Reflections on the Digital Transformation of Traditional Enterprises

Traditional enterprises is actually a revolution rather than a mere transformation. Failing to recognize this is the essence of the failure of many enterprises in their transformation endeavors. The day before yesterday, when I visited Microsoft, Mr. Wei, the CTO who has gone through the entire transformation cycle of Microsoft, made a powerful statement. He said that the digital transformation of all enterprises is essentially not a transformation but should be called digital change or even digital revolution. In that demonstration space of Microsoft, there were 12 insights on enterprise transformation posted, each of which hit the nail on the head regarding the essence.

12 Insights on Enterprise Transformation

• Only by respecting our own history can we better face the future.
• The strategy should be visionary while the tactics should be people-oriented.
• Fully mobilize every colleague and front-line manager on the front line.
• Non-quantifiable indicators are completely meaningless.
• Start with the end in mind and be result-oriented.
• The preparation will never be perfect. Perfection is the enemy of taking action.
• Take small steps quickly, correct mistakes in a timely manner and iterate.
• Celebrate every little success. 
• Communicate! Communicate! Communicate! 
• Let technology serve as the accelerator of reform. 
• Go all out. It's either ALL IN or get out. 
• Reform is always on the way.

It might seem rather ironic to discuss digital transformation using the case of Microsoft. However, that's the truth. The success of the transformation, or more precisely, the revolution, of such a huge enterprise indicates that these 12 points have precisely hit the nail on the head regarding why the digital transformation of traditional enterprises fails. Many of them can even serve as negative examples.

Here, I don't intend to delve into the technical details of digital transformation. Too many people, mostly professionals in the digital field, are talking about those technical details. From the perspective of the top decision-makers of the actual users, having experienced numerous gains and losses in the transformation process, having been fortunate enough to receive guidance from masters, and having groped in the endless darkness on my own and fallen into most of the possible pitfalls, I have finally found a bit of a methodology that I think is worth sharing. In this world, there is a methodology for everything. Excellent companies simply apply the correct methodology in the process of their corporate governance.

Summary of Several Points of Experience

1. It's not about digital transformation, but digital change, or even revolution. Technology is merely an accelerator. The issues regarding digital technology are not the real bottlenecks and difficulties. A company that can be trapped by digital technology is not qualified to talk about change. Because the core elements that determine the success or failure of digital change are never the product technologies in the digital realm. Overcoming this technological bottleneck is just the entry threshold. Only after crossing this threshold can we start to discuss digital change. There are numerous traditional enterprises that fail to cross this threshold, but that doesn't prevent them from using fragmented digital technologies to improve efficiency. These are two different matters. First of all, it should be made clear that digital technology is not the core obstacle. The real obstacle lies in re-evaluating the existing business scenarios, governing the company with the right methodology, deconstructing the business from a digital perspective and with digital concepts, and operating the business.
2. The core of digital transformation lies in re-sorting out the business, reconstructing the entire organization, revolutionizing the decision-making and working patterns, and even reshaping the business model. These are not problems that digital professionals can solve on their own. This is precisely why many people say that this is a top leadership project. Implementing an ERP system is already a top leadership project, and the entire digital transformation is no exception. However, it doesn't mean that the top leader should do everything by himself. Instead, the top leader's awareness and determination must be in place. Anything that can be accomplished online can, in theory, also be accomplished offline. Technology is just an accelerator. The core reason why the vast majority of companies fail to achieve digital transformation is the problems with the business itself and corporate governance, which cannot be solved by digital technology. You can imagine that putting on makeup on your face can never fundamentally change the ravages of time. Between the fundamental and the incidental, the real problems of the company's business and governance, as well as the team's awareness and determination, are the real difficulties and obstacles. And this process is bound to be extremely difficult because it requires breaking out of the comfort zone and transforming into a better or completely different version of oneself. So, besides pain and determination, one also needs the opportunity to elevate one's awareness to that level, to see the entire transformation process from a top-down, God's-eye view, to know what resources are needed and how the transformation should take place. This is why many companies seek the help of consulting firms for digital transformation. Note that this definitely doesn't mean looking for simple software implementers. It requires a BA (Business Analyst) team that is proficient in business and has digital experience, can translate business into digital language, thoroughly understand and see the entire process, and has a God's-eye view. They can't solve all the problems either. Some personnel need to be upgraded to those with such awareness and experience. The structure of the entire organization will change, and some people will also change. Almost everything will change. In this process, it's not just about the technical difficulties and the difficulties of re-sorting out the business, but also about the setbacks in finding the right people as many people's interests will be affected. The investment is huge, but the pitfalls and resistances in the process of achieving results are immeasurable. At this time, I will recall a soul-searching question posed by a master to me: What is your purpose of doing digital transformation? 1. To change the world. 2. To become a leader in the industry. 3. To improve the company's efficiency? For an organization that wants to undergo transformation, if it doesn't aim for the first or second option, it will hardly succeed because it really requires going through a lot of pain and also needs the right opportunity. The determination and aspiration must be strong enough. And the investment in cost and the risks are also huge, and it may even be out of control at certain stages.
3. Often, such troubles are encountered in some small and medium-sized traditional enterprises. These enterprises are precisely those with very limited resources, small scales, relatively complex business structures, and an intense desire for the success of digital transformation. For some large-scale companies, in fact, the pain points mentioned above ultimately boil down to the awareness and determination of the top leader. They do not lack resources. However, the problem faced by the digital transformation of the vast majority of enterprises is the lack of resources, yet they still want to achieve the success of transformation. It is extremely difficult to fulfill grand visions with limited resources. Precisely because it is difficult, it is meaningful. Since companies with abundant resources can achieve it, their competition is not on this dimension. And if one or some companies in an industry with limited resources can achieve this qualitative change, isn't it an unattainable competitive barrier in itself? This is precisely the charm brought about by the success of digital transformation.

Summary of Key Points

Summary of Several Key Points We Have Experienced. We Are Also on the Way.

1. The transformation of the organizational structure should start from the business and re-sort out the organizational structure. If the design of an enterprise's organizational structure is wrong from the very beginning, there will be no way to talk about efficiency. Suppose a department that should not have existed has become the core resource distributor of the company. One can imagine that the digital governance plan designed based on this structure can only make the disorder continue to worsen.
2. The establishment and re-sorting of job functions, job grades, and business manuals. Yes, that's right. Many companies don't have business manuals, clear job functions and grades, or a reasonable organizational structure. This is the sorrow of small enterprises. Many business owners haven't received systematic and excellent workplace training, nor have they had the opportunity to develop to a sufficient scale to find truly excellent managers to acquire such common knowledge. When these aspects are not clear, including an incomplete budget system and unclear responsibilities and rights, the processes cannot be efficient. Digitalization can't solve these problems. The unclearness of responsibilities, rights, and interests is an important obstacle to digital transformation.
3. The transformation from IT (Information Technology) to DT (Data Technology) to OT (Operational Technology) also represents the transformation of work habits and patterns. Using algorithms to deconstruct humans is an important step. Except for highly sophisticated arts, most things can be deconstructed by algorithms. By using algorithms to deconstruct humans and reducing the decision-making points based on human experience, a significant step can be taken.
4. Start from the architectural design and then build on it step by step. Too much rework or the situation where some tasks cannot be carried out in the end is often due to errors or the absence of the original architectural design, which leads to repeatedly doing useless work.
5. During the process of digital transformation, it is essential to find the right people and focus on achieving results. If you can't find experts, you should seek professional consulting agencies. The most difficult part lies in understanding and deconstructing the business scenarios, and cooperating with the people or teams who are in charge of the business structure, including the top leader and central directors. Getting the direction and architecture right is more important than speed.
6. In the end, values determine everything. The top leader should have such aspiration, determination, and awareness. Team members need to be excellent, innovative, and open-minded. If they are not such people, they won't be able to go through this painful yet challenging and growth-filled process together. It is inevitable that some people will leave, and such turmoil will inevitably have an impact on the existing organization. This process is also an inevitable path, and one should be well-prepared for it.

The above should be our insights during the first stage of officially embarking on the right path of digital transformation. Much of the content is rather superficial. As the digital transformation progresses further, there will inevitably be more insights or revisions.