What is digital transformation?

Well, digital transformation is not an easy concept to get a hold of. You see, it’s what you would call multifaceted; it has a lot of different sides to it. But broadly speaking, digital transformation is a way of enabling companies to use digital technologies with the aim to improve their business processes and their results. However, it’s not just about digital technologies. People tend to think that when we talk about digital transformation, we only mean applying technology to our business activities. And while that is an inherent and very important consideration, it is only part of the equation.

Looking at the big picture, digital transformation is just as much about the people working at a company and changing the way they approach business problems or finding solutions to different problems. To succeed with a transformation such as this, companies need to commit themselves to a sort of shift in mindset.

Mindset shift

Many companies forget to address the need for this mindset change within their decision-makers and other employees, but without it, no digital transformation project is ever going to succeed. People trapped in a ‘fixed’ mindset can slow down, or even worse, completely wreck the business transformation initiatives of their company. Okay, but what should the new mindset look like? 

Digital agility

Well, it should be based on agility. Agility, as they would put it in textbooks, is ‘the ability to move quickly and easily’. From a digital transformation point of view, the agile mindset can mean different things for different people. However, if you dive deeper, you will see that all of these have some core elements in common. These are 4 principles that one should keep in mind:

1. The willingness to let go of what is currently working

Sounds simple, but for many companies, this is something they wouldn't do. Let me share some examples. First, let’s start with 2 lessons from history. Blockbuster and Kodak. While they represent two different industries, one thing is common. How they failed when everything was looking fine. Both companies had very strong business models that were generating steady revenues and growth. Yet, this was also their Achilles heel. As their core business looked healthy, they were too comfortable to adapt strategically and focus on alternative revenue models, even though Blockbuster had streaming technology long before Netflix, and Kodak was the inventor of digital cameras long before digital cameras started to get popular. They both failed because they were unable to let go at the right time of what was working for them.

On the opposite end, we can see many cases that should inspire us all. Brands like TransferWise, UiPath, or Netflix are great examples. Most of the time people just nod and think, "Well, it was easy for them." I don’t agree with this mindset; nonetheless, let me give you some examples that show that even small companies are able to change from their traditional business model to digital. Let’s take a look at a Hungarian baker, Szabadfi Szabolcs, whose restaurant was forced to close during the lockdown in spring. Instead of being just another face in the crowd of complainers, he took action and started creating online training sessions about baking sourdough bread. His videos helped him not only to engage with thousands of people but also to position him as a thought leader in the Hungarian bakery industry. Do you think this is a special European behavior? For sure it’s not. If we jump to Asian markets, we see similar endeavors. Chinese farmers during lockdown started streaming videos about how they work, showcasing an authentic view of their work experience on their farms. This not only built further trust in their products but also started a new social sales channel for them. 

2. Embracing failure

The thing is that when you start a digital transformation, failure is inevitable. But if we define failure as a lesson learned, or in a digital way, a pattern that doesn’t bring the desired results, we are already on the right side. When people see digital success, let’s say they see a startup reach billions in revenue, they usually just see the tip of the iceberg. What lies behind is typically a series of attempts that kept pushing forward the business model for several years. It’s very important that we be aware that not even digital-first companies, like Uber, Spotify, or Waze, succeed at their first try. Why, you might ask? Because digital is changing so fast that it is almost impossible to catch the right growth wave from the first surf.

3. An empathic posture with a touch of curiosity 

Agility is only possible when you leave your ego outside the meeting room. It’s not about who is right; it's about finding the path of growth, which can sometimes come from new places or new people. While this looks like a no-brainer, I was amazed to experience the opposite as well. Let me share an example where the lack of an empathic posture turned off any potential for digital transformation. This happened 3 years ago. We were invited to hold a digital transformation workshop for a business that was founded in the late 1980s. While it looked like they showed willingness to learn from our hands-on experience with digital, the workshop turned into a very confusing debate. Key decision-makers from the company's board were counterattacking every potential strategy and even example use cases, as it was their personal vendetta to defend their own traditional business models. So basically they expected that they could keep all their existing business models and turn digital without any change. It was their way or no way at all. They couldn’t have been further from an agile mindset.

Final Reflection

Digital transformation starts with technology but only succeeds with people. Companies that embrace agility, allow room for failure, and lead with empathy are the ones that don’t just survive disruption; they shape the future.