Critical capabilities and skills for successful digital transformation

In this last article for 2022, I’ve collaborated with one of our FutureBuilders co-founders, my colleague Dr Norman Chorn. We provide guidance on the critical capabilities and skills for digital transformation. Read more if you’re wondering how best to de-risk and accelerate your own digital transformation and growth journey.

HOW HAVE CAPABILITIES AND SKILLS CHANGED?

The term ‘digital transformation’ is almost a mantra these days. It has become a key theme for both established enterprises and digital native startups. But in essence, digital transformation has been around for decades. So, what capabilities and skills have actually changed, and what is needed for success?

The challenge is to think ‘digitally’ in order to find better ways of increasing efficiency and effectiveness. For start-ups and scale-ups, the focus is to transform an idea into a new scalable value proposition (business model) that is capable of hyper-growth.

For incumbents, the pressure is to reinvent the business digitally in order to avoid extinction or replacement.

The purpose of digital transformation can include improved collaboration, new ways to address customer pain points, step changes in productivity through automating workflows and new work practices, and connecting players to form new ecosystems.

All this requires new skills and behaviours.

However, organisations have been transforming digitally since computers starting becoming mainstream in businesses in the 1980s. One of our previous projects in 2001 was the transformation of a large, traditional organisation into the “information age”. At the time, there was significant interest in the transformation of organisations through digital means – it was just called something different.

So, let’s take a look at what has changed in the last 2 decades since the dot com crash of 2001, what has remained the same, and what are the implications for successful transformations.

THE ENVIRONMENT, HOW WE WORK, TECHNOLOGY AND VALUE PROPOSITIONS HAVE ALL CHANGED

Over the past two decades, there are four key differences that affect the implementation of successful transformations:

• The business environment provides a different context in which we operate. The “new normal” is faster and more complex, described by the acronym “VUCA”. If you haven’t heard this term, google it, you are living under a rock!
• Technology has advanced across every category. The current proliferation of developer tools and platforms are set to continue to automate common tasks, improve collaboration and reduce development time.
• The way humans work has also changed. New tools and methodologies have been invented to further speed up innovation cycles and improve collaboration. Along with these changes comes new jargon — when did Google even become a verb? Project management methodologies have morphed from Waterfall to Agile “sprints” and accelerated execution cycles.
• New genres of value propositions (business models) have been invented, enabled by these new technologies and tools. For example, omni-channel models; B2C digital marketplaces (eg Amazon, Tinder); business models based on network effects (eg Trip Advisor) with valuable data being created by users to make these models very sticky; and publishing businesses (particularly based on social media platforms).

Despite all of this, some things remain unchanged.

CORE ORGANISATIONAL CAPABILITIES ARE THE SAME

The 5 core organisational capabilities for successful digital transformation remain the same. These are:

• A clear cohesive strategy guides the decisions, resource allocations and initiatives to achieve the digital transformation.
• A purposeful leadership team motivates and engages people in the change.
• The deployment of people ensures the right people are in the right places and can move flexibly to deliver the change.
• A nimble governance framework sets the appropriate project execution architecture.
• Sound commercial nous optimises decisions on business cases and throughout the implementation.

It is clear that new skills sets are needed in individuals to achieve these organisational capabilities critically important for digital transformation.

NEW SKILLS ARE NEEDED FOR DIGITAL TRANSFORMATION

Groundbreaking research has identified 8 categories of skills that are required to successfully implement digital transformation. As shown in the Skills Base Digital Transformation Skills Taxonomy to the right, these skills categories include technical and behavioural skills, as both are critical to successful digital transformation.

The skills required for each of the 5 organisational capabilities described above have radically shifted over 2 decades. The table below summarises each of the 5 organisational business capabilities and the relevant skills categories. There are over 400 skills in the taxonomy.

For example, sound commercial nous requires new skills across ALL categories. Even a basic level of IT skills are required for non-technical business managers who are leading digital transformation. A case in point is cyber security, which is now a significant threat for all technology development.

KEY IMPLICATIONS OF THIS ANALYSIS

There are some important implications of this analysis of capabilities and skills required for successful digital transformation.

We sometimes see instances where the excitement and focus on the new technology has masked the understanding and need for the core organisational capabilities and associated skills required for digital transformation. This leads to several shortcomings for the transformation process, including:

• The business does not acquire or develop the core organisational capabilities and skills needed, and the digital transformation fails although the new technology and value proposition are sound.
• The new language and jargon surrounding the new technologies serve to exclude some older people, or those unfamiliar with the new technology. In this way, valuable and experienced individuals are not considered for roles.
• There is sometimes more focus on the technology than the people: staff, customers, users. Techniques such as design thinking and human centred design help address this.

However, there is a bright side to this as well:

• Once organisations understand the need for the core capabilities, the use the skills matrix can identify the specific skills required. This can improve the suitable deployment of people through the business.
• A number of the skills can be easily learned by competent and experienced people.
• There is an enduring need for skills in strategy, leadership, change management and commercial acumen. These are all part of the ingredients for a successful digital transformation.

We believe that the success of digital transformation can be enhanced by identifying the appropriate skills related to the core organisational competencies, and never losing sight of the non-technical behavioural skills required.

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About Lisa Carlin

As a strategy execution specialist and scaleup mentor, Lisa works with ambitious digital leaders to turbo-charge their business, cultural and digital transformation. Lisa is Co-Founder and Director of FutureBuilders Group of organisational development specialists, and volunteers as Chair of the University of Cape Town Australia Trust. Her early career was with Accenture (South Africa) and McKinsey (USA).