Define a Shared Vision: The First Step to Digital Transformation

Digital transformation is no longer a question of if, but a question of how. Every company today is thinking about digital transformation, but there is still a fair amount of confusion about exactly what it is and how to do a better job of it. 

I define digital transformation simply as “the transformation of an established business so it can thrive and remain competitive in a world of constant digital change.”

This points to three key truths about digital transformation.

1. Digital transformation is about business, not technology. Of course, technology will be involved with the implementation of specific strategies. But the heart of the transformation is about your customers, your employees, and the work you do.
2. Digital transformation is about changing an existing organization. This is quite different than launching a new startup. Everything must be done with a focus on leveraging the strengths of the existing organization and transforming it for the future.
3. Digital transformation is a continuous process. There is no start date and end date. It is about becoming a more adaptive, nimble organization that will respond to continuing waves of digital change into the future.

It's also important to note that digital transformation is quite hard. Over the last few years, every major management consultancy (e.g. McKinsey, BCG, KPMG, and Bain & Company) has looked at success among companies who have tried to pursue a digital transformation. They found between 70% to 80% of companies report they are failing to achieve the results that they hoped for.

The focus of my latest research has been to understand the root causes of digital transformation failure. I have identified five barriers to digital transformation which any organization must overcome if they want to have successful digital transformations. 

The first barrier to digital transformation is not defining a shared vision of where you are going, why you must go there, and why your organization is uniquely suited to pursue this future path. 

The benefits of having a shared vision for digital transformation are manifold. A shared vision can inspire and align the work of employees at all levels of the business. It sets expectations, with a clear understanding of what success should look like in 12, 24, or 36 months—and what metrics to use to track progress. A shared vision will also guide resource allocation, directing investment towards digital initiatives where the company has a clear 'right to win'. For public companies, a well-articulated vision allows investors to make informed decisions about supporting a company's digital transformation journey.

Without a shared vision, it becomes nearly impossible to align the organization and set clear expectations. This can result in confusion, resistance to change, and suboptimal decision-making. Without a shared vision, a digital transformation initiative is certain to falter.  

A shared vision for digital transformation has to have two qualities. 

First, it needs to be unique to the organization. So many companies embark on a digital transformation saying things like, "We want to be a digital-first company. We want to future-proof ourselves. We want to be a digital leader in our industry." These buzzwords could be said by any company, of any size, in any industry, or in any part of the world. They’re completely generic. For a successful digital transformation, you must start with a view of where your world is going—your customers, your particular industry, and your particular organization. Then ask, what is the role you are going to play in that digital future? And why you?

Second, this vision needs to be shared, meaning it cannot just be cooked up in a small room by a few people at the top of the organization. It has to be something that everyone at every level of the organization understands, is aware of, and has in the back of their mind as they go about their work.

Shockingly, very few companies have a unique, shared vision. In my research, this is one of the most common barriers to effective digital transformation. When I ask executives in the same company, "What does digital transformation mean for your business?", I will usually receive different answers from each person.

Many leaders ask me about how to effectively make the case for change, how to motivate others. 

We have actually learned some interesting things about change, thanks to the COVID pandemic. We learned that, when an organization is in a state of true existential crisis, change is very easy. As media researcher Lucy Kueng observed in the early months of the pandemic, smart leaders took advantage of the fact that their organizations were “unstuck.” Everyone in the business understood that things had to change and fast. Everything was up in the air, and people were willing to try new ideas and different ways of working.

But, when an organization is not in that state of crisis, aligning everyone around transformation is much harder. This is because you lack an automatic, shared understanding among everyone of why the organization must change, and how. Instead, making this clear case for change is the leader’s job.

Now, many consultants will tell you that, in order to motivate people for digital transformation, a leader needs a “burning platform.” That is, a narrative of how an external threat is going to disrupt your organization, such that you must either change quickly or go up in flames.

The term “burning platform” comes from a famous memo written by Stephen Elop. At the time he was CEO of Nokia, and he was trying to get his executives to shake off their torpor and realize that, while they had been the leading company in mobile phones for years, Apple’s iPhone and Google’s Android were an existential threat. In his memo, Stephen Elop stated, "We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally. Nokia, our platform is burning."

But the telling fact is that Elop’s memo failed. The quintessential “burning platform” narrative was not enough to motivate change within Nokia's organization. Nokia wound up selling its phone business and getting out of the category entirely.

In order to inspire and motivate others, you need a positive case for change. You need an answer to the question: How will your organization create value by undergoing and pursuing this transformation?

When Satya Nadella stepped into the CEO role at Microsoft, he stressed a clear, positive vision of Microsoft’s future as a technology company "whose mission is to empower every person and every organization on the planet to achieve more." Nadella continued to relentlessly communicate this vision to stakeholders throughout his company, explaining in detail what it meant for the work they did and the products that they built. As he explained, "Productivity for us goes well beyond documents, spreadsheets and slides. We will reinvent productivity for people who are swimming in a growing sea of devices, apps, data and social networks. We will build the solutions that address the productivity needs of groups and entire organizations as well as individuals by putting them at the center of their computing experiences. We will shift the meaning of productivity beyond solely producing something to include empowering people with new insights." 

This positive vision helped to shift the direction of the company into cloud-based solutions and more open partnerships with other tech companies—from Apple to Google to OpenAI. Since Nadella became CEO, Microsoft's share price has increased tenfold.

Psychology has shown us that leaders need to tap into two kinds of motivation to enact change. The first is extrinsic motivation. Within a business context, that boils down to things like ROI, new revenue, the impact on EBITDA, and other financial metrics. This motivation is critical for shareholders if you're convincing them to invest, and CFOs or anyone who is responsible for profit and loss (P&L) if you want them to get on board with a digital transformation strategy.

At the same time, leaders also need to create intrinsic motivation. This is all about the value that digital transformation will create for others—your customers, your partners, and society at large. If your company truly does transform, what difference will that make in the world? For the average employee inside a business, if the EBITDA shifts a point, it generally doesn't shift their lives. If they're going to go through all the hard work of changing their job and the work that they do, they need to see some kind of purpose and meaning in it. This is where intrinsic motivation comes in.

This combination of motivations is critical. Both extrinsic motivation and intrinsic motivation need to come together to create a shared vision that inspires change.

Defining a shared vision is the crucial first step in any successful digital transformation effort. It represents the first in a five-step framework—The Digital Transformation Roadmap—that I have developed based on research and is designed to be applied in any organization in any industry.

The program Leading Digital Transformation: Rebuilding Organizations for the Era of AI, which I teach at Columbia Business School, is designed to help executives apply this framework to the digital transformation of their own businesses. In this immersive 4-day program, executives learn from each other as they gain the tools and skills to reorient and transform their businesses for the digital age.

Digital transformation is not a box to be checked. It is a critical challenge for every leader today to master. Defining a shared vision—unique to your business, and with a positive case for change—is the first step to securing a future for your own business in the digital era.