture can make all the difference in its overall digital maturity, organisations need to create environments where digital transformation can occur. In the study, nearly 60 percent of respondents from digitally maturing companies noted that their companies drive digital efforts by cultivating such values as risk-taking, collaboration, agility, and continuous learning.

To find out more about the tactics involved in creating that innovative environment, read the report.

Barriers to culture change

As they anticipate the dramatic impact of digital technology, companies gain a rare opportunity: A chance to restart the business—and its culture—from scratch. Not literally, of course, but by re-evaluating how the business creates and captures value, and by making some fundamental organisational shifts. But some barriers can make it difficult for companies to adjust their cultures to accommodate digital transformation, including:

• Competency trap
• Speed trap
• Structure trap
• Enemy within trap

Discover more about these traps and how they could affect your organisation in the latest CFO Insights report.

Model leadership for digital dominance

The need for organisational self-assurance helps explain why effective leadership plays a critical role in creating the culture necessary for digital transformation. In the Deloitte/MIT SMR study, 90 percent of respondents from digitally maturing companies expressed confidence that their organisation’s leaders have the skills and experience to direct digital strategy. By contrast, no more than 30 percent of early-stage companies communicated such conviction. Still, as disorienting as the digital revolution may be, the essence of what constitutes effective leadership hasn’t drastically changed.

Whereas in the past, organisations may have defined a strong leader as one who had all the answers, in a transforming environment, leadership is about framing powerful and inspiring questions. To keep their organisations at the digital forefront, leaders, including CFOs, will need to model continuous learning, as well as other essential capabilities which are outlined in the report.

In the survey, 68 percent of organisations believe they need to find new leaders to triumph in the digital era. What can be true of leaders may also be true of culture: The type that took the organisation to the entryway of digital transformation isn’t the same type that will manage its forthcoming restructuring. The key, in both cases, is to recognise the situation—and act on it—as swiftly as possible.