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Re-assessing the SME challenges in digital transformation based on our 2016 experiences

January 3, 2017

With the end of 2016 and the start of a new year, several newspapers and magazines – online and offline – have been flooded with articles about digital transformation and what will happen to medium-sized companies in 2017. To cut it short the answer was always you will be drowned by the end of this year and start-ups will take your position.

What a fantastic outlook and we can say that based on our recent work this must not be what will happen to your company.

 

 

The first good message is that you as the CEO (in some cases CFO or COO) of the company have all tools in your own hands to turn your company as the incumbent on the market from being under pressure by new rivals to being the most successful player in the next years to come to.

During the last years’ we had many projects in companies in Switzerland, UK, Austria, France and Germany to find a lot of common denominators we helped them to establish in order to survive on a market in strong competition – often by digital business models disrupting their traditional market. This is the time when every leader of a company needs to roll up her sleeves. And yes, this is not what most leaders love to do as the current situation with the company is often very comfortable – and who loves to leave the comfort-zone to go into some troubled water? But based on our experience, this is what you have to do: Leaving this zone, changing organisation, processes and establish a new way of thinking.

 

Here are the most relevant things you need to do in order to avoid being disrupted but to remain the leader in the market.

 

Define your digital transformation Strategy!

Your company needs a digital strategy. This strategy is not only about what your company is setting up in the digital world, this is also a lot about organisational changes that needs to be done in order to be successful. The digital strategy needs to identify where you can grow, what kind of markets will probably be under attack (be true to yourself!) and what kind of defensive strategy you might need to stay at the top (recommended video: Defending your brand by Tim Calkins). In the projects we have been accompanied the hardest part is always that you might have to disrupt yourself, i.e. come out with a digital business model which is not in line, even worse in direct conflict with your current business model.

 

Communicate!

That sound so easy, but it’s by far the hardest part. You have a new strategy, you might have new competition with digital business models and often much lower cost structures. This is what you need to communicate to the company and you need to tell it to the employees directly and from the top. These are no issues that can be communicated via the standard hierarchy – when you enter the digital transformation, make it your task as a CEO to explain what the strategy is, what will have to be done and how this will reflect in the organisation. Do not start to late, start as soon as you can by using the strategy to tell every employee where the company is going to. And name the competition and threats.

 

Disrupt in a separate entity!

Whenever you have your digital transformation strategy in place, there will be lots of people trying to get that piece of work on their own agenda. Why? The reason behind is that this will bring lots of change to the organisational structure and from their perspective it’s better to embrace and influence it, then be surprised. Asking these people directly will bring answer like “This fits into my unit’s agenda” or “I have all resources and skills to deliver this” etc... This will not work!

If you really want a successful digital transformation, keep the implementation of the strategy away from the leaders in IT, services, sales and marketing departments, cut through the long-lasting relationships within the company, even when it’s hard to do so. Of course, they have resources, but they will not act in the fastest way possible, only adapted to their units’ needs. And this is to slow for a company needing to embrace challenge and work with MVPs (Minimum Viable Products) and lots of Trial-and-Error projects to find the best way possible for your company. And these new ways can always conflict with the traditional IT, Marketing, Sales or Services divisions processes. Our advice: Form a separate unit led by a new CDO (Chief Digital Officer) who has an own agenda: Your digital strategy and how to establish it successfully. An interesting read in this context is Digital Vortex.

 

Note: Today Michael Kroker from WirtschaftsWoche in Germany supported this article heavily by releasing this infographic. The outcome of the study by the innovation Alliance.

 

Plan for a long-term investment!

Whoever told you that a digital transformation is done with a fixed budget and will work after some month of implementation, don’t take it for granted. Yes, you might have great people with potential inside the company, but most SMEs need digital skills that are not present or at least not sufficient. So you have to higher new people or work with external people, both adds costs. In the projects we did we have seen that the costs for digital transformation are always underestimated. This is due to stronger than expected internal resentments, lacking skills, missing software products or service due to new processes and structures. Digital transformation is a long-term investment into the future of your company. The costs will have their return-on-investment after some years, but their might not be positive effects within the first 12-18 month. But we have seen positive exceptions from that, too.

 

These are just four things we can give to take with you on the long road to digitally transform your company, but it might help. When we have been to congresses and talked to CEO’s about this topic, every SME has the same challenge, most are not done with this task. And in case you need support, just contact us.

 

And finally, embrace the challenge!

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