Governing successful digital transformations

In the final article of this series on digital strategy and organizational transformation, we will see how setting up standardized governance principles and mechanisms is important for a successful digital transformation.

For a successful digital model reinvention, there must be a sound governance mechanism in place for the chief digital officers (CDOs) to constantly track the progress of the transformation journey, and make amendments whenever necessary. Digital assets and solutions are accelerating the performance and capabilities of businesses with each passing day, thereby making it difficult for many organizations to keep up with the new pace. The way organizations have traditionally consumed and created value is evolving at a fast pace, and hence it’s imperative for organizations to adapt their organizational models equally as fast – if not faster – to gain that strategic advantage.

Why is a chief digital office important?

The primary role of the CDO is to let go of control measures and expedite the decision-making process to maintain agility. Whenever a decision turns out not to be the most optimal choice, tweaks can be made accordingly. Additionally, the CDO should be quick in identifying new technologies that are relevant to his or her organization. The CDO must be then able to convince the top management as to why these technologies are relevant, and should be able to capitalize on such opportunities, thus shaping the vision and the implementation of the associated digital transformation. Most importantly, the CDO should allow his or her employees to optimally accelerate this digital transformation, and position employees with the right skillsets in the right places in the firm.

Some CDOs often termed as “Visionary,” outline the vision and mission, ensure that there is a clear focus and commitment throughout the organization, determine the applicability of new ideas, and identify which competencies are required for implementation.
Some CDOs, transform ideas into opportunities in the market, and are often known as “Entrepreneurs.” These leaders are good at understanding the business models that are most relevant to the organization, and are aware of digital threats and opportunities.
Some CDOs are adept in formalizing frameworks, prioritizing initiatives, and establishing principles. These CDOs are known as “Architects,” and typically look at the external environment to identify whether entering into certain ventures and partnerships can accelerate their digitization growth and enrich their products or services.
Finally, there are CDOs who are more implementation-focused, and pay more attention to making the ideas tangible, as well as realizing them faster, better, and cheaper in an agile manner. These leaders are mostly known as “Voyagers,” and ensure that the digital roadmap is implemented diligently.

On a broad level, CDOs are enforce governance frameworks for any organization embarking on a digital transformation journey in two ways: a top-down and a bottom-up approach.

TOP-DOWN APPROACH

STEERING COMMITTEES across different business units can form an integral part of the governance mechanism. These committees are ideally led by leaders from different SBUs as it serves dual purpose:

Signaling change and a willingness to reinvent the organization
Leadership team also provides the confidence to experiment while at the same time reallocating resources from running the business to transforming the business.

Steering committees can help in, but not limited to the following objectives:

Prioritize and fund digital initiatives despite unclear business goals sometimes, in order to venture into new space
Allocate resources judiciously across multiple digital initiatives and BUs, and track ROI and benefits consistently, to tweak investments as and when necessary
Enforce policies to ensure regulatory compliance among employees, and ensure faster realization of digital transformation
Implement rules that should be adopted internally to ensure adherence to the digital roadmap, maintain business continuity, and ensure a consistent customer experience
Define guidelines to decide upon what initiatives or actions should be taken centrally v/s which should be undertaken locally to reap maximum benefits
Constantly examine your digital portfolio to make investment choices, prioritize among competing interests, and implement on tangible ideas.

BOTTOM-UP APPROACH

INNOVATION COMMITTEES are small groups which are tasked with rapid execution of lean digital initiatives. These committees typically try to avoid long drawn-out initiatives that deplete team’s energy and delay the realization of results, and learnings. Innovation committees are a common phenomenon in the governance bodies across organizations to stay ahead of fast-moving digital technologies and business practices.

Organizations often also implement such committees around emerging technology, not only to identify technology-enabled business opportunities, but also to adjust to changing employee or customer behaviors. These committees primarily focus on scaling up digital efforts across the organization.

These committees also aid in designing the governance mechanism, allocate the decision rights, and define the decision-making mechanisms
Innovation committees additionally help in designing the KPI model, derive specific KPIs and check feasibility, and help in target setting, reporting, and KPI review.

In addition to the CDO, steering committees, and innovation committees corporates are defining new niche digital roles to expedite the digital transformation process, and define a robust governance mechanism.

Digital czars

Organizations often have to take governance beyond organizational structures to include specific leaders. These new carved-out roles include “digital czars,” who lead digital transformation at the organizational or business level.

E.g., Starbucks Coffee Company announced the hiring of a CDO, Adam Brotman, reporting to the firm’s CEO. According to Brotman, “[Digital] has been an essential part of how we build our brand and connect with our customers … there’s been such a seismic shift [in our interactions with customers] that we needed to pull it all together and make it a priority.”

Digital liaisons

Some organizations tend to position liaisons in business units to lead digital transformation at a local level. The role of digital liaisons is to aid business units to take the digital dimension into account and second to encourage the use of central resources.

For e.g., Spanish media group Prisa, has assigned CDOs in each division to lead implementation of the digital transformation in their division and to coordinate with the corporate CDO.

Finally, organizations are constantly striving to evaluate and invest resources against competing priorities. Hence, it becomes increasingly important for organizations to reprioritize resources, thereby making budgeting a critical function in your governance model. Tracking progress against desired outcomes and rapid reprioritization of initiatives is imperative for a successful transformation.

Therefore, as a best practice, organizations need to rope in implementation teams and partners from the very beginning into the process of establishing the strategic plan and vision. Leveraging partners and their expertise for identifying the vision state and how to get there, and more importantly, building accountability by having the implementation team defining the measurement framework that will monitor and guide the firm towards success is thus a prerequisite.

Summing up, in this series of blogs, we have seen how customer experience enhancement, employee augmentation, digital workforce and workplace enablement, operational model reinvention strategy, and a sound governance mechanism are all important cornerstones for a successful transformation.

Ludvig Daae is a Digital Strategy and IT Operating Model expert and is head of the Dutch Digital Advisory practice. You can contact him at Ludvig.daae@capgemini.com or +31(0)30-6892760