By clinging to old structures and the fear of change, there are clear winners and losers on the way to the digital age. And those who adapt too late to new trends will eventually make themselves redundant.

The fact that this change is more challenging for some companies than for others is also due to a misunderstanding of the digital business transformation. After all, those who think primarily in terms of IT solutions, quickly find themselves in a dead-end. A decisive key is a culture of innovation throughout the company and a corresponding mindset at all management levels.


Soft factors slow down change

But cultural change means changing behaviour and this is often difficult to implement. Overly human behaviour such as sticking to tried and tested working methods, deadlocked hierarchies, management’s self-image and the unpleasant confrontation with one’s own regression – all these factors slow down the necessary change.

“The soft factors are the biggest obstacles to digital transformation,” states the recently published third study of the Digital Transformer of the Year (DTOY) initiative in Germany. These include, for example, a hierarchical management style, a lack of diversity and an increasingly visible bottleneck among digital professionals.

Dr. Katja Nettesheim, Professor of Digital Management and Transformation at the School of Management + Innovation at Steinbeis University Berlin and founder of the initiative, is convinced that the “digital transformation must take effect in several areas of a company in order to take place at all.” She says it is about products and business models as well as methods, know-how, mentality and technology.


Offering customers innovative solutions

The expert, therefore, recommends as a holistic approach to successful change a “digital transformation triangle” consisting of continuous customer orientation, efficient data use and the ability to handle the latest technologies. All three elements are based on knowledge and culture as decisive factors.

“Culture is one of the biggest barriers to scaling digital transformation”, says Mark Raskino, an analyst at the consulting firm Gartner. At the Gartner IT Symposium/Xpo in Barcelona last year, he listed nine typical errors in digital change. Such as the blind focus on technology. “Digital Business Transformation is never just doing the next big thing”, he warned. Instead, companies should focus on reinventing their industry with a collection of technological tools to invent solutions to do things nobody could do before. His advice: “Aim at unmet needs – the needs of the market and customers that your industry has never served before”.

In this case “lean startup thinking” is the right approach. “This process aims to quickly and iteratively build innovation to become a minimum viable product that can be released to the customer, and then through feedback, it continues to evolve the innovation.” The analyst also cited the following error in digital change “too much inward thinking“: „Organizations too often focus on themselves and what they want to do rather than analyzing customer needs, the opportunities those present and a fully competitive market view for examples and learnings.”

Raskino said this type of thinking is presuming that digital change is just another operating model change and that is not the case. “An operating model focus does not consider the overall market. It focuses primarily on efficiency and effectiveness. A business model focus considers the market and how it is monetized. An outside-in perspective is what most successful digital transformation projects hinge on,” he emphasized.


Employees are the key success factor

“The winners of the digital transformation will be those who establish paradigm shifts in their own companies as standard and continually create new business models,” according to the Deloitte Digital study “Survival through Digital Leadership”. CEOs should be aware that digitalization will lead to significant changes. Above all, however, they should be aware of the effects on their own business model, define the necessary measures for transformation and establish constant change and innovation in the company.

From this, the consultants derive a four-phase model consisting of awareness, realization, transformation and constant innovation. While the first three phases ensure the survival of the company, the last one is necessary to generate sustainable value in the future. “Given that technology, cycles are becoming shorter and shorter, companies today only have a two to five-year time frame for transformation,” the consultants estimate.

This, they say, is different from the industries where change has already begun earlier. Such as in the media and retail sectors, for example, which have had five to ten years to adapt to digitization. “In all four phases, employees are the key success factor,” the study concludes. To enable constant change and innovation in the future, the corporate culture must first undergo a fundamental change. Everything else comes after that.

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