The Covid-19 pandemic has brought a new phrase to the jargon of business — digital transformation. Every consulting company is selling it in hordes. “The digital transformation is a $1.7 trillion industry and 70 per cent of those fail. A lot of that money goes waste,” contends Tony Saldanha, a US-based advisor to corporates on digital transformation strategies.
“It is much more than a technological transformation,” he stresses. During his three-decade-long tenure at Procter & Gamble, he ran both operations and transformation for the company’s Global Business Services and IT organisations across the world.
He says organisations are under constant pressure to deliver new products and services. They face challenges in the form of ever-evolving customer expectations as well as from competition.
He, however, argues that they are focusing mostly at one level — their attention is on product innovation, ignoring the other key challenge of organisational transformation. Those who are already at it are doing at certain levels, but it needs to be done continuously.
He calls for a dynamic transformation of organisations to stay put and take on the competition at multiple levels with aplomb. He, along with co-strategist Filippo Passerini, recently wrote a book ‘Revolutionising business operations: How to build dynamic processes for enduring competitive advantage’, putting forth a case for a dynamic transformation as against periodic spells.
Saldanha, who oversaw Gillette’s integration with P&G, says organisations need to put systems in place that makes them transform themselves continuously to weather the challenges.
“My job was to integrate the $10-billion Gillette into the $50-billion P&G. The commitment that our CEO had made to Wall Street was that we will take that entire $10 billion business into P&G and evolve it into a shared services business. My job was to help them swallow the whole company, but keep it flat. So that was an interesting transformation experience,” he says.
He feels that the term digital transformation is a big hype that most software and services companies use routinely.
Quoting from his book Why Digital Transformations Fail, he says there are two key factors involved in a digital transformation process — setting the right goal of understanding what you are trying to do and the second is how to execute that change.
“The reason why digital transformations fail is that most people use the same project management approach whereas 90 per cent of digital transformation is about organisational change management. You need to incorporate the two factors in order to achieve a successful digital transformation,” he points out.
Stating that cultural issues play a major role in making the transformation strategy a success, he points out that there is something called the ‘frozen middle’, the layer of management that is trained not to make too many changes, not to rock the boat too much.
“They do play an important role. But for them, companies would go left and right every day. But when it comes to change, they are trying to slow it down. What gets communicated layer-by-layer by the time it reaches the lowest levels is very different from what the intent is. That’s one of the reasons for failure,” he points out.
A key mistake, he contends, “is the excessive focus on cutting costs and saving rather than focusing on the byproducts of improving effectiveness of the processes and the existing business models, and creating new business models and opportunities,” he observes.
On creating new business models, he cites the example of Amazon, which is primarily a retailer, starting and becoming a dominant seller of cloud services.
There is a four-step process. Goal setting and providing a clear air cover. What leadership should do is to translate the strategy into execution goals. Digital transformation is not about technological transformation. Of course, technological platforms and solutions are deployed. But that should not be the goal. The goal of the business is to change the outcomes. It needs to trickle down across the organisation, making all layers of people get involved in the process and rolling out the transformation step-by-step. “Without that people will think that it is simplistic, thinking that somebody is going to implement the technology (and we don’t have much to do),” he observes.
When asked what could be the right model for countries like India, that are yet to embark on the digital transformation journey, he says, the model is to leapfrog. “Western countries have had a long journey to mature at those levels. I think rapidly developing countries such as India cannot take another 50 years to do this. In fact, India is not taking 50 years to drive any transformation as we have seen from recent successes in space”
“We have to do something different and not just follow the same old recipe. That different approach is to leapfrog the way we did with telecom and the start-up ecosystem. We have to jump a few steps,” he explains.
The Covid-19 digital experience, he says, is a great technology adoption experiment in mankind’s history. It was a completely bottom-up process. The Covid gave a reason for people to innovate and we have done that. What goals should we set to ensure it is not a haphazard growth? For digital transformation, you need upside-down goals. It is going to be different for governments and different companies, says Saldanha.
The way forward for MSMEs (for a digital transformation journey) who can’t afford and are not aware of the advantages is to “ follow frugal innovation,” he says, adding, “You are not going to take the expensive digital infrastructure for digitisation quickly. There are technologies available in India that are very much affordable. Small industries should also benefit from an ecosystem of companies with similar needs. We haven’t organised the sector enough,” he points out.
Asked whether digital transformation takes away jobs, he says it will. “Every industrial revolution results in mass upheaval,” he says, referring to the changes that happened when cotton mills arrived in the UK. “To avoid human failure, there is a need for investments in re-education of people. That is the opportunity,” he feels.
“The reality is you can’t stop digital transformation. It will happen. What we should do is to find a way to arrest the human losses. Never waste a good crisis. In any industrial revolution, there will be losers and winners. We need to prepare for that,” sums up Saldanha.