Digital transformation (DX) has almost descended into a cliché.
With the rise of DX in the past few years and the pandemic accelerating its adoption, it is hard to find a company that has not embarked on the DX journey. It is equally hard to name a business that has truly succeeded.
At the recent 2022 Tech Outlook Conference in Hong Kong, CDOs warned DX in 2022 will continue to be challenging.
“DX in 2022 will be equally painful as DX in 2021,” said Dan Wong, general manager, global innovation, MTR Corporation.
Don’t blame the technology, though. “What makes it painful is not technology; it’s not the hard part. The hard part is everything else, like organizational structure, culture to processes,” Wong explained.
The DX conundrum
With experience in leading transformation for two global enterprises — Nokia and Samsung — Wong said culture and people’s mindset remain the biggest hurdle for successful DX in 2022. He added that the rising pressure over revenue growth is trapping many business leaders in a DX conundrum.
“On one hand, we are telling people transformation takes time. But in the next board meeting, there will be questions about when the revenue comes in. It is a race against time to show results,” said Wong. “It also requires mental stamina from the DX leaders.”
He quoted an example from Tencent Music. It started streaming music when the market was filled with pirated music. However, it only started making money after ten years.
“How many companies, board members, and CEOs have the patience for ten years?” Wong asked.
The revenue pressure extends across business leadership, including technology executives, observed Forrester. The firm’s Prediction 2022: Tech Leadership And Innovation report stated 10% of tech executives will have direct revenue generation as a KPI in 2022.
“When it comes to accelerating out of the crisis and driving revenue, it’s all hands on deck,” the report stated. “Most tech execs at companies in growth and hyper-growth mode are under considerable pressure to deliver for the business.”
Forrester added that if tech executives continue to focus on the traditional cost reduction metrics, they will be limited as order takers.
Nevertheless, benchmarking revenue growth in 2022 is going to be difficult. With the economic slowdown in the past two years, DX advisor Arthur Shek, partner at McKinsey & Company, said businesses should go back to the fundamental question.
“Why does your business need DX? What do you want to achieve?” he said. “This is the question we spend a lot of time on with companies.”
Shek added that business leaders should identify the transformation they are trying to bring to the business. Whether it is to transform the company’s existing business operations, introduce a new business model, or develop new partnerships or relationships, he said business leaders should be clear about the purpose of their DX journey.
Transformation before digital
“There is too much focus on digital, which is technology, but not enough on transformation,” added Samuel Hui, co-owner and chief transformation officer, HKBN.
Aiming to steer the focus toward transformation before technology at HKBN, Hui said the Hong Kong-based telco focuses on doubling its revenue without doubling its headcount. “We look at our transformation by looking at how we make our talent’s life easier,” he added.
Meanwhile, as an enabler of DX for other businesses, HKBN prioritizes transformation for their customers over technology implementations. Hui discussed how his company helped an insurance company to enable a new business model using the cloud.
“The CIO of the insurance company told me because they [went into the] cloud, they [were] able to price their products differently and access risk real-time, which was not possible previously,” he said.
The focus on transformation ahead of technology also aligns with Forrester’s prediction. The firm stated that tech executives would leap from digital to human-centric transformation in 2022. On top of revenue, they would also seek new ways to demonstrate value in their DX investment, like enabling employee experience and customer satisfaction.
“Leading firms will unlock the creativity of their employees by using intelligent technologies like automation and predictions engines,” stated the report. “This shift will establish a new era of transformation, one comprising human-centered tech initiatives that form a tight link between CX and EX.”
“As a design thinker, we’d always think about people,” said David Chung, co-founder and managing partner of consulting firm Innoedge. He said design thinking is a methodology that drives people-centric organization-wide transformation, starting from the CEO to the tea lady within the company.
Chung quoted an example of an online marketplace of vacation rental Airbnb. The travel restrictions imposed during COVID-19 had hit Airbnb’s business hard. By adopting design thinking principles, he noted that the company could gather ideas across the organization and identify new business opportunities with Airbnb Experience, offering local or virtual activities that were memorable.
“I believe the technology is mature,” added Chung. “But how to make people feel comfortable about transformation is an important topic, and culture is an important element.”
Turning around 99.9% failure
MTR’s Wong added that in the painful journey of DX, where failure rates could be as high as 99.9%, success depends on the company’s corporate culture. “I think you need a culture of can-do,” he said. “MTR has a 99.9% on-time delivery commitment. If you have a culture like that, where everyone is onboard to make it happen, you have a fighting chance [to succeed in DX].”
“We try to supercharge can-do,” added Hui from HKBN. He said the telco empowers a can-do attitude by encouraging talents to drive transformation through “skin in the game” projects. Team members that organize these projects will invest a month of their salaries. If the project met the KPIs, every team member would be rewarded multiple times; missing the mark meant donating their one-month salary to charity.
“We think if people fight harder not to lose a dollar, they are more likely to gain a dollar. We tried to embed that into our company culture,” said Hui.
“Sometimes, having skin in the game still isn’t enough,” said Wong. In addition to getting everyone onboard for a project, it is also essential to align the right resources and incentives to make these projects works.
Despite the painful DX journey awaiting Hong Kong CDOs, they remain optimistic about the outcomes. Hong Kong companies can succeed if they focus on a clear business purpose, leadership with solid stamina, and can-do culture to apply human-centric technologies.
“It can be painful, but…there is optimism,” Wong concluded.
Sheila Lam is the contributing editor of CDOTrends. Covering IT for 20 years as a journalist, she has witnessed the emergence, hype, and maturity of different technologies but is always excited about what's next. You can reach her at [email protected].
Image credit: iStockphoto/AndreyPopov