To Accelerate Digital Transformation, Follow these Tactics

Now more than ever, companies are incorporating digital transformation into their business models. As organizations’ transformations yield advantage and generate growth opportunities, industry participants are challenged to accelerate their own digital initiatives to remain competitive.

Helping management scale and speed up transformation will require your board to adopt new strategies and methods, unbound by legacy assumptions. Adopting a new set of management disciplines and making multiple cycles of innovation come to life at scale will be critical to future-readiness.

Three Tactics to Accelerate Digital Transformation

1. Implement a cloud-based technology model. But don’t stop there. If cloud-based interface designs are constrained by legacy systems, they won’t remain competitive in today’s market. Boards can push management to focus on revolutionizing customer experiences by leveraging today’s digital tools and separating legacy systems from customer-facing digital services on the back end.

2. Create a “digital product factory” with participation from all organizational functions. As a director, you should be asking how management is partnering withlegal, finance, compliance, technology, and other departments to develop specific objectives that will generate revenue growth through digitally enabled products and services. Such partnerships can force the internal functions to figure out what matters most in the digital markets and how to rapidly adjust historical business processes.

3. Be wary of “recreating the wheel.” Scrutinize any leadership priorities associated with homegrown solutions and encourage management to find ecosystem partners who have already built successful process capabilities. Adopting a business model from a partner—especially one whose digital transformation model has demonstrated that it can compete effectively—helps you quickly learn new business processes and the services necessary to support novel customer experience enhancements or commercial models.

One Fortune 100 client of Alvarez & Marsal offers a great example of leveraging ecosystem partners for transformation. After several years of trying to centralize its finance operations (and spending hundreds of millions of dollars in the process), only a small fraction of its 100-plus operational subsidiaries had converted to the centralized platform.

The client went back to the drawing board to define its foundational technology strategy. Instead of reinventing the wheel, it reached out to potential partners and evaluated a number of existing outsourcing and engagement layer tools to augment core systems. The client chose the best options from proven partners and platforms to speed implementation and help standardize processes, allowing internal teams to focus more on analytical work of strategic importance to the business. The new strategy improved the efficiency of the client’s finance operations, saving the company roughly 30 percent annually.

Pitfalls to Avoid

Structuring a digital transformation program using the three tactics above will challenge the old ways of doing things. But boards should also help management avoid the following common traps as they execute the digital transformation journey:

1. Building solutions that simply “tune up” today’s business models. Many tools or strategies can optimize the current business. But for technology to be truly transformative, it usually needs to change how a company creates value, engages with customers, or executes its business model. Boards can ask: how will this revolutionize the stakeholder, customer, and supplier experiences?

2. Investing in digital toys that won’t enable a sustainable competitive advantage. It is easy to lose focus as a result of sensationalized marketing for new digital tools. Directors can help management stay focused by asking three critical questions to ensure a given technology presents a clear path to sustainable competitive advantage: Will it create significant differentiated customer value? Will it create new revenue streams from existing assets or capabilities? Will it optimize business models to improve the customer experience? If the answer to all three is no, it’s best to move on and avoid the distraction.

3. Investing significantly without customer testing. Companies often believe they know what customers want only to learn that customer expectations have changed. The bar for competitive wins has been raised to a new level. The board should ensure management tests a few strategies before investing in or implementing them to determine the best practices proven to work.

One of our clients (a nonprofit operator of hospitals and clinics) sought a competitive advantage and wanted to provide superior customer service where most patients first encounter the company—online.

So, the company researched customer pain points and developed tactics and systems to solve these problems. Its “digital front door” paved the way for the business’s first real-time online appointment system and mobile app, resulting in a 200 percent jump in bookings of certain services. It was also foundational to the client’s pandemic response plan, enabling critical communications and patient interactions when they needed it most.

How to Stand Out

Companies will have to adapt to keep up with their competitors now and in the future. Taking the above tactics and pitfalls into consideration, directors should focus on helping management develop new skills and recruit for talent that improves digital marketing, customer experience design, dynamic pricing, digital technology tools and platforms, and more.

The key is to not wait—or worse, neglect digital transformation altogether. That will only leave you in the dust of your speedier competition.