Why Digital Experts Shouldn’t Lead Digital Transformation

By Lisa Wirthman, Contributor

Digital transformation isn’t always radical. Rather than planning a revolution, two business school professors recommend thinking of the change as an evolution of your current organization, with a focus on finding new ways to use digital technologies to better serve customers.

With the customer at the heart of the change, it turns out that the best person to lead a digital transformation is not necessarily an outside, digital guru, but rather a company insider who already understands the existing business, according to Nathan Furr and Andrew Shipilov, professors of strategy and international management at INSEAD, a graduate business school with campuses in Europe, Asia, and the Middle East

Their recent research backs this idea, showing that company insiders with little digital experience have an 80 percent success rate in leading their companies’ digital transformations. Why? Because company insiders typically understand that the evolution is as much about managing organizational change as it is about adding new technology.

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Serving Customers

Computers that now fit in a pocket or on a wrist, software applications that automate a broad range of traditional human tasks, and embedded sensors that transmit real-time data for informed decision-making are profoundly changing the customer experience. In light of this widespread progress, Furr and Shipilov believe “digital technology should be applied to almost every part of a company’s value chain.”

But the professors add a key distinction. “Technology is never an end in itself,” they say. Adding digital technology to the mix without a clear value proposition is a risky venture; instead, they believe a good use of digital technologies is to provide better solutions to existing organizational issues, like addressing customer problems, optimizing value chains, and improving recruitment.

“Many companies we studied continue serving the same customer needs that they did before,” say Furr and Shipilov. The difference is that digital technologies now enable them to do the job better.

As an example, they point to organizations like G7, a taxi company in Paris, founded in 1905. The company’s new app allows customers to book a taxi with various service levels, including a shared cab, a regular cab, a green cab, or a VIP ride. G7 still serves the basic transportation need, but now uses digital tools to provide a better solution to customers.

Getting Started

A good way to start a digital transformation is to find an internal activity or an external market niche where technology can start providing quick returns at your company, the professors say. Because it’s difficult to create a detailed business plan around digital technologies with uncertain outputs, Furr and Shipilov also suggest developing a framework to run internal experiments.

The framework should include questions such as:
– What is the problem the organization is trying to solve?
– Which technologies are currently mature enough to solve the problem?
– What experiments will answer whether the technology can do the job?
– Which parts of the organization will run the experiments?
– How will the findings be reported?

While companies may consider creating a separate business unit to manage a digital transformation, that’s not always a good idea when evolving an existing business model. Instead, it’s better to reserve that solution for cases with a significant conflict between a company’s old and new business models, say Furr and Shipilov.

“If your digital transformation is sustaining your existing business model, it should be fully integrated; if it is completely disrupting your business model it should be separate, and if it is changing your business model (most cases), it should be a hybrid of the two.”

Leading the Way

With no disrespect for their technical talents, digital gurus aren’t always the best people to lead a digital transformation, especially when they come from outside the company, note Furr and Shipilov. Because a digital transformation is about organizational change, and not just adopting the right technologies, a company insider with broader experience may be a better match for the job.

“We have seen that most of the time, company insiders can be much more successful at leading a digital transformation because they understand how the organization works—and how to get things done.”

—Nathan Furr and Andrew Shipilov, professors of strategy and international management, INSEAD

“We have seen that most of the time, company insiders can be much more successful at leading a digital transformation because they understand how the organization works—and how to get things done.”

Key qualities to look for when tasking a company insider to lead a digital transformation are a willingness to learn, political savviness that can be leveraged to navigate the invested interests of current employees, and empathy to help address the natural fears that come with change, Furr and Shipilov say.

A digital guru with strong technical skills could be added to the leadership team to report to the company insider, they add. But if hired externally, the guru would need to be willing to take the time to become deeply acquainted with the company culture.

While a digital guru may know how to create a brand-new digital business, existing companies may benefit more from the leadership of an insider who understands the needs of both the customers and the company, has existing relationships, and most importantly, knows what still needs to be learned.

“Digital transformation should ultimately be about serving a customer,” say Furr and Shipilov. It’s not about novelty, or technology, they add. That’s why, in many cases, the best person to lead that transformation is the one who already knows the customer best.