In late 2007, a couple of youngsters Brian Chesky and Joe Gebbia moved from New York to San Francisco. Struggling to make rent, they put out air mattresses in their living room and turned it into a bed and breakfast. It seemed like a good idea since there was a local Industrial Design conference and all hotels were booked. They called it “Air Bed and Breakfast” and charged $80 a night to each of their first 3 customers. A few rather unusual pivots (they built a site called SXSW that fell flat and sold cereal) and funding rounds later, they renamed the company to Airbnb.com. The rest – as they say – is history.
Saying that Airbnb has taken the accommodation industry by storm would be a massive understatement. Today, Airbnb has more listings than the 5 biggest hotel chains put together.
Sounds simple enough, right? You take an industry that hasn’t had any fundamental changes for decades, you make it digital, affordable and accessible, and *bam* you’ve blown up your Total Addressable Market (TAM) to pretty much anyone who has an internet connection.
It is simple, but far from easy. It was nothing short of a battle for Chesky, Gebbia and Nathan Blecharczyk (who joined later as the CTO). And for businesses already in existence for a while, it’s even harder.
The challenge with Digital Transformation
We’ve seen stories similar to Airbnb in other industries as well. Uber revolutionized how we commute, Instagram revolutionized how we share our life with others. But how do you successfully implement digital transformation in a legacy company, particularly if it involves a radical change to the way things have always been done?
Technology aside, the challenge here is two-fold – You need to change how the company is perceived externally and you need to change what the company stands for internally.
For businesses that have been in operation for over a few years, the former is comparatively easy. There have been cases where established companies changed their approach to a digital one and skyrocketed their growth. Amazon is a classic example. You could argue that that’s because Jeff Bezos is a visionary who understood the scope of the internet when others were skeptical, even wary. But more recently, we’ve also seen digital transformation being carried out successfully at companies like Connex Credit Union, Domino’s Pizza, StubHub, and Sprint.
Oftentimes, it requires changing the messaging and mission statement and the CMO usually takes the lead. That requires a series of highly publicized PR and marketing campaigns.
Why Digital Transformation fails for legacy businesses
Let’s look at how businesses usually look at digital transformation. They realize the need for aligning with IT and start including the CIO in board meetings. The technology side of the transformation is led by CIOs and IT leaders (and in some cases the CTO or a Chief Digital Officer). The key areas they look to transform are:
- Products and Services
- Customer Experience
- In some cases, they even suggest overhauling the Business Model
But by far, the most challenging element of digital transformation in established organizations is culture. It’s also the most overlooked.
Solving problems like technology, talent, and business model will only take you so far. At the end of the day, it’s the people who need to come together, adopt, and embody the transformation. This requires a change of mindset.
Implementing an org-wide change is almost always met with resistance. According to a 2017 CIO survey conducted by Harvey Nash and KPMG, 43% CIOs cited this resistance to change as the biggest impediment to a successful digital strategy. The reason is simple. Changing the DNA of a business (especially one that’s been around for decades) and its people, is not easy.
What CIOs can do to bridge the culture gap
With their understanding of technology, CIOs already have an upper hand. Plus, they’re the most adept at change since the technology world undergoes more transformation than other LOBs like marketing and finance. They’re also familiar with the process of continual improvement which is an important part of digital transformation, unlike what people generally think.
Assuming that your IT operations has moved beyond day-to-day firefighting onto strategic planning, and assuming that you’re leveraging options like self-service and automation, you already have a head-start. Here are a few things you can do to translate all this to the transformation of the business:
1. Start small and demonstrate success early
Before you take the giant leap, pick an aspect of the business that needs to be fixed first. Once you accomplish that, be sure to communicate the success story to employees. Let’s face it – stories of success don’t sell themselves, unlike failure. While telling the story, resist the temptation to cram it with technical jargon and metrics. Use data in the end if you’d like to quantify success and drive home the message, but overall, keep the language simple and the narrative chronological. This will instill trust in employees on the IT organization’s ability to manage, plan, and solve problems effectively.
2. Communicate the why
Once you’ve built trust and are ready for the big project, communicate why it’s required, and why now is the right time. More often than not, this is the easiest. Perhaps the company is incurring huge losses, facing investor pressure, or rising competition. Generally, employees have a fair idea of whatever it is that’s triggering the change. It still helps if it’s officially communicated to them, so they’re prepared for the mindset change you’ll need down the line. Remember, it’s more about business transformation than digital transformation. Be as clear and direct about the reason behind the decision as possible.
3. Communicate the what and the how
This is where you communicate the actual strategy. Again, clarity is key. The clearer your message, the less the inertia. Get them to focus on exactly what’s going to change and how you’ll go about it on a high level. Give them a reasonable timeline and share high-level updates on the progress and milestones throughout. It’s important to communicate extensively or daily work will take precedence and the transformation project will just fall through the cracks.
4. Be more visible and approachable
For people to be involved throughout, leadership needs to get a lot closer to them. Of course, this is not restricted to the CIO or the IT organization. The CEO, in particular, needs to endorse the change and other LOB heads need to work with their respective teams. CXOs and senior management should open up to the staff, encourage and answer questions and address any concerns they might have. Take a more informal approach to management, so employees feel comfortable raising concerns in the first place and eventually feel closer to the decision to transform.
5. Encourage collaboration and break down silos
Finally, business transformation requires everyone to come together for a common cause. Create an environment of collaboration, knowledge sharing, and mutual trust within LOBs. Build central repositories that can work as the single source of truth across LOBs and keep it updated.
Digital transformation is just one aspect of the overall business transformation. And it doesn’t stop at executing just this one project – it’s a continuous process rather than the end goal. But as we move through the journey of constant transformation and improvement, let’s not forget that it’s the people who we’re taking the journey with. And it’s the people who, knowingly or unknowingly, decide whether it’s going to be an uphill battle or a runaway success.
Hope you enjoyed reading the article. If you did, check out some of these other articles that talk about the role of culture in a successful digital transformation effort:
Culture, Ethics, and Behavior – Why Are We Still Struggling? by Paul Wilkinson
Digital transformation: The three steps to success by James Bilefield
16 real-world digital transformation success stories by Clint Boulton
Why 84% Of Companies Fail At Digital Transformation by Bruce Rogers
What has your experience with digital transformation been like? Let me know in the comments below – particularly if you disagree with what you just read, let’s talk 🙂