Putting digital transformation in its place
Most transformation projects fall flat, with organisations failing to get projected returns on expensive investments. What is the key to digital transformation?
At the start of the COVID-19 pandemic, digital transformation was the key to survival for businesses. Driven by lockdowns and social distancing, services and operations went digital overnight.
The pace of change was so rapid that companies accelerated the digitisation of their customer and supply chain interactions and internal operations by three to four years in 2020, according to a McKinsey & Company report. The share of digitally-enabled products companies offered accelerated by a staggering seven years.
However, it is well-known that most transformation projects fail, with organisations failing to get projected returns on expensive investments. Previous McKinsey research shows that 70% of all large-scale transformation initiatives do not succeed, while organisations are receiving less than a third of the impact they expect from digital investments. So what are we getting wrong about digital transformation?
Process, not intervention
“The digital economy will not only change the way we work, but also the way we learn, innovate and collaborate with each other. Therefore, digital transformation goes beyond the implementation of technologies. It requires a new mindset and culture to embrace change and experiment while adopting digital technologies,” says Myrna Flores, executive director at the Centre for Digital Transformation, Imperial College Business School.
The Oxford Dictionary defines transformation as ‘a marked change in form, nature or appearance’. It describes something finite, radical and instantaneous, promising a result but ignoring the process. However, successful digital transformation is as much about an ongoing, evolving digital strategy as it is implementing new technology.
“Although the use of digital technologies promises high investment returns and an impact on productivity, its success depends on a number of factors,” agrees Flores, who has worked on digital innovation with organisations like Rolls-Royce, General Electric and Nestlé over her career.
“Businesses need to implement a digital strategy with clear goals, driven by strong leadership. They need to upskill their workforce to ensure they have the skills to test and adapt to new technologies. They also need to develop a roadmap by executing pilot projects to improve operations and increase customer loyalty through designing new products, services and experience,” she adds.
Eric van Heck is professor of information management and markets at Rotterdam School of Management, Erasmus University. He agrees with Flores that digital transformation is more than just buying new technology and expecting results.
“Digital transformation is in essence a business transformation, but most companies are not designed to be digital. They need to remove the barriers that hold them back and rethink their digital value offerings to customers and operations,” says van Heck.
Four routes to digital transformation
Doing so requires an organisation to identify the correct pathway to digitally transform. However, all businesses are built differently, so what works for one may not work for another.
van Heck cites the work of a group of MIT Sloan School researchers, who have studied data on thousands of companies to identify four key pathways to successful digital transformation.
In their book Future Ready: The Four Pathways to Capturing Digital Value, researchers Stephanie Woerner, Peter Weill and Ina Sebastien examine barriers like internal limitations, corporate culture and leadership mindsets before positing four routes.
The first option is to digitise first and worry about customer experience later. This route is often chosen by firms with an existing excellent customer experience, who want to rush through digital products. The second option takes the opposite route, with a focus on customer experience over digital transformation. This route is best taken by those worried about competitors, as it encourages customers to feedback on digital experience and the change process.
Third is trying to alternate between digitisation and customer experience in a stair-step style. This route is best for businesses who want to develop both organisational efficiency and customer experience in tandem. Finally comes the nuclear option - simply creating a whole new digital-native business unit, leaving the existing business as it is.
The researchers argue that organisations who successfully move forward with their transformation efforts - regardless of approach - have some traits in common. These include developing a more egalitarian, softer leadership approach than traditional command and control; focusing on cross-product digital integration; and promoting innovation across all levels of the business.
In addition, van Heck argues that going through the process of digital transformation can also help businesses understand how to redesign other elements of their structure, such as sustainability or environmental goals.
“Some companies are linking digital transformation to how to move from a linear to circular business design, such as the ability to reduce, recycle and redesign inputs for a more sustainable, less polluting business footprint, including targets around net zero,” he says.
Ultimately, a successful digital transformation project is about more than just the technology you implement. It requires strong leadership, a vision and strategy, ongoing culture building and the retraining and upgrading of existing employee skillsets.
Above all, it’s about having a clear vision around the purpose of the transformation and an alignment on how employees will help the business achieve it. Without the right culture and vision to take employees with you, digital transformation projects are destined to fail as expensive technological investments meet resistance and are not utilised effectively.
“Digital transformation can improve internal operations, automate processes and redesign existing business models to deliver better products, services and customer experience,” says Flores.
“However, digital transformation is a journey, not a destination. To be successful, it requires ongoing effort that will pay off in the medium to long term,” she adds.
Hybrid working – out of sight, out of mind?
Companies are still experimenting with ways to get flexible working right – and for a seamless employee experience, they first need to focus on technology choices that are human-centric
Flexible working helps businesses to unlock significant financial gains resulting from higher productivity, and at the same time creating a happier and more fulfilled workforce – and many jobseekers will discount an employer that doesn’t offer the option to work from home, in the office, or from elsewhere.
“Employees expect it, and we will not attract and retain the right kind of people if we don't allow more flexibility,” says Ricoh Europe’s chief executive Nicola Downing. “The pandemic had many negatives. But this is one of the positives: we put a much bigger focus on two-way communication, there was a mindset shift from both a management and an employee level, which resulted in greater trust, productivity and ultimately fulfilment. Now, I think I have an opportunity to build on that,” she adds.
Research from Ricoh reveals that employees are, on average, 4% more productive when working in a hybrid way, and, given that only 53% of businesses in the UK and countries in Europe allow staff to work like this, the economy is missing out on a potential €113 billion, the study found.
“The way we think about office space has shifted as hybrid working has become the norm. There are options to re-design our existing spaces, potentially reducing footprint, and re-investing in workspaces which better support employee experience and collaboration. If you don’t engage in the benefits of flexible working, you absolutely will miss growth opportunities,” Downing says.
There is a clear appetite among staff to work together in person for particular occasions. “Our research showed that 75% of people still want to learn and train with other people,” Downing says. “At the more junior end of the workforce, where you're bringing in graduates or people who are starting their careers, if they’re not absorbing your business and your culture, then it's really difficult. So, people really benefit from being in the office for those kinds of reasons,” she says.
Get the tech right
But, as people return to the office for part of the week, some are finding equipment lacking or meeting rooms unavailable. Almost a quarter (23%) of 3,000 office workers surveyed by Opinium for Ricoh said the amount of collaboration space in their office had decreased, while less than half (45%) said they had seen an increase in meeting room communication technology to aid hybrid working.
“One of the biggest challenges is technology,” says Downing. “People are quite happy to come into the office, if there's a purpose to doing it - and if everything works.” At home, most people are well set-up with decent Wi-Fi connections, but things can be more complex on a company’s premises, she adds.
“You’ve got to get your tech right. For large corporations like Ricoh and many of our customers, that is quite challenging, because there's a lot of different parts to that tech stack,” Downing says.
Many businesses simply have “too much technology,” Downing says. “Leaders have got to approach technology in a human-centric way - that is, from an employee perspective and a customer experience perspective. And if it doesn't tick one of those two boxes, you just don't do it.”
Make it easy
Ricoh still makes about half of its revenue from its original printing business, and during the pandemic it had to pivot – like many firms – rapidly growing services such as room booking apps to its broad digital workspace portfolio. “One of the things that’s clear is that technology has to be simple. You need a single sign on, and you need to be able to access your work apps like you would do in your personal life,” Downing says.
At Ricoh, this means a single app lets employees book parking and equipment along with their meeting room. “It is about knitting everything together and trying to have a one stop seamless experience for your employees,” Downing says.
Technology has also allowed employees to communicate more effectively and engage with their company’s leadership, Downing says. For example, during monthly online town hall meetings, participants can ask any question anonymously – and they do take that opportunity to raise all sorts of topics for discussion. At Ricoh’s in-person all-staff meetings before the pandemic there might have been one or two questions, but online there might be 50 to 100. “As a leader, this is such a positive, since you get to hear what’s going on in your organisation and what really matters to employees,” Downing says.
Ricoh’s customers are increasingly outsourcing all their tech needs to the company, or having it manage their existing equipment and services. “We've become more of a workspace integrator, where people are saying to us: ‘Just make the office and our employees flexible work experience function seamlessly and effectively,’ Downing explains.
With technology so important in elevating the experience of employees, it’s a crucial focus for businesses in creating happier and more productive workforces.
What does digital maturity look like?
Ricoh's Digital Services Maturity Indicator reviews a business’s current capabilities in digital workspace, business process management, cloud and infrastructure, cybersecurity and digital experience
Digital maturity is a key predictor of an organisation’s ability to succeed at digital transformation. But exactly what is it and how can it help in practice?
One business leader with a deep understanding of digital maturity is Ricoh Northern Europe CEO Phil Keoghan. Post-pandemic, his organisation has continued to focus on developing its digital services offering, guiding Ricoh’s customers through digital transformation programmes.
It also launched its free digital transformation tool the Digital Services Maturity Indicator (DSMI) in 2022, which reviews a business’s current capabilities in five key areas - digital workspace, business process management, cloud and infrastructure, cybersecurity and digital experience. Recommendations are then made on how to improve digital strategies.
“Digital maturity is about taking your organisation on a journey and making it fit for purpose for years to come. It’s an ongoing process that requires a clear strategy to create a more secure, efficient and resilient workplace, with engaged employees who gain fulfilment through their work,” says Keoghan.
“Digital transformation can be such a broad topic, touching on every element of an organisation. If leaders are not crystal clear on their focus areas, their objectives and knowing exactly how they will measure improvement, it can be very difficult to implement and demonstrate success,” he adds.
The pace of technological change is such that it can be hard for organisations to keep up with digital innovation. Often, the risk is that businesses think of digital transformation as a finite action - buying new software, training employees on new technology, rather than an ongoing process. “People should always remain the driving factor, your ESG agenda should be embedded in your strategic direction to ensure any transformation is effective and sustainable at all levels.” states Keoghan. Understanding your digital maturity and where you sit in that process is key to success.
One organisation taking advantage of the impact of technological change is integrated facilities management provider Sodexo. It worked with Ricoh on wholesale digital transformation across its workflow and processes.
A key element of this was the redesign and technological upgrade of Sodexo’s UK headquarters in London, moving away from a traditional office space to one that encourages collaboration, improves employee experience and accommodates new working patterns.
“Given the industry we operate in, we know the importance of building an office environment employees can thrive in. Pre-COVID, we could already see that people were beginning to use the space differently and that occupancy was declining, so we knew we had to do something,” says Julie Ennis, CEO corporate services at Sodexo UK & Ireland.
Sodexo brought in specialists including Ricoh to work with employees on understanding how they used the existing office space and potential use cases for the future. Through this, it became clear that the office needed to be redesigned for collaboration and creativity, rather than as a formal workspace. It also provided an opportunity to introduce new technology and digital solutions to improve employee experience and record data on people flow, room occupancy and even air quality.
“We analysed our existing space, identified the technology we wanted to bring in, used our values to build it and then brought in partners like Ricoh to help us deliver on that vision,” says Ennis.
Sodexo completed the office transformation in early 2022, reducing the number of desks from more than 200 to 22 and growing its meeting spaces, with new areas for collaboration including sofa spaces and private meeting rooms. It drastically reduced its office footprint and early results are encouraging with occupancy growing from 35% at the start of the project to above 70% now. Employee satisfaction is also high, sitting at 4.8 out of five, according to Ennis.
Any transformation project will face challenges and adjustments along the way, but success requires two key pillars.
First is engaging your people and taking them with you on the change journey. Sodexo ensured that those who used the office the most were consulted on changes and made part of the journey.
“If you don’t engage with your people on a change process, you risk poor adoption or losing employees, especially with technology. If you have a lot of new technology and people don’t know how to use it, it can cause frustration. We did a huge amount of communication in advance and were very clear about what we were trying to achieve. People need to be part of the journey, not have it done to them,” says Ennis.
Second is ensuring that any transformation is an ongoing process - particularly important when introducing new technology.
“Our relationship with Ricoh is still very strong and we monitor the applications we’ve introduced and how people are using them. We’re constantly iterating, as the last thing we want to do is leave it for ten years and have to do it all over again,” adds Ennis.
Data maturity boosts productivity and adaptability
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How to measure your company’s digital services maturity
Digital transformation is an ongoing process – and understanding where your business sits on this journey is key to success
From artificial intelligence and automation to digital services and product development, the impact of technology on the world of work is forcing organisations to transform their business practices at a rapid pace.
Yet digital transformations are difficult to accomplish, with almost three-quarters failing at the first attempt to deliver on desired goals, according to research by McKinsey & Co.
Too many companies see digital transformation as a finite project with a beginning and an end, rather than as an ongoing process - and understanding where your business sits on this journey is key to succeeding, argues Glenn Griggs, CEO of Ricoh UK.
Measuring digital maturity
“It used to be that ‘being digital’ was a competitive edge, but now it is table stakes. To not be digitally mature, or at least be actively on that journey, is to risk organisational failure,” says Griggs.
Digital maturity is a term used to describe an organisation’s ability to respond and adapt to technological trends. As an ongoing process, it requires businesses to be adaptable and agile, with end results not always defined. Consequently, it can be hard for business leaders to understand where their organisation sits in the process.
“Understanding where your business is on its unique digital maturity journey should be a real, tangible measure. Assessing digital maturity and taking action to improve is about resilience, agility, security and even long-term survival,” says Griggs.
To help companies achieve this, Ricoh has launched a bespoke online tool to determine where a business sits on the digital maturity scale. Called the Digital Services Maturity Indicator (DSMI), the tool provides an organisational score for five key areas of business - process management, cloud and infrastructure, cybersecurity, digital workspace and experience.
Once an organisation’s data is processed, they receive a tailored report identifying priority areas for investment. These could include opportunities for re-engaging digital transformation, enabling hybrid working and the optimisation of critical operations.
People and technology
Using Ricoh’s DSMI tool to understand where to focus interventions is a vital element of successful digital transformation, but another is ensuring your people are bought into your digital strategy. Without clear communication, objectives and a long-term strategy, most organisational shifts will fail.
“When we break it down, people become the driving force to the adoption of new technology. Not having people fully on board at all levels of the business will leave an organisation inflexible in the face of change,” says Griggs.
“A strong focus on diversity, equity, and inclusion supports this approach - creating a fairer and more equitable workplace – in turn brings myriad benefits, for your people, and your business in terms of competitiveness, and the ability to fully embrace and achieve successful transformation.” states Griggs.
“We’re hard-wired as people to resist change. It’s in our DNA. So, employee buy-in and adoption are critical to the success of any digital project. You need a clear view of how your people are feeling, how they work, the daily challenges they face and their perspective on technology,” he adds.
Despite this, most employees understand that change is coming. A recent Ricoh study found that 65% of UK workers would welcome some element of artificial intelligence or automation into their role, believing that the digitisation of manual processes would allow them to work more efficiently.
At its heart, this is about communication and engagement. Leaders need to regularly talk to their people, asking their opinions and allowing them to influence decision-making on what technology to adopt, based on what they need for their workplaces. Success is also about providing employees with the right skillset to work through digital transformation, including on-going training and development on new technologies - particularly important given the pace of technological evolution.
Griggs believes that embedding digital maturity into an organisation can help mitigate this challenge.
“Investing in the latest technology will not deliver success unless companies have the right mix of people and skillsets to deploy and embrace it,” he says.
“The technology we invest in today should be an extension of your people and vice-versa. Both need two key characteristics: agility and flexibility. As our workplaces and the technology that drives them evolve at a rate never seen before, our people will have to continue to adapt the way they work,” he adds.
To succeed in the long-run, businesses will need to continuously challenge ways of working, understand how technology can disrupt and influence strategy and adapt to these interventions. In short, they will need to understand their own digital maturity.
“We don’t know what work will look or feel like in the future. But we do know that organisations that put their digital strategy at the heart of what they do will be better prepared for the challenges and expectations of tomorrow,” says Griggs.