What can we learn from first-wave digital transformations?

Woman leading digital transformationAs many businesses move from the peak of inflated expectations down into the trough of disillusionment with their first forays into digital transformation, what learnings can we draw out on the dos and don’ts of digital?

In a previous post, I said that it’s a tough time being an Executive in a large corporation. They are caught between a growing worry that their market is next for disruption and a business model that is the very opposite of risk-seeking and nimble.

What happens as a consequence? Encouraged by external commentators and advisors they mobilise a digital transformation. Unfortunately, we’re not at all clear what a digital transformation is. Indeed ask 10 people and you get 11 different answers. So what do you do when you have an initiative and you don’t know what it is? We bring in someone with the title Chief Digital Officer (CDO) and let them work it out.

Now I’m prepared to bet a tenner that Jeff Bezos doesn’t have a CDO. Not that I’m trying to have a pop at CDOs, most of whom I’m sure are desperately trying to make a difference. It’s just that transforming the organisation surely has to be central to the role of CEO? But how many of today’s large company CEOs could have penned a memo like the now famous Jeff Bezos’ Big Mandate?

CEOs take note if you think that digital disruption is coming to your market, and you don’t know what:

“All teams will henceforth expose their data and functionality through service interfaces”

means, you’re part of the problem. Worse still it’s not what it means that matters, it’s why it’s important. Loose coupling of, and standard connections to, the organisation’s capabilities make changes happen much faster. And of course, when your CEO signs off the memo with the line “Anyone who doesn’t do this will be fired”, it grabs your attention. And to add insult to injury, Jeff Bezos wrote that memo in 2002. Now that’s prescient.

digital 1.0

So let’s take a hypothetical, first-wave digital transformation programme.

  • A transformation protagonist is hired in from an impressive role in an out-of-market, digital organisation. They arrive but remain somewhat apart
  • Because it’s not at all obvious WHAT digital means in your market and for your customers, they focus on HOW you do things
  • They set about disrupting you because that’s the way to get new digital things done fast
  • If they don’t own the technology function, they start to create their own one, with a separate set of disruptively incompatible approaches
  • Waves of new hires are made, agile DevOps teams are created, data lakes are filled and eventually, an app or two appears
  • Unsurprisingly, this all passes your customers by. They have better things to focus on in their busy lives
  • Costs spiral, productivity stalls
  • The transformation protagonist declares your organisation digital and exits stage left

Could it have been better? You bet. And let’s hope we learn that for digital 2.0.

An alternative approach

What should this transformation have been all about? At the very highest level, it must still be about two things: customers (not competitors or “digital” companies) and what you do, not how you do it. It’s customers that choose to use Airbnb, Uber and Amazon because these companies offer them something they’re not getting today. Disruption happens when your customers start doing business with someone else. And if doing a better job for customers isn’t top of the CEO’s to-do list, perhaps you need a new CEO.

How should the story go?

  • The CEO pulls together the customer officer, strategy officer, the people office and technology officer (after all, we’re all CDOs now): “We need to do a better job for our customers, and maybe we can make it easier to do business with us, and fix the problems our customers keep telling us about. We know our customers are moving on to new platforms, let’s make sure we are there with them too”
  • We mobilise a genuinely cross-functional approach, led from the front by the CEO
  • We start small because we need to learn how to do new things, but we pick some areas that really matter for customers. We also realise that we have to keep doing the current things our customers take for granted, brilliantly
  • We use our own people on the team. But we help them with some external partners who have been on the journey before. We co-locate teams
  • We’re frustrated that things take too long to do. So we start to try out some new approaches
  • Slowly we get faster
  • When we don’t know an answer we try out the idea with customers and see how they respond
  • When new approaches conflict with our current ways of working, we spend time working out how to make it fit together. After all, that’s the core of transformation, isn’t it? This isn’t trivial, because it’s not only about technology, it’s also about capital funding, decision-making, risk management, customer service, culture
  • Over time, we build out from our small start to take learnings across other teams. We’ve also realised that some of the things we’re doing for customers would also help our own colleagues too
  • Five years on, we seem to do more things this way than the way we used to

Let’s be honest, nobody ever transformed an organisation with a long heritage in 2 years. But it’s not about the end game. This is a race without a finish line. That’s why Jeff Bezos’ Big Mandate is so prescient – we’re always going to be changing, so we need to be able to do that quickly and easily. He also spotted the power of a platform, where others accelerate your progress by adding in their content. Sometimes the big things that are worth doing, take a little time to deliver. Netflix, who deliver the world’s best, streamed entertainment service, took 7 years to complete their migration to the cloud.

digital 2.0

So what are the big learnings from digital 1.0 that we should take forwards into digital 2.0?

  1. the aim is delivering better outcomes for customers, more quickly. Everything else should be assessed using this measure. Beware “more haste, less speed”
  2. if we’re really serious about this, leadership needs to come from the CEO. If the CEO is too busy running today’s business, then we’re not really serious about creating the future organisation
  3. disruption is not a good way to change established organisations from the inside. It damages revenue streams and creates winners and losers. Building a coalition across the right executives who then collaborate on making it happen is much more likely to succeed. Remember, it’s the old that funds the new
  4. digital transformation isn’t just about the technology function, it’s about the whole organisation. To make the change manageable, start with an end-to-end slice across the whole organisation. Take the learnings and then scale from there
  5. hotspots will appear where the new meets the old. Take the time to work these though, that’s what transformation is all about
  6. this is a journey, not a destination, so building towards an organisation with people, processes and systems that can adapt quickly in future is critical. Agile, Cloud, DevOps and all the other “How” ideas need to be measured against this standard
What can we learn from first-wave digital transformations?

Rob works with technology start ups and leading retailers on the impact and opportunities of digital technologies