Leadership for Digital Transformation
Transformational leadership is a leadership style in which leaders encourage, inspire and motivate their employees to innovate and create change that will help grow and shape the future success of the company. This is achieved when company leaders lead by example and foster a strong sense of corporate culture and independence in the workplace.
In a changing and dynamic business environment, the key to success may be to find a leader who dares to take risks and thinks ahead. This is what transformational leadership is all about.
- It fosters motivation and positive development of its followers.
- Exemplifies moral standards within the organisation and encourages the same in others.
- It fosters an ethical working environment, with clear values, priorities and standards.
- It develops the culture of the company by encouraging employees to move from an attitude of self-interest to a mindset of working for the common good.
- It emphasises authenticity, cooperation and open communication.
- It provides advice and guidance, but allows employees to make decisions and take ownership of tasks.
Although the concept of transformational leadership can be applied to any type of business, it is particularly important in companies involved in digital transformation. Adapting to rapidly advancing technology requires constant innovation and strong leadership to stay ahead of the curve and remain competitive.
Source: https://www.youtube.com/watch?v=60O2OH7mHys
According to a study by Gartner, 40% of CIOs are leaders in their company's digital transformation, while 34% say they are responsible for technology innovation. Inspiring and motivating employees is an important part of digital transformation planning.
However, not all parts of ICT can benefit from transformational leadership. The development of some projects requires more structure, consistency and security. This style of leadership is referred to as transactional leadership.
Leadership style matters
Transactional leadership is the exact opposite of transformational leadership, i.e. it relies on inspiring and motivating employees through incentives and punishments. This style requires supervision, organisation and constant performance monitoring. The transactional leadership model does not try to innovate.
Instead, it is based on keeping things constant and predictable over time. Possible errors are thoroughly investigated and the ultimate goal is to create efficient working routines.
The transactional leadership style is best suited to departments that require routine and solid structure, especially in areas where it is essential to minimise inefficiency and chaos. As a consequence, there is no room for innovation in this leadership model.
While transformational leadership allows employees to come up with new ideas and look to the future, transactional leadership aims to maintain consistent and secure processes over time.
Examples of transformational leaders include the following:
- Jeff Bezos, Amazon: As someone who jumped from the world of finance, he brought a fresh perspective to e-commerce through years of experience in a different industry.
- Reed Hastings, Netflix: Coming from a software company, he was unfamiliar with established procedures in the television industry.
- Tim Cook, Apple: Tim has always maintained a focus on innovation, software development and brand loyalty.
How to define an appropriate Budget for Digital Transformation?
Defining the budget for a company's activities is always complicated, and even more so for companies undertaking digital transformation projects.
With so many different moving parts, digital transformation projects require a solid foundation from which to start building, including a budget that accurately reflects the scale and complexity of the initiative, while remaining achievable and realistic. However, defining such a budget can be challenging.
Defining the budget for a company's activities is always complicated, and even more so for companies undertaking digital transformation projects. With so many different moving parts, digital transformation projects require a solid foundation from which to start building, including a budget that accurately reflects the scale and complexity of the initiative, while remaining achievable and realistic. However, defining such a budget can be challenging.
Source: https://live.staticflickr.com/2947/33887741275_22bc30a37a_b.jpg
The following are key considerations to be addressed to ensure that the budget dedicated to digital transformation supports organisational requirements and strategic objectives.
1. Involve everyone
Obviously, it is impossible to involve every individual in the company in the budgeting process. However, when it comes to digital transformation, it is important to consider alternatives to traditional budgeting methods that are generally managed on a departmental basis. This model is not viable when digital transformation is spread across multiple departments, roles and locations. Instead, a collaborative approach is needed that facilitates an understanding of core business processes to ensure that every element of the business is accounted for in the budget. Without this holistic picture, there is a risk of creating bottlenecks.
2. Consider hidden costs
In companies where there are different business units, there are likely to be additional areas within the company that will need to be included in the digital transformation budget.
3. Shared vision
Defining the budget is only part of the battle. It is crucial to create a collective awareness of the need and benefits of digital transformation from an early stage. This is why an early 'discovery' phase can help to more clearly articulate objectives and ideas that provide greater confidence and help ensure buy-in. Prototyping or proof-of-concepts are good tools to present ideas in a highly visual way.
4. Value
The key driver behind any digital transformation project must be to deliver value. If you focus only on the functions you want to deliver without thinking about how they will satisfy the overall vision, the project is unlikely to achieve the proposed outcomes. When defining the budget, keep in mind the precise reasons why you want to undertake digital transformation projects.
5. Agility
Is the budget flexible enough to capitalise on new trends and market conditions in a timely manner? The commercial elements of a project generally follow very traditional approaches, and as such often focus on fixed costs. Delivering a digital transformation requires a shift in mindset to deliver the greatest possible value from transformation initiatives.
But are companies really investing in digital transformation?
Globally, companies are devoting a large portion of their capital to digital transformation, as there is a clear trend for companies of all sizes to undertake digital transformation projects. This trend is also characterised by less investment in data analytics-related projects and a greater focus on developing business applications, new services and cybersecurity. However, successful companies with high operating margins are generally investing more in technology innovations to transform the business in order to keep up with the times.
In the European Union, and according to the Digital Economy and Society Index, the trend is one of growth for all indicators of the use of different technologies. This can be seen in the following graph, which also shows that cloud services and Artificial Intelligence are the fastest growing projects:
As far as online business is concerned, it is also evident that it is growing steadily. In the following graph we can see how, despite the differences between large, medium and small companies, the growth in turnover from e-commerce is constant:
Do you want to explore for yourself the relevant indicators on digital performance in the EU and its Member States, across five different dimensions (Connectivity; Human Capital; Internet Use; Digital Technology Integration; and Digital Public Services)? Access the EU's Digital Indicators and Data Visualisation Tool.
Putting the customer at the centre
As markets around the world go digital, companies no longer have a small group of competitors, which they face on price and quality.
Today they compete globally, and the difference between them is the level of customer satisfaction they can deliver.
Thus, hand in hand with digital transformation, a traditional product-centric strategy has given way to a more customer-centric strategy. We can say that the most prominent objective of digital transformation is customer satisfaction and customer experience.
Customer Centricity
Investing the necessary resources to make the customer's experience with your brand the best possible is what makes a company "Customer Centric".
The main characteristic of a Customer Centric company is that all its strategic planning is focused on the customer. In other words, everything that is carried out within the organisation is aimed at providing the customer with a satisfactory experience.
Source: https://www.youtube.com/watch?v=3_EXavzcV50
It no longer makes sense to group all customers into a single global segment, and to use the same communication, engagement, sales and CRM strategy with all of them.
Instead, customer-centric companies strive to listen to the customer, provide answers and ensure customer engagement, especially in the early stages.
So, if I want to focus my attention on the customer, how do I do it? Here are some tips to get you on the right track:
- Customer-oriented leadership
We have already discussed leadership above. Focusing on the customer will mean making decisions that put the customer above all other factors. It will be necessary to train or recruit leaders who think about the customer first and make decisions accordingly.
- Get to know your customers
The Customer Centric company must know its customers' tastes, challenges, and goals, and of course their online behavioural parameters. This is the only way to offer the best possible experience.
Only if we know what they are looking for will we be able to adapt our strategy to them and personalise our product or service offer. The implementation of a CRM (Customer Relationship Management) tool, which we will talk about later, can make this task much easier.
- Customer contact channels
Today's customer is connected to one or more digital devices and serves a variety of channels. Therefore, the optimal solution is to have an omni-channel or multi-channel service, which allows contact through the customer's preferred channel, whatever it may be.
In fact, the customer may perceive very positively the availability of various channels for contact with the company.
- Decentralise
Companies that give freedom to their different departments or work teams eliminate intermediate processes that are not always necessary. In addition, by having greater autonomy at a level close to the customer, they can offer more agile responses and make decisions that improve the customer experience.
- Use the comments to improve
Keep up to date with the feedback provided by customers.
It is imperative to respond to their comments as the image of the company will be greatly damaged if this is not done properly.
It is a very valuable source of information, which can enable constant improvements to be made to products and services.
- Monitor, monitor and monitor
We do not want the customer to visit us only once, and we already know that to achieve this it is necessary to listen to them and get to know them. How do I assess whether my strategy is working to retain my customers? There are several indicators that can be used to carry out this monitoring. It will be necessary to define which are the most appropriate in each case and to monitor them while testing different customer relationship strategies. Some of these indicators are as follows:
Lifetime Value (LTV)
Measures your company's profits in relation to a specific customer. That is, what were the profits generated for the business from the moment it became a customer of the company.
Churn Rate
Measures the number of customers or subscribers who have stopped following a company each month. There is no point in acquiring new customers if you are losing many others.
Net Promoter Score (NPS)
Have you ever been asked how likely you are to recommend a product or service to a family member or friend? That question is used to measure NPS. It is an indicator that measures customer loyalty.
It works by subtracting the detractors from the promoters, then this result is divided by the total number of responses obtained and multiplied by 100. An NPS above 0 is perceived as good and an NPS of 50 is excellent.
Customer Acquisition Cost (CAC)
It is the result of the sum of the investments made in marketing and sales divided by the number of customers won in the same period. It indicates how much is invested in marketing and sales to close each sale.
It should always remain lower than the LTV. If it is too close to, or even exceeds the lifetime value, the financial health of the business is in serious jeopardy.
Average ticket
It is the result of dividing the total value of sales by the number of orders.
It indicates how much money each customer is putting into a company over a certain period of time.
Knowing it will allow you to take actions that can increase it more and more. Increasing the variety of products, creatively associating less sold products with the most popular ones, or reminding the customer of products he/she has bought on another occasion, are some of the strategies that serve to increase the average Ticket.
Customer Relationship Management (CRM)
Customer Relationship Management (CRM) software is software that can comprise various functionalities focused on managing a company's sales and customers.
Source: https://www.youtube.com/watch?v=SlhESAKF1Tk
These systems can greatly help companies to focus on customers. However, as you might expect, technology alone can only do so much. In fact, although it has been shown that the use of CRM can increase revenue by 41% on average, it is estimated that 43% of companies that use CRM do not use it correctly.
But then... What is the right way to use CRM?
A winning CRM strategy needs to be developed. To do so, the company must:
- Set objectives and plan the steps to achieve them, setting smaller, achievable intermediate goals.
- Prioritise customers: Not all customers are the same. Returning customers are often much more valuable, and spend on average almost twice as much as new customers. So we must be willing to prioritise customers who are more profitable and we must identify the traits that matter most to us in a buyer, in order to segment customers and increase effectiveness.
- Involve employees: A CRM is designed to handle large amounts of data and facilitate communication between various groups, but it is up to the employees to determine whether this communication actually takes place.
- Synchronise everything with the CRM: A CRM may have built-in proprietary programs that mimic the functionality of other applications. However, if this is not the case, and it is necessary to use external applications, it is important that they are synchronised with the CRM. Synchronising everything together ensures that the CRM can be used to its full capacity.
At the end of the day, a CRM is just a tool. On its own, it is incapable of helping the business achieve its objectives. But when combined with a detailed business strategy, CRM can help put the customer in the company's focus.