Digital transformation is so much more than an efficiency tool, potentially fuelling future success. Why do so many companies stick to the slow lane when reimagining their digital pathways?
A 2021/22 report by Baker McKenzie found that only 8% of businesses use digital transformation to change business models, with 69% limiting it to improve process efficiency. But, done right, it can be the rocket under your company.
One year into its business, language-learning app Babbel decided to rewrite its free product by transforming it into a premium service.
“The engineers had built a free vocabulary trainer and given it a user-friendly interface,” says Markus Witte, the app’s co-founder. “But that interface taught us two things. That you would never learn a language from it. And you would never make money from it. The site looked great and was technically sound, but we soon realised we had to transform the product and culture.”
To truly bake language learning into the digital product, Babbel began an employment drive and hired more of those with on-the-ground experience in learning languages who could input on the digital side. Additionally, an emboldened way of thinking helped delegate and motivate staff during and beyond the transformation. “We banned the concept of asking your boss because we found that stopped people from taking responsibility and slowed change,” Witte says. The bold move worked, with the new version helping them sell more than 10 million subscriptions.
Transformation is about more than applying willpower. There are issues surrounding time, money and staffing. A recent US-European survey by Couchbase pointed to many of the hurdles ahead for senior IT decision-makers looking to transform. Sixty-one per cent of those surveyed said they found past technology decisions made new transformation projects more difficult, in particular: poor cloud infrastructure (48%); the complexity of implementing technologies (experienced by 31%), and reliance on legacy technology (28%).
Beyond that, the biggest block to an ambitious digital transformation is culture. An element of digital transformation that Babbel got right – but which is often overlooked – was winning hearts and minds, says Mat Rule, CEO and founder of UK software company Toca, which solves complex enterprise development challenges for large firms. “Digital transformation projects fail because workers are working with one hand tied behind their backs, being asked to deliver the impossible, within very tight budgets, while being understaffed.
“Added to this, your transition can be hampered by data silos, a shortage of skills and legacy technologies. The initial vision is then compromised, delayed and ROI is depleted,” he says.
Many firms also shy from digital transformation and progress in small, manageable parts that won’t disrupt the business and reduce cost and risk, says Helen Ashton, CEO of transformational consultancy Shape Beyond and who has overseen digital transformations at Asos and in private-equity portfolio businesses.
“That way, even if it doesn’t go to plan, it will never be classed as a failure, just a learning for next time. This business almost doesn’t recognise this as digital transformation, just everyday entrepreneurial growth and therein lies its success. It’s when programmes are costly and never-ending that disappointment is inevitable,” she says.
The final barrier is that many businesses don’t know what their transformation should look like, so are permanently left at base camp when it comes to positive, ambitious change. WalkMe, a digital adoption platform provider, spoke to 1,400 global decision-makers and found that enterprises wasted $16.6m (£12.76m) on digital transformation in 2021 because people didn’t use technology as expected.
A ground-breaking digital transformation for your firm should look to unify the three key areas of user journeys, Rule says. These are the digital door (where users meet your product – such as a site or app); information-gathering (how your business collects the most useful data) and the conductor (how automation uses this data to enhance user experience, for example by offering relevant goods or promotions).
Businesses don’t always have this clarity when they start on the transformation journey. Many companies find it difficult to articulate what it entails and where to start, Ashton says. But a well-executed transformation can lead to huge wins.
“Digital transformation shouldn’t just be about driving efficiency and reducing cost in a business,” she says. “It can, more excitingly, be a key lever to protect and generate revenue through enhanced customer experience and engagement. It can expose bottlenecks and show what customers want from your product.”
Surprise wins could include improved customer experience, employee experience, cost-reduction, product development, and speed of delivery. All of these things rapidly deliver business value and, if successful, pilot wider adoption.
This breathes confidence into the business and generates a culture of bravery and ownership, she says, as seen in Babbel’s introduction of encouraging staff to take responsibility.
“When we launched, we had fewer than 10 people. Now we have a staff of 750,” says Witte. “The hard part was getting everyone to think one way and embrace it but the model we created endures to this day.”
The success of Babbel’s digital transformation lay in applying a democratic and transparent assessment of its product and systems, which proved pivotal in growing the company globally. Many others will look to follow its example.