Where to Start With Digital Transformation

In his many years in industry and as an entrepreneur and researcher of digital transformation, Abayomi Baiyere has noticed how organizations struggle to take stock of their digital capabilities or develop what they need to execute a big change. “Some end up duplicating efforts, missing essential digital capabilities, wasting investments, being frustrated and, ultimately, failing or learning the hard way,” says Baiyere, Distinguished Research Fellow of Digital Technology at Smith School of Business.

Baiyere decided to do something about that. During his time in Finland, he and his colleagues — Hannu Salmela (University of Turku), Harri Nieminen (VTT Technical Research Centre of Finland) and Tomi Kankainen (DIMECC Oy) — developed a deceptively simple framework for assessing digital capabilities in four key areas: management, infrastructure, networking and development, or MIND for short.

In this conversation with Smith Business Insight senior editor Alan Morantz, Baiyere discusses what the framework offers organizations that may not know where to start with digital transformation.

One would think organizations would have a good idea of their capabilities relative to what they’re setting out to achieve. Why do they struggle with assessing capabilities when it comes to digital-first transformations?

I like to think of it as a voyage to an unfamiliar domain. These organizations typically are pretty good at what they do, but digital transformation requires them to actually open a door to a new dimension that isn’t something they typically think about. It’s like changing the wheel on a moving vehicle.

With an IT project, you bring in technology to help you do what you’ve been doing before, only faster or more efficiently. But when it comes to digital transformation, many times the offerings of these organizations also have to shift. And therein lies the difficulty. There are parts they know very well but there’s a lot they don’t know. If you’re following how digital technology is advancing, it’s almost something new every day. How do organizations wrap their heads around this? First hint is not to treat it like another IT project. There’s a strategic component to it. There’s a tactical component. There’s an operational component.

Organizations may have an idea of an end state, let’s say overhauling the customer journey. How do they typically go about taking stock of what they have and what they need to get them to that end state?

One of the challenges for most organizations is that end state is not known. They’re still trying to figure out: Should we leverage data to change our products? Or should we actually change our identity? It can be a shifting target so there isn’t a static view of what capabilities are needed.

Most organizations will hire consultants to help get people on the same page. Other companies will do trial and error. There’s value to that because there are a lot of unknowns, and through that process they may actually strike gold. But at what cost?

What we put forward is a simple approach to get both the strategy decision makers and operational people to have a common sense of direction. Given that technology changes so much and that organizations have tunnel vision, there’s a need to drive ideation across the organization. You just don’t know who will create that spark to get your organization flying into the digital realm.

What is the core of your MIND framework?

The framework helps organizations ask three straightforward questions that are pivotal for a conversation about capabilities relative to their transformation goal.

The first is, What do we have or not have? That’s an assessment of the current status of the organization relative to where they want to be. The second is, What can we do or not do? That’s about the capabilities they have or that are missing. And then, What should we or should we not be doing? That’s about the aspirations requiring a rethink of the capabilities. With all these questions, the transformation goal always serves as a guiding compass.

The framework brings together people at the operational or technical level of the organization as well as decision makers at the strategic level. Typically, the leaders will formulate a strategy that’s a vision of where they’re going. Then they involve all managers and employees with knowledge of the organization to discuss: If they’re going to achieve that goal, what do they know about what they have and don’t have? That forms a useful starting point to identify capabilities that they don’t have that would be essential.

These emerged from an extensive review of prior research on the useful capabilities for technology-driven transformation. We came up with a huge table of capabilities and then categorized them into four categories.

With management, it’s about the capability to manage digital technology to achieve a transformation goal. This is about strategic thinking, how to leverage people, entrepreneurial alertness. When you go digital, there’s an agility required, a different way of working. It requires the capability to think in a very planned process and to iterate a lot.

Infrastructure refers to technical assets, personnel, knowledge operations related to digital technology. Think of it as an enabler of what you’re capable of achieving based on the tools in your toolbox.

Networking is not about connecting cables. It’s about recognizing that you don’t have all the expertise in-house and that you may need to extend the boundaries of your organization to people who may not be employees. It represents an organization’s aptitude for identifying, acquiring and absorbing digital value from outside its immediate business environment.

And development refers to how well digital activities of the organization align or adapt to the business objectives. It speaks to the ability to leverage resources to create and develop new technology solutions, new value propositions for your customers. It requires business system thinking, business process integration, internal partnerships.

What the framework represents, at the beginning, is that it helps companies establish a direction. You need that compass to point somewhere. As you go along, you may need to do a course correction, but now you have the vocabulary to say, ‘This is what we thought before, but we recognize the need to change the infrastructure capability. Let’s tweak it based on this new information.’

Your MIND framework was adopted by a consultant working with a manufacturer in Finland, and you worked with this company as well. What did you learn from this experience?

One is that I noticed a shift in attitude. This is a manufacturing automation company where the CEO is a visionary who realized the need to take digitalization seriously. One of the wake-up calls for them was when they bid on a project that they were favourites to win. In the end, a digital startup won the bid. How could a software company win a bid for a machinery project?

It turned out that this digital startup had what the customer needed in terms of their software, and they just went for the cheapest hardware they could find. What wowed the clients was how they leveraged digital technology. This was an awakening for the manufacturer, and from that point the CEO realized they needed to do something and transform fast to keep up.

So they went through a strategy exercise within the organization but went back to doing the same thing as before. In a second iteration, they brought in consultants who recommended they take digital transformation seriously. Again, they went back to doing what they were doing. The allure of the familiar was just so difficult to break.

This is when we started our research with them. From that point, people within the company could see themselves in the process and had an understanding of the capabilities the company had and what was needed. This attitudinal shift was a huge win for the firm.

Having a shared understanding, a shared conversation, is magic. It doesn’t matter how visionary you are. If you get your organization on board, it helps align people to the transformation goal.