You’ve hired a digital transformation officer. Now what?
Recently hired a digital transformation officer and not sure what to do next? Our own Bruno Fiastre discusses the opportunity and why private equity, real estate, and alternative asset firms should not let it go to waste. Read more on Bruno’s approach in his feature article in PE Hub.
A new job function is gaining in popularity at private equity firms, real estate companies and other alternative-asset managers.
It goes by several names – digital transformation officer, chief of digitalization, head of digitalization or even leader of digital product.
A recent appointment for a director of innovation at U.K. real estate company Palmer Capital said the move would enable the company to “drive and promote agile decision making in a changing world.” He joins many others, including in PE.
But what does this title mean? After all, it is not as if previous major investments were made by abacus and typewriter. As the Harvard Business Review put in an early article on the phenomenon, “in many companies, ‘digital’ is a cacophony of disconnected, inconsistent, and sometimes incompatible activities.”
And more important, what is a newly installed digital officer’s opportunity to institute meaningful change inside organizations?
When an organization decides to hire someone with an explicit mandate around digital transformation, it shows it is committed to operational changes that not every organization is able or willing to make. This is particularly important in industries, like PE, that have traditionally eschewed technology and infrastructure.
Just as every organization is different, digitalization heads all have slightly different mandates – but they share a few common threads:
- A mandate toward modernization
- Understanding of shortcomings in existing processes
- Review of existing processes and recommendation of revisions to save time and/or money
- Incorporation of new technologies and industry best practices
Alternative-asset-management firms can resemble medieval courts with several factions, each with a dedicated set of interests.
A newly installed digital transformation officer must spend time with all of them, understanding their needs and requirements. Smart heads of digitalization will spend as much time listening to colleagues as they do implementing solutions, especially in their first few months.
Resistance is inevitable, even if the person involved has a mandate from the chief executive or primary portfolio manager. Transformation officers must be prepared to smooth over misperceptions about what will and will not change.
I have found the most compelling thing I can say inside organizations is this: “Digitalization does not mean standardization.”
The worst possible approach to digital transformation is to push all functions toward a preset approach.
There are two main issues here. First, standard approaches do not save time or money because of the resources required to fit current data into those approaches. Second, and more important, the calculation models and reporting that have developed over years represent an investment firm’s true alpha.
Digitalization is about taking what makes companies unique and enabling those processes to work better. This means cutting down on painful Excel calculations or enabling instant access to data from anywhere.
It can also mean realizing more complex formulas or scenarios that would have taken too much employee time using standard techniques.
Talented heads of digitalization have to become evangelists for change, to encourage their new coworkers to be unsatisfied with the status quo.
As time goes on, they need to be unafraid to tout success both inside and outside their firms. People can be too hung up on time used during implantation and forget the benefits gained.
These improved processes can also be selling points to current investors – showing a continual dedication to maintaining their edge – and potential institutional investors – who are looking for an edge.
Digitalization is an incredible opportunity for organizational transformation. Smart firms won’t let that opportunity go to waste.