Organisations seem intent on achieving digital transformation and HR should be front and centre of these efforts. But how far have they actually come in achieving this, asks Roisin Woolnough
Digital transformation: a phrase that is bandied about constantly and one that’s the focus of numerous pieces of research. But it seems that while lots of organisations are talking about it, relatively few are actually achieving it.
So says a recent report called The 2017 State of Digital Transformation, conducted by technology research company Altimeter. Businesses still have a long way to go to catch up with their digitally savvy customers, it suggests.
“Hundreds of millions of people worldwide use smartphones and other digital devices to communicate, buy and sell, learn, and be entertained, but many companies still have not made critical investments to be digitally competitive and consumer responsive as this global shift happens,” it says.
This third annual study into the state of digital transformation found that many organisations were struggling with both the technical and the human challenges facing them.
Where are they going wrong?
Altimeter found the following issues with achieving real business transformation:
- Meagre digital literacy within businesses was restraining the scope and extent of innovation
- Digital transformation initiatives tended to be viewed as short-term cost centres and had limited budgets and resources, rather than long-term investments that would lead to long-term success
- Many company cultures were risk averse and leaders did not feel a sense of urgency to compete differently
- Politics, ego and fear were the main obstacles to achieving the collaboration and solidarity needed within organisations to make the necessary changes
Arguably, all of these findings fall under the remit of HR – skills, organisational attitudes and cultures, politics, change management and leadership.
The result of these attitudes and obstacles is that many organisations are still only in the early stages of what Altimeter calls the six stages of digital transformation, which are:
- Business as usual
- Present and active (pockets of experimentation)
- Formalised (more intentional experimentation)
- Strategic (making roadmaps for digital transformation)
- Converged (bringing business and customer-centric goals together within a new infrastructure)
- Innovative and adaptive (digital transformation is part of business)
Part of the problem is that digital transformation is not universally understood.
Altimeter defines it as “the investment in and development of new technologies, mindsets, and business and operational models to improve work and competitiveness and deliver new and relevant value for customers and employees in an ever-evolving digital economy”.
But Emma Parry, professor of human resource management at Cranfield School of Management, comes at it from more of an HR perspective.
“It’s about changing the organisation so it can fully leverage the benefits that new digital technologies offer,” she says. “This is much more than just introducing technology – in fact this is just a first stage – but more about transforming processes, activities and associated skills and competencies in the organisation so that it can truly benefit from this via increased innovation and agility.”
Parry says it is important that HR professionals understand what digital transformation really means, whether that’s in terms of organisational planning, workforce planning, culture, skills, talent, leadership, policies and procedures.
She adds that these are all fundamental elements of digital transformation and they are all fundamental elements of HR.
Where does HR sit in transformation?
HR professionals also need to think about what digital transformation means specifically for the organisation and sector they work in and what needs to happen to make digital transformation a reality in their organisation.
Noel Scotford, HR director of systems and management information at the BBC, explains: “If one considers what I think of as being the true meaning of HR – building the workforce of tomorrow and ensuring its readiness for tomorrow’s work – then HR is front and centre in this.
“Being able to predict and craft the new skills and jobs required for tomorrow will be paramount.”
First of all, HR has to stop equating digital with IT. So says Jos Creese, principal analyst at IT services provider Eduserv.
“HR has traditionally seen digital as being to do with tech and that HR are to do with people,” he says. “Actually, the issue is less learning about IT and more about understanding the digital world. How could this apply at work? What can we be doing differently?”
Technology is the driving force behind transformation and is an enabler, but digital transformation is actually about how an organisation operates. In order to understand what is possible and then achieve it, Creese says HR needs to work in collaboration with IT.
Slow on the uptake
Earlier this year, Eduserv and the PPMA (Public Sector People Managers Association) published Skills for digital change: HR and IT working together for positive change in local government.
This found that 63% of participants recognised that digital transformation was less about IT and more about changing ways of working, yet only 32% of councils said they had an HR strategy that specifically referred to digital capability.
Even fewer (29%) were promoting digital skills in recruitment and staff performance measures, and 51% said they depended on external specialists to support digital leadership and change programmes because internal support was lacking.
Caroline Nugent, president of the PPMA and director of HR & OD at oneSource, London boroughs of Havering and Newham, says HR has been slow on the uptake with regards to digital transformation, both in the public and the private sector.
She says fear of technology has been largely to blame and that HR has to overcome that. “Digital is about people,” she says. But it’s not just fear that has held HR back – Nugent says a lack of resources and the daily pressures of work have also impeded progress.
“It’s not HR not wanting to do it, but it’s been very difficult the past few years because of cost cutting, reorganising, TUPE transfers…” she says.
“If you have five people in your HR team, you are firefighting, you are reactive and dealing with issues. Where is the capacity for anything else? The day job takes priority.”
Moving up the agenda
Digital transformation has moved up the strategic agenda in the public sector in recent months and change is now happening, however.
Nugent says: “We have to find ways of doing the same things differently as customers want the facilities.
“I am the HR director for two London boroughs, both of which are doing significant stuff on digital transformation, such as using data to predict what is coming up and for workforce planning. Having smarter systems is very high profile in local priorities now, but it has to be led from the top.”
As well as helping councils provide better, more accessible services, Nugent says digital transformation can generate cost savings as well.
For example, a number of local authorities have collectively reduced recruitment and agency costs by £500,000 in the past 12 months by transforming their recruitment processes, with the help of managed services provider Matrix SCM.
As with success in most HR projects, the key to achieving digital transformation is having the right culture in place.
But for many organisations that is easier said than done. “Culture is by far the most difficult bit to get right,” says Professor Gianvito Lanzolla, founder and director of the Cass Digital Leadership Research Centre.
“And real transformation creates lots of new paradoxes, such as openness and efficiency, risk-taking and optimising.”
Lanzolla says it is these paradoxes and a lack of certainty that is causing so many organisations to hold off on digital transformation or to take a piecemeal approach.
“The urgency for digital is there, but it’s not clear how. Some organisations are doing exploration work and capability building and are taking a piece-by-piece approach.
“A lot of companies have taken a wait-and-see approach, waiting to see what their competitors do, to see what they can follow.”
Recent research by global consulting and technology company Capgemini claims that culture is the number one barrier to digital transformation.
Its report The Digital Culture Challenge: Closing the Employee-Leadership Gap found that cultural issues were a hurdle to digital transformation for 62% of organisations.
This was followed by archaic IT systems and applications (48%), lack of digital skills (43%) and a lack of clear leadership vision (38%).
In order to have the right digital culture, Capgemini says seven key attributes have to be in place: customer centricity, innovation, data-driven decision-making, collaboration, open culture, digital-first mindset and agility and flexibility.
The consulting firm Accenture has another way of describing customer centricity. Its report Digital Transformation: Re-imagine from the outside in states that being a digital business means being a customer-relevant business.
To achieve that transformation, organisations have to retrace the footsteps of the customer back to their workforce. And they have to keep doing it. They have to keep changing to meet customer demands if they want their products and services to stay in demand.
What about those organisations that keep delaying on digital transformation and tinker around at the edges, rather than going for organisation-wide transformation?
Lanzolla says this is a gamble: they could find they are left behind, struggling to catch up with their digitally mature competitors.