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Digital Transformation and the CEO’s Role

By June 15, 2023September 9th, 2023No Comments

Though the idea of the “digital transformation”—updating tools, platforms, processes, and business models to take advantage of modern capabilities and improve ROI—has been around for a while, lately it seems to be on every company’s to-do list. By and large, companies recognize they need to keep up with the speed and capabilities of the marketplace, but they don’t all understand how to get there, in part because goals, capabilities, and the gap between them are unique to each company. A digital transformation can encompass everything from the simplicity of going paperless to the complexity of fully integrated digital platforms that manage every step in product and enterprise lifecycles. Every company will need to create its own roadmap, and every CEO will have to determine how they should lead the digital transformation charge.

In their article, “How the CEO’s leadership in digital transformation can tip the scales toward success,” Deloitte presents insights gained from talking with more than 400 CEOs about their roles in digital transformation initiatives over the past five years. Their conclusion:

“The CEO’s role is not only critical for most digital transformations, but also fundamentally different depending on the CEO’s ambition for the transformation and the organization’s readiness to carry it out.”

Fortunately, Deloitte has advice that can help CEOs determine exactly how they should be involved.

Ambition Assessment

The first step is for the CEO to evaluate how extensive his/her ambition is for the company’s digital transformation. Deloitte presents a five-level, incremental scale:

Ambition Assessment

The first step is for the CEO to evaluate how extensive his/her ambition is for the company’s digital transformation. Deloitte presents a five-level, incremental scale:

Level 0, incremental digitization: These are foundational initiatives with limited scope for change that nonetheless are essential changes underpinning more ambitious transformations. While CEOs typically initiate Level 0 transformations, they don’t usually need to be very involved in the work.

Levels 1-3, advanced digitization, new markets, and new products: These aim to “extend existing business offerings to pursue new sources of revenue and value creation.” Since they tend to impact all levels of an organization, they often require collaboration among the executive suite, including new communication and collaboration methods across organizational boundaries, and ongoing change management throughout the company. CEOs are typically very involved in leading the organizational and high-level procedural changes required for these levels.

Level 4, new business models: These fundamentally change how the organization operates or makes revenue, and as such, require the most CEO involvement. As Deloitte puts it, “The CEO’s vision for change becomes the rallying cry around which the organization reconstitutes its structure and culture.” Level 4 transformations can require everything from new or changed executive roles and new KPIs to different periods of measurement, such as years versus months or quarters, and new methods of interacting with customers.

The article points out that the higher the level, the more likely getting there will require enterprise-wide transformation, potentially even including a new operations model and organizational structure. Deloitte’s research also leads them to an interesting caution for CEOs: be careful not to limit your ambition, or you may find yourself “finishing” your transformation only to discover you’ve merely kept pace with the marketplace. The CEO’s ambition for digital transformation should match the scale of opportunity (or threat) they identify.

Capabilities Assessment

The next step for CEOs in charting their digital transformation courses is to assess how ready their organization is for that kind of change. Deloitte explains, ”When a company’s transformation ambition is mismatched to its readiness, it’s the CEO’s job to close that gap.” To assess your organization’s readiness, Deloitte proposes evaluating four core dimensions:

Leadership: How motivated are key executives—the C-suite and others—to execute the vision? How capable are they of it? Are there any key individuals who need to be replaced because they’re not willing to contribute? How will the leaders work together to bring existing team members and new employees on board for the work?

Culture: Is your organization bureaucratic, reactive, and risk-averse (low cultural readiness)? Or is it collaborative and proactive (high cultural readiness)? How can you implement a consistent communications strategy and metrics tied to organizational change? How can you tie leadership compensation to the project’s success?

Structure: Will you need to—and can you—reorganize teams, assign new roles, revise incentives, modify organizational hierarchies, and implement new governance structures? Can you prioritize securing enough of the right resources? Can you commit to dedicating enough full-time people to the digital transformation effort?

Capabilities: Can you prepare your organization to be able to pivot when you have to (to be nimble)? To handle unanticipated changes in demand (to be scalable)? To maintain operation excellence and results even while being nimble and scalable (to be stable)? To integrate new capabilities, even while being nimble, scalable, and stable?

Deloitte goes on to address how CEOs’ roles will change, depending on four different ambition and readiness scenarios—low ambition and readiness, low readiness and high ambition, high readiness and low ambition, and high ambition and readiness. “Ultimately,” the article concludes, “the CEO is, more than anybody else, the custodian of the future and distinctively responsible for preparing the organization to face its challenges.”

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