Most industry leaders realize that the VUCA (Volatile, Uncertain, Complex, and Ambiguous) environment is here to stay and that it has far-reaching implications across three dimensions: people, process, and technology. Digital transformation is an unavoidable organizational imperative in such an environment, so much so that technology strategy has become ‘The Strategy’ for enterprises. 78 per cent of respondents in a recent study revealed that a company’s survival depended on its digital transformation capabilities.
On the ground though, change is not happening fast enough. Enterprises are plagued by concerns about the effectiveness of their digital efforts. Despite investing significantly in new technologies, high performance and breakthroughs in business impact typically do not live up to expectations. It is vital that companies find ways to bridge this gap between the massive potential of digital and the current reality of its sub-par impact.
The feedback I have received from CIOs falls into three dimensions:
- What VUCA means for CIOs
- Key priorities for digital strategy in the VUCA world
- Challenges in implementing a digital strategy
What VUCA means for CIOs
Disruption is happening across industries because of multiple factors – both internal and external. Enterprises are in a constant state of flux owing to the pace of change in the technology landscape, ever-increasing customer expectations, new competitors causing industry disruption, and rapidly changing talent requirements. The revenue models, and oftentimes entire business models, are rapidly evolving. In addition, companies need to grapple with the frequent regulatory changes introduced by governments globally. This has led to the emergence of the VUCA era, where organizations are forced to adapt to an unprecedented velocity and variety of change.
These rapid adaptations are at multiple levels. Companies have to revamp products to cater to more digitally savvy customers and create their branding in the digital space. This typically requires a new type of talent. Dynamic strategies and dynamic resource allocation have become the norm and are the cornerstone of sustained success for any enterprise.
In as much, ‘big is no more beautiful’ which necessitates micro- approaches that evolve fast with disruptions – an all-too-common VUCA feature.
Key priorities for digital strategy in a VUCA world
Digital is much less of a thing than it is a way of doing things. A digital strategy lays the foundation for delivering the right experience based on real-time intelligence.
There are three impact areas around which companies can knit together their digital strategy and drive outcomes: 1. Customer experience; 2. Acceleration; 3. Insight
1. Customer experience: Digital transformation gives the enterprise the opportunity to move away from creating various siloed customer experiences to a unified, customer-centric approach. With an ever-increasing number of options available as the means to do this and the accompanying digital clutter, enterprises need to provide a frictionless and intuitive customer experience. Otherwise, they risk customer churn. The key factors enterprises need to focus on are the delivery of digitally-empowered simple solutions, ensuring immediate and real-time resolution, consistent omnichannel experience and continuous reinvention. To do this, a cross-functional approach is needed, which can ensure speed, efficiency and agility in action.
Ensuring a seamless, well-integrated, omnichannel communication strategy is an important dimension of enhancing customer experience. Often, customer experiences are determined by how your brand communicates with the customer.
When customers call, email or use social media to communicate with enterprises, the company’s response system could make or break this relationship. For instance, if a customer first emails a query to a company and subsequently follows it up with a call, she expects the company representative to be aware of the conversation history across all the digital platforms and to respond accordingly. This calls for unifying communication across different product lines and businesses.
2. Acceleration: One of the biggest opportunities with digital technology and the accompanying business models is scalability. They can allow you to both build and scale up a new business rapidly. However, for that, you need to find the right product-market fit, develop the right business model, make intelligent technology choices, and leverage the ecosystem smartly. This is where a dynamic strategy, broken down to a micro-level, becomes crucial for success. One has to bear in mind that there is no end state. It’s a continual change process.
3. Insights: The velocity, volume and variety of data that are now possible present tremendous opportunities, such as one-to-one personalization for your customers at one level; and helping enterprises improve the quality of their decision making at another level. On top of this are the massive opportunities brought by AI and machine learning. The opportunities provided by data are unprecedented. Perhaps, it is fair to even suggest that digital strategy is really a data strategy!
Digital is not only about the ‘what’; it is increasingly about the ‘how’. Digital strategy demands a mindset shift while the organization is moving from legacy to digital. It is an overall strategy, not just a strategy pertaining to certain operations or departments. It is a complete shake-up of the status quo. It is cross-functional. It is interdisciplinary.
While strategy in the VUCA world needs to be holistic, there is also a need to fundamentally rethink one’s approach to strategy. The traditional flow of action from strategy to execution does not work and can even be counterproductive, given the dynamic environment of the VUCA world. It requires a more dynamic approach to strategy, which is more real-time and adaptive, where you make many changes as you are executing. A good analogy is how ailerons on airplane wings adjust the flight path of the craft thousands of times every minute!
Strategy in a VUCA world is messy; you can even say that VUCA is the end of strategy! What we can certainly say is that VUCA requires a more dynamic approach to strategy, with dynamic resource allocation. Here, the traditional strategy-to-execution cycle is reversed. A clear picture of your strategy emerges only upon looking back and connecting the dots.
Challenges in implementing a digital strategy
Organizations often struggle to meet the challenges of digital disruption in the VUCA world. There are typically five challenges that enterprises face in the execution of their digital strategies. These challenges are the reason for the big gap we see between strategy and execution in the enterprise world. How each of these challenges is met will determine an enterprise’s future.
Architecture: VUCA requires companies to move from large, monolithic structures to a more microservices-based agile architecture. Increasingly the approach has moved from defining an ‘end state architecture’ to working on an ‘emergent architecture’, an architecture that can be integrated and is extensible.
Architecture is no more something you solve completely, but something you make progress on. Cloud, virtualization, and API- based architecture are the key components of a company’s dynamic architecture. The customer life-cycle view should form the basis of any IT transformation initiative. Making the IT environment agile, which also helps enable seamless integration of the enterprise’s IT environment with that of its partners, is another critical dimension.
Organizational structure: Traditional organizations typically operate in silos in the form of business units, functions, geographies and the like. This is a major hindrance to digital transformation, which is inherently cross-functional. Digital typically needs different units to work in unison to solve customer problems. A borderless organization that is customer-centric brings the best out of the organization and gives it the velocity and agility to deliver in the VUCA world. That is the need of the hour.
Talent: Finding talent which can adapt to this dynamic world is a challenge. Do you try re-skilling existing talent or just hire fresh talent? Creating a small but distinctly upgraded talent pool can be a huge positive multiplier, creating a pull for the rest of the talent. However, getting talent in a hot talent market is just the beginning; you still need to plan for their development, adoption into the organization, and retention. At the same time, digital is also a great opportunity to focus on the ‘skills of the future’ to unlearn, learn, up-skill, re-skill. If harnessed well, digital can bring new meaning and purpose to talent and to the organization as a whole.
Culture: While digital is seen to be about technology, the most fundamental roadblock to realizing the potential of digital is not technology (or even strategy) but organizational structure, processes and mindsets that are rooted in an enterprise culture. Culture is ‘the way we do things here’ – something deeply embedded in the organizational psyche and difficult to change. An illustration of this is moving to daily release cycles, which can be a huge challenge in legacy enterprises. It is not just about implementing agile but about building organizational agility. This is a massive change management process and requires taking the entire organization along.
Leadership: So, how do you change a complex thing like culture? A panel of CIOs I polled strongly felt that leadership is the starting point for this change. Digital transformation has completely changed the nature and dynamics of leadership. Companies need a new generation of leaders who are technology natives, who have the foresight and vision to proactively develop strategies so the enterprise may benefit from the tectonic technological shifts. But most importantly, they need to be change agents, customer-obsessed organization builders and must have the resilience to absorb and learn from the many shocks that will invariably come in the VUCA world.
To sum it up, VUCA is real, and we are already in the middle of massive digital transformation and disruption. Enterprises have the opportunity to scale up and leapfrog the competition by adopting ambitious digital strategies. However, there are many challenges due to which we see a big gap between the potential and current impact of digital. Technology is only one part of it; the issues that are more fundamental are rooted in the organizational design, culture and leadership of the enterprise. Enterprises and leaders need to drive organizational transformation at multiple levels to bridge this strategy-to-execution gap in digital. It is not easy, but those who succeed will win big!
About the author
Nitin Seth is CEO of Incedo Inc., a technology services firm focused on Digital Transformation and bestselling author of “Winning in the Digital Age: Seven Building Block of Successful Digital Transformation”. Prior to Incedo, he was COO of Flipkart; Managing Director and Country Head of Fidelity International India; and Director of McKinsey’s Global Knowledge Centre in India. He graduated in engineering from IIT Delhi and received his MBA from IIM Lucknow. For more information on successful Digital Transformation and to reach the author go to https://www.winninginthedigitalage.com/