Business Management

Where Digital Transformations

Go Wrong in Small and Midsize
Companies
by Cynthia A. Conway and Mitch Codkind

August 24, 2021

tomnackid/Getty Images

Summary. The current economic environment threatens the success — and

perhaps even the survival — of many small and midsize companies, because larger
organizations are increasingly able to provide personalized experiences to their
customers, in literally any way their... more

Digital transformation is a hot topic, but most leaders don’t

understand the full scope of what it means. At a recent class in
Drexel University’s Executive MBA program, one of Microsoft’s
highly respected technology executives and global C-Suite
advisors, April Walker, presented this definition: “Digital
transformation is not just ‘doing digital.’ Digital transformation is
a deliberate, strategic repositioning of one’s business in today’s
digital economy.” She went on to share that businesses of all sizes
can no longer get away with using digital tools to simply enhance
and support traditional methods of doing business.

The current economic environment threatens the success — and

perhaps even the survival — of many small and midsize
companies, because larger organizations are increasingly able to
provide personalized experiences to their customers, in literally
any way their customers choose.

Most leaders of these smaller companies have already made

significant digital investments to support their businesses
operationally. They may have implemented technologies across a
broad spectrum of business functions, like HR, governance and
cybersecurity, customer relationship management (CRM),
enterprise resource planning (ERP), and finance and risk, but
stopped short of investing in AI or predictive analytics. But even
as teams continue to work hard to harness all the data being
generated by these technologies, it still takes longer than it should
to get answers to basic KPI questions that are critical to running
the business, such as those around customer churn, retention and
satisfaction rates, employee satisfaction and turnover, average
deal size, or billings by key products and services. Even more
frustrating is that, when the reports are finally delivered, they
lack insights into why the changes are occurring.

Assuming you have the above in place, what digital strategies are
most small and midsize businesses missing? The answer is two-
fold: understanding that you need specialized business analytics
expertise on your leadership team and that you need to change
how your organization makes decisions.

Hire a Data Scientist and Implement a Data-Driven

Decision-Making Culture

An April 2020 Oxford Economics study uncovered a sense of

unpreparedness among 2,000 small and midsize businesses
surveyed across 19 countries. Approximately half of participants
reported that the pandemic brought a series of operational
disruptions and market volatility that has challenged their ability
to serve customers reliably, engage employees authentically, and
build trust with their partners. Although that may not be entirely
surprising, more revealing was how they viewed their access to
data-driven insights to support their goals and digital
transformation efforts. Fewer than 40% said they have all the data
needed to support analytics-based decision making. Gaps in data
collection and analysis hinder small and midsize businesses’
ability to offer customers personalized connections. As a result,
67% of those surveyed said that this data deficit is giving larger
organizations a stronger competitive advantage due to the more
sophisticated analytics capabilities they have in place.

In today’s digital world where customer, operating, and financial

data is being collected at an exponential rate, you need the
specialized expertise of a data scientist to help you develop a
business intelligence strategy to meet your goals, boost
profitability, and drive success. First, they will make sure your
data is in good shape to accelerate problem solving and business
growth. From there, they will develop a technology architectural
plan. The plan, which should be high-level and proprietary to
your business, will outline how to store your company’s data,
which will most likely be in a highly scalable, cost-effective, and
secure cloud environment like AWS or Azure.

The plan will also include technology solutions to ensure you

meet your corporate governance requirements, and it will enable
a full range of analytical capabilities that connect and share
information across all functions of your organization. It will also
include a data visualization layer, which will allow you to see your
prioritized performance metrics quickly and easily, accelerating
your organization’s decision making to near or real time.
With this in place, you, your data scientist, and their peers will
develop processes across your organization to foster a data-driven
decision-making culture for a customer-centric organization —
without bias. They’ll ensure you’re working with just the right
data based on measurable goals or KPIs and have the ability to
understand trends, seek out opportunities, and identify issues
before they become barriers to profitability. They’ll also analyze
patterns and utilize them to develop strategies and activities that
benefit the business in a number of areas.

While you may not be entirely on board with AI and predictive

analytics, small and midsize companies should aim to adopt these
tools over the coming years — especially as many competitors
begin to personalize customer interactions using AI-driven
software and chatbots and increase efficiency with robotic
process automation. Specifically, supply chain leaders across
many industries are using these technologies to power their
strategically repositioned, customer-centric organizations. By
going above and beyond conventional approaches of doing
business, leaders are able to consistently deliver more resilient
supply chains, higher levels of innovation, increases in customer
and employee satisfaction, and improvements to overall
efficiencies and financial growth.

Transform Your C-Suite into Digital Leaders

In our combined 60 years of experience, we’ve found that change

is always most difficult at the top. The primary goal of having a
strategic data scientist on your leadership team (known as a chief
data officer in larger companies) is to improve the value you’re
getting from data and analytic investments. They will be
successful if they treat data and analytics as an asset, create
business value, increase data sharing, and ensure that your
organization’s decision making is data driven. For those things to
actually happen, your entire leadership team must align with and
support them and play an active role in ensuring their success.
Throughout the process, each of them will also learn how to be an
analytics-enabled, digital leader.
Not all leaders are interested in or willing to embrace being a
digital leader, however. The simple comparison chart below uses
the standard “7 Ps of marketing” to illustrate the typical strategic
thought processes of today’s leaders.

The Ambidexterity Exercise

Skills analysis for today’s top-performing leadership teams.

Standard What leaders What leaders What

marketing from an analog from a digital ambidextrous
elements to business think business think business leaders
help leaders about about think about
strategically
position their
business

PRODUCT What can we How do we How can we

sell, in what create value for reimagine each of
volume, that our customers? our businesses
makes the most from a truly
money? customer-centric
perspective and
determine which
analogs can be
exploited and
which digitals
should be
explored?

PRICE What is the How can we Before diving deep

highest price capture value into this important
point customers for our topic, how does our
will pay; how ecosystem and balance sheet
does it compare share value with change when
to the our strategic rethinking strategy,
competition? business culture, talent,
partners? and operating
models to support
a hybrid business
model?
PROMOTION Who is our How can we Before diving deep
customer? What bring value to here, make sure
is our message? the community value creation for
Where can we and optimize customers and the
reach them? network power of strategic
effects? partnerships is
clearly understood
for analog and
digital, and in
particular, defining
the customers who
value both.

PLACE Where do we How do we Before diving deep

want to sell our scale to serve here, understand
products and/or the world? value creation
services? and the power of
strategic
partnerships for
both analog and
digital businesses,
and in particular,
defining the
customers who
value both. When is
location relevant
and to whom?

PEOPLE What customer How can we What skills

service model leverage our and talent (existing
do we need to culture and or through
satisfy our talent to foster recruiting) are
customers? lifetime value needed for future
with our sustainable
customers? success as a hybrid
What value can business? What
we bring to our talent gaps do we
community? have? What are our
talent hiring and
learning
development
strategies to
correct this?

PROCESSES How can we What technical How can we unlock

make and architectural and leverage our
deliver our plan, data data to propel
product and/or strategy, and continuous
services in the experiences do innovation and
most efficient we need to improvement
and cost- create, capture, lifecycles for both
effective way? share, and analog and digital
deliver value to businesses?
our customers?
 PHYSICAL What physical How do our How do we define
EVIDENCE product does customers this, now as a
our customer define tangible hybrid business?
receive? and intangible
value?

© HBR.org

Is your organization made up of leaders with analog expertise

who are generally product focused, driven by profits, and
constantly aware of external forces — especially from their
competitors? In contrast, do you have leaders with digital
expertise who are customer focused, driven by delivering value
through technology, and constantly looking for strategic business
partnerships to grow their ecosystem — especially from
competitors who can deliver value better than they can? Or do you
have an ambidextrous leadership team, which is a hybrid of both?
By creating a culture of ambidexterity within your leadership
team, you’ll be able to be able to remain competitive in your
current core markets while also winning in new domains. In our
experience, a leadership team comprised of both areas of
expertise is ideal.

Take the time to simply understand these different perspectives

and where your company fits on this chart. It can help you
establish a starting point for how to begin and improve your work
to transform your organization into a digital business for current
and future success.

For generations, small and midsize businesses have enjoyed a

distinct competitive advantage of strong, loyal relationships with
their customers. This bond was forged by consistent and
continuous levels of personalized service and experiences. These
relationships generated meaningful insights or business
intelligence that allowed companies to continuously improve,
add value, and stay ahead of their competition. Another distinct
competitive advantage was the ability to make and implement
strategic decisions at a speed their larger competitors could never
hope to replicate.

Now more than ever, it’s important to recognize that your digital
competitors, who are using speed as their competitive advantage,
are disruptors by nature. If you wait to be disrupted, it could end
your business. To avoid this all-too-common pitfall and ensure
sustainable success,
Cynthia A. Conway is CEOdo not
Peer wait. Be
Advisory deliberate about not
Group
delegating.
Chair of VistageTake ownership
Worldwide, toFounder
Inc., and transform
of your organization now
OakWise
— beforeMarketing,
someone LLC, where
else doessheit
helps
for CEOs,
you.
executives, and business owners make great
decisions in today’s digital economy that benefit
their companies, families, and communities.

Mitch Codkind is president of Initiative

Consulting, a division of Initiatives, Inc., where he
works with CEOs and CFOs to develop strategies
and executable plans to maximize shareholder
value.