3 key pillars of digital transformation in companies

This article is based on knowledge insights by Marc Correa

Today, digital transformation is a core issue common to many companies. Even though it now forms part of our vocabulary, Esade Associate Professor Marc Correa raises an important question: what really is digital transformation? And the truth is that each passing article, study or talk brings about new nuances.

In digital transformation processes, Correa argues, one of the factors leading to low performance often lies in relying too heavily on technological aspects, thus neglecting other social and organisational aspects that are equally important. This relationship must be rebalanced.

Bringing companies closer to digital transformation requires adopting changes that are based on three pillars: knowledge of technology, fast skill acquisition and change in organisational capabilities.

Benefits and characteristics of digital transformation

Before understanding what are the key pillars of digital transformation in companies, it is necessary to know its most relevant benefits and characteristics.

Successfully implementing digital transformation implies some benefits such as the correct automation of processes, an improved customer experience and data-driven decision-making, among others.

On the other hand, the characteristics of digital transformation encompass different important aspects, such as the adoption of new technologies and the implementation of more efficient organisational models.

If you want to learn more about digital transformation, you may be interested in our article: The challenges of digital transformation in executive education.

The key pillars of digital transformation in companies: examples

In order to overcome the barriers of digital transformation and achieve your goals, the following key pillars must be taken into account:

1. Knowledge of technology

Technology is the cornerstone and the main trigger that can launch new products, improve efficiency and so on.

“Company leaders should, without fail, be familiar with new technologies, know what they are and what they involve,” says Correa. “We must rethink executive training, which is usually more focused on teaching soft skills, and increase the learning of technology to help executives successfully lead digital transformation processes."

Digital transformation pays off. A study by MIT Professors has shown that companies whose boards of directors have digital know-how obtain higher financial results as compared with those whose members have little or no experience in digital business.

Companies whose boards of directors have digital know-how obtain higher financial results

The findings also reveal that boards of directors with at least three digital-savvy members obtained a 17% increase in profits as opposed to those who had two or fewer such members.

Businesses with digitally capable board members also experienced a 38% increase in sales, a 34% increase in their return on investment and a 34% increase in market capitalisation.

According to Correa, this lack of training in new digital technologies would explain why only a third of the efforts made in digital transformation have been successful. It is worrying that 70 % of initiatives fail to achieve the objectives of digital transformation, as corroborated by one of the latest McKinsey reports. This means that of the 1.3 trillion dollars invested in technological improvements last year, 900 billion did not manage to reach their goals.

Only a third of the efforts made in digital transformation have been successful

The technologies included under the DARQ acronym must be incorporated in this new executive education scheme. In other words, training in concepts such as blockchain, artificial intelligence, virtual reality and quantum computing, tools that drive the pillars of digital transformation.

2. Fast skill acquisition

“The exponential nature of changes taking place are shortening the time required for learning almost everything, and this is a great challenge for skill development,” says Correa.

Learning is a slow process – the challenge is significant. Back in 1993, Erikson and his colleagues published an article that claimed that one needed 10,000 hours (or ten years) of intensive training and practice in order to be an expert on anything. “Today this concept is no longer an option,” says Correa.

The exponential nature of changes taking place are shortening the time required for learning almost everything

“Executives need to be capable of acquiring abilities and skills much more quickly if they are to successfully implement digital transformation processes in their organisations.”

But, in an ever-changing market, not only are the timelines changing, but the skills also keep evolving. Recent studies show a growing demand in skills such as agility, risk decision-making, collaboration, adaptability, creativity, communication, influence and a growth mindset.

“Having the technology available, but not the necessary skills to take advantage of its potential is virtually the same as not having the technology.”

There are evidence-based models that demonstrate how organisations can speed up learning to acquire new skills. These models, such as the one shown in the chart below, have cut skill acquisition times by 50% and 80% as compared with traditional methods.

3. Change in organisational capabilities

Finally, digital transformation unavoidably involves organisational change. But for it to be real, effective and long-lasting, organisations must be conceived as a system, with connected and interrelated subsystems.

In this process, leadership roles change. “A leader becomes the architect of the system, whose main function will be to design and ensure its correct design. All the subsystems must be aligned and push forward in the same direction,” argues Correa.

One should also remember that a company’s culture must lie at the heart of this organisational model. The implication is that the cultural subsystem is the result of the other subsystems.

Although it might seem contradictory, an organisation’s culture does not change through efforts to modify it directly, because such change is the consequence of the different subsystems that yield this culture.

Executives in leadership roles must be competent in technology

“When a cultural change process is to be implemented, as many subsystems as possible must be modified – the more the better – for the result to be a really different culture,” Correa summarises.

In short, going through the phases of digital transformation involves designing a system that incorporates the following key aspects:

1. Keeping abreast of the latest technologies (current and future) that are relevant to the organisation. Managers need to be technologically proficient, as technology decisions will have a direct impact on financial results.
2. Create new processes that enable the rapid adoption of skills to leverage the value that technologies can bring to the organisation. Exponential times require establishing mechanisms that help organisations accelerate their digital transformation processes.
3. Build new organisational structures that drive systemic and cultural changes aimed at increasing the success of digital transformation initiatives. The acquisition of new skills should be embedded in the organisational culture of companies, and change processes should be coherent with the different organisational subsystems.
4. Incorporate the right tools for digital transformation to enable companies to move forward in a sustainable way.

6 key concepts to reduce skills acquisition time

When implementing a digital transformation plan in companies, optimising the skills acquisition process is very important when it comes to adapting to a changing environment. This model structures the learning path, accelerates training experiences and promotes active emotional immersion, reducing the time needed for qualification.

The monitoring and skills ecosystem allows for a more efficient and aligned development with the objectives of the digital transformation, as we can see in the following image.
 

Organisational system in digitisation and digital transformation

Digital transformation in companies also means an evolution in their organisational system. Organisational culture is the result of the interaction between people, behaviours and relationships, reward systems, technology, structure and strategy, which are among the key elements for digitalisation.

This can be seen more graphically below:
 

Such a digital transformation in companies is not just about technology, but a strategic change that encompasses processes, skills and organisational culture. Overcoming its challenges and adopting its key pillars enables companies to become more efficient, innovative and competitive. Those that integrate digitalisation effectively will definitely be better prepared for the future.