CEOs can tip the scales toward success in digital transformation

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

In this article, we have identified common principles that can help CEOs boost the odds of getting the results they want. The principles are based on 400 CEOs’ views on their role in digital transformation initiatives.

Setting the transformation ambition

The goals and objectives of digital transformations vary significantly. Some involve implementing a new enterprise resource planning (ERP) system, while others move the entire organisation to the cloud, begin to leverage artificial intelligence (AI) or focus on new customer-facing mobile applications.

But the CEO’s ambition for digital transformation should go well beyond implementing new digital tools because they are readily available or trendy. It is important to investigate how the transformation adds real value. Therefore, the first question for the CEO to answer is: How extensive is my ambition for our digital transformation?

In Figure 1, we have identified five levels of ambition that characterise digital transformations. For example: Am I looking to digitise my existing business model? Do I want to develop a new product? Am I hoping to disrupt my industry?

The CEO’s vision should always guide them and embody a strong “theory of the case” articulating why to pursue the transformation, as well as a blueprint for how the transformed organisation is expected to create value and competitive advantage.

Level 0: Incremental digitisation: Level 0 transformations are foundational initiatives that digitise existing processes with minimal change in other aspects of the business. Much of the work involves taking analogue processes and making them digital. CEOs frequently initiate level 0 transformations, but they usually delegate much of the execution, supporting their team only as needed. Besides clearly communicating the change and ensuring collaboration within the executive team, the CEO’s most frequent task may be to remove obstacles.

Level 1-3: Advanced digitisation, entering new markets and creating new products: Levels 1 to 3 go beyond incremental digitisation by aiming to extend the existing business offerings to pursue new sources of revenue and value creation. These transformations affect all parts of the organisation and require intense collaboration across the C-suite. Moreover, they often need extensive and ongoing change management throughout the organisation.

Level 4: Radical business transformation: Level 4 transformation fundamentally changes the business model – how an organisation operates or makes money. Here, the CEO’s role shifts from merely championing the transformation to embodying it. The CEO’s vision for change becomes the rallying cry around which the organisation reconstitutes its structure and culture.

Assessing transformation readiness

When a company’s transformation ambition is mismatched with its readiness, it is the CEO’s job to close that gap. But first, the CEO must assess the current level of organisational readiness for change. It spans different dimensions, such as:

• Leadership: CEOs need to ensure that their C-suite and other key executives are motivated and capable of executing the vision.
• Culture: A significant potential barrier to readiness is the organisation’s culture. Low cultural readiness typically takes the form of bureaucratic, reactive and risk-averse ways of working that are at odds with the collaborative, proactive learning mindset needed for ambitious transformation.
• Structure: CEOs often will need to lead the reorganisation of teams, assignment of new roles, revision of incentives, strategies to collapse organisational hierarchies or layers to increase agility and implementation of a new governance structure.

Taking action as CEO

In Figure 2, we have plotted ambition against readiness to identify four different transformation scenarios in which the CEO will play different roles. They do not necessarily represent reality – rather, they may be instructive as CEOs determine their type and scale of involvement in digital transformation initiatives.

• Ambition and readiness are high: The CEO plays the role of “cheerleader” and “score taker.” The CEO can ensure consistency between the transformation’s vision and execution, help the organisation stay focused on the North Star, and surgically intervene to overcome local resistance.
• Ambition is high, but readiness is low: The CEO needs to be significantly involved in execution. In this scenario, the CEO often needs to lead a culture and mindset change to get the organisation to think and operate differently.
• Ambition is low, but readiness is high: Pockets of the organisation are likely eager for change, and the CEO should support those efforts.
• Ambition and readiness are low: The CEO needs to step back and reflect on balancing the tensions between the strategic imperatives and the organisation’s realities.

If you want more insights, you can dive into the full article here.