Executive Leadership Guide to Successful Digital Transformation
Navigating the Waves of Digital Transformation
By Thomas Lah
There isn’t a question of if your industry will be hit by digital transformation, but when. In fact, it is already well underway. Digital transformation is required to ensure your company is at the front of the pack, not falling behind.
But what are the real-world implications for your business? Your digital transformation strategy should be a roadmap that everyone in your company follows–especially those at the executive level.
Here’s a clear picture of what successful digital transformation looks like, and tangible next-steps to accomplish it.
What Is Digital Transformation?
Digital transformation is the integration of technology into our everyday lives, creating an expectation from customers of digital solutions to their problems. This means companies need to change the way they do business and reimagine products and services for the digital age.
"Can you imagine being a bank without a mobile app today? A large retailer without an e-commerce site? Digital capabilities upend the way customers buy and consume your products and services." - Digital Hesitation
Ask yourself: how can you digitize the customer experience of your business? Can you offer better digital solutions for your customers?
Digital transformation can be difficult to define, as the execution of it can look different in every industry. However, there are some key steps that all senior executives should take if they want to be a digital transformation leader.
Digital Transformation for Executives: Why It Matters
There are some executives who might think that digital strategy is an IT issue or the product team’s problem to solve. However, successful transformation is dependent on large-scale, long-term change, and that starts at the top.
Digital transformation leadership requires decisions that can only be made and executed at the executive level. Changing your business model or upending your business processes have far reaching implications that require a total transformation. This type of digital disruption to your business strategy can only be accomplished by an “all-in” mentality.
Going “all the way” with digital transformation in the C-suite is exceedingly difficult. It has the potential to upset a lot of the names and faces you care about, including employees, partners, and shareholders. However, the consequences of not committing to your digital transformation will have long-lasting repercussions that will affect those same stakeholders even more.
Acting in fear and hesitation won’t make your journey easier, just longer. Businesses that do not spend the time, effort, and resources on digital transformation are at risk of seeing their business, and entire business model, become obsolete.
In short: work towards being a “Netflix,” or you’re fated to become a Blockbuster.
The Waves Of Digital Transformation
Even though it may be the buzz word of the moment, digital transformation has been affecting industries for years across all technology sectors. TSIA’s Technology & Services 50 and Cloud 40 tracks the top 50 technology and top 40 cloud companies to create industry benchmarks. Through this data set, we are able to see how the markets and industries have reacted to the rising tides of digitization and brought about new best practices.
Working with our member companies to help them weather these changes, we’ve seen two distinct waves of digital transformation.
Wave One: Subscriptions and Outcomes
You can categorize Wave One by two key markers: the shift to subscription-based services and the focus on business outcomes over product features.
"We are moving faster and faster to a world where we are a service industry. If you’re not there yet, look at the growth you’re missing out on." - J.B. Wood, TSIA President and CEO 2021 TSW keynote
In Wave One of the digital transformation, we saw a shift from up-front transactions to recurring subscriptions. This was indicative of a larger shift that the technology industry was making. As a whole, companies embracing digital transformation were moving away from the one-time purchase of a product and towards renewable services.
Along with the surge of subscriptions, wave one saw an increased focus on outcome-based offers. In our 2014 best-selling book, B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship
, we predicted the move from product-focused offers to outcome-focused ones. Today, we see outcome-based selling
as the industry highbar.
The rise of outcome-based offers and subscriptions go hand in hand. If the customer does not get the promised outcomes, they will stop subscribing. Companies that have achieved their business outcomes through your solutions are likely to renew.
In Wave One, it became clear that technology suppliers need to be digitally connected to their customers through the product. Having visibility into adoption levels can show you the progress a customer has made or alert you if they’re falling behind. This allows you to intervene and work towards the promised outcomes with the customers, and, hopefully, secure their renewal.
Many companies are still struggling through wave one, or have yet to start the journey in earnest. If that’s you, I encourage you to commit to this journey now. It will only become a bigger challenge as the second wave hits.
Wave Two: Easing the Path to Value Realization
The second wave of digital transformation is all about reimagining the customer’s path to value.
"Piece by piece, decision by decision, department by department, you have built a maze around your core value proposition." - Digital Hesitation
So often, customers are made to navigate a maze of features before they can realize the value you offer them. Intentionally or not, companies have built complex offers that put the work on the customer to understand your value. This ropes off the path to value realization and can hurt your chances at renewal down the line.
Ask yourself: Do my buyers spend more time navigating our maze or enjoying the value of our offers?
While there are plenty of digital tools at your disposal to enhance the customer experience, make sure your primary focus is on easing the path to your value.
Where Are We Today?
So, where are we now in the digital transformation journey? While the answer will differ for each company, let’s look at where we are historically using TSIA’s fish model
as a lens.
Above, you’ll see the solid line represents revenue and the dotted line represents costs (resembling the outline of a fish). This illustrates the “financial growing pains” companies go through when switching from traditional financial models to XaaS. Revenue will dip and costs will go up as you make the necessary changes to support new XaaS capabilities and transition out of your old revenue model. However, once on the other side, the revenue and cost lines switch trajectories and the long-term benefits of digital transformation can be felt.
As you can see, we are right in the midst of finishing out the first wave and transitioning to the second. If you and your company are behind that timeline, now is the time to jump onboard.
The State of the Technology Industry 2023
What Can Executives Do for a Successful Digital Transformation?
Riding the waves of digital transformation and embracing the Fish model takes buy-in from the top down. Senior executives and department heads can be the drivers of change, but also impediments to that transformation.
Here are five things you can do today that will make a difference:
Recognize where you are in your digital transformation.
1. Make an honest, data-driven assessment of where you are in your digital transformation.
Identify key benchmarks and KPIs to act as road markers in your journey, and don’t assume you are further along than you might be.
2. Create consensus around your digital transformation strategy.
Stack hands with the C-suite around your next steps, and commit to going “all the way.” Securing executive buy-in ensures that when you encounter obstacles, leadership will hold strong to your commitment. From there, continue to rally key stakeholders around your digital transformation strategy.
3. Act on empirical evidence.
Don’t underestimate natural resistance to change, and be on the lookout for arguments against digital transformation that aren’t focused on data. Data should be the driver of your digital strategy, so be sure to emphasize its importance within each department. At some point on your journey, you will experience push back. Remind your team of the commitment you made and the data that supports that decision.
4. Think through costs and financial roadblocks.
You’ve convinced your team to embrace digital transformation–great! But are you ready for the financial realities of swallowing the Fish? Be wary of approaching the XaaS transition with false optimism that your financials will remain in the black. Be prepared for tough conversations; swallowing the Fish will not be pleasant, but “the only way out is through.” Have contingency plans in place for slowed revenue streams, and set realistic expectations for how long this journey will take.
5. Be convinced of your ability to succeed.
Digital transformation leadership hinges on being a leader of thought. You must act in the belief that you will have a more profitable, faster-growing business at the end of Wave Two.
"True digital transformation for technology and industrial companies—meaning going all the way—takes guts, resolve, and commitment."
- Digital Hesitation
“Good” can often be the enemy of “great.” You might be hesitant to leave behind a “good” approach that is working for you…for now. But the day is coming where “good” won’t be good enough, and you’ll be forced to make a messy, last-minute digital transition that is much less likely to succeed.
Sooner or later, you will have no choice but to embrace digital transformation–why not make the move today?
Going from Digital Hesitation to Digital Transformation
In our book Digital Hesitation
, we examine why most B2B companies are failing to reach the full potential of their digital transformation efforts. It also examines the specific actions needed to take on the eight toughest challenges we see executives struggle with today. Download chapter one now to get an overview of what that journey entails.
A must-read for B2B tech companies!
Next Steps to Tackling Business Challenges
Helping companies navigate the tides of change has been our main focus at TSIA for over a decade. Reach out today to learn more about how we can help you with your business outcomes.
April 7, 2022
About Author Thomas Lah
Thomas Lah is
executive director and executive vice president of TSIA. Since 1996, he has used his incisive analysis, strategic thinking,
and creative solutions to help some of the world’s largest technology companies improve the
efficiency of their daily operations. He has authored several books, including, Bridging the Services Chasm (2009), Consumption Economics (2011), B4B
(2013), and Technology-as-a-Service Playbook: How to Grow a Profitable Subscription
Business (2016), and
Digital Hesitation: Why B2B Companies Aren’t Reaching Their Full Digital Potential (2022).
He is also the host of TSIA’s podcast, TECHtonic: Trends in Technology and Services.
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