Book Review by Neil Rainey of Neil’s Books
What is it really and is it worth the effort?
In this review of “Digital Transformation – Build Your Organisation’s Future for The Innovation Age” by Lindsay Herbert, Neil gives us an insight into the key topics and learnings.
What does REAL Digital Transformation look like?
|Do not assume everyone understands the same thing when they hear “Digital Transformation”. It is a powerful concept, often misunderstood.|
Digital Transformation is about finding the new business as usual. It takes the right people with the right attitudes and mindsets to get there. Real Digital Transformation is about the organisation’s ability to be able to react to use new processes, technologies and ways of working. Most organisations are slow to react and bogged down. Real Digital Transformation breaks down the barriers of hierarchical inertia and creates real adaptability. New devices, platforms, ways of working and processes are tangible proof points of Digital Transformation. Digital Transformation increases competitiveness, revenue, market share, lowers customer acquisition cost and enables lower cost.
“Digital Transformation” is now a cliché
Jargon is dangerous as it leads to mistakes. Digital means different things to different groups. For Consumers “Digital” is everything on the internet, modern appliances such as mobile phones, fitness watches and many more. For Businesses “Digital” includes IT infrastructure, communication processes and processes such as HR, Supply Chain and others.
For a CEO it means we are doing web site upgrades to keep our investors happy that we are keeping up. For a CMO that we are spending more on Digital Marketing. For a CIO that we are buying a new Customer Management system and for a CFO that we are automating, reducing headcount and moving work offshore to save money. For a Digital Agency that we will develop a new website using “Agile” without preparing you for the ongoing change. In General, it means that we just don’t want to fail like Block Buster or Kodak by ignoring the inevitable.
Digital is a Democratiser
Digital gave power back to the individual. People can attract and retain customers from their garage. Value is created and held in new ways in a Digital world and it disrupts our old hierarchical way of doing business. Think Uber (a taxi company without owning a car), Air BNB (the biggest hotel chain in the world but owns no hotels). In addition, transparency means customers have more powerful than ever, Social media can trash your reputation in a day. Knowing who your customers are and what they expect in a digital era is vital. In Business to Business organisations, your “customers” are the many people who interact with your organisation, not just the decision makers in the Business you sell too.
Digital Transformation is a struggle
Change is an unnatural act for most of us, particularly change as a constant. We like the idea of change but not the effort and risk involved. The challenge is changing attitudes towards change itself.
Common challenges facing Digital Transformation
Staff resistance – caused by fears that machines may do their jobs or offshoring or younger Digital Native employees. Mid-level Management resistance – caused by perceived threat to autonomy and power. Loss of revenue from nondigital customer segments – this could be the segment of customers engage with you in a non-digital way. I.e. those who will only interact face to face. A Decrease in productivity – as we divert resources to a Digital Transformation, business as usual can suffer. Staff and Customer Experience inconsistencies – some areas may obviously lag as others may move forward and this can become obvious to customers.
Focus on the “why” not the “how” of your business when setting the target of your Transformation program.
Target “why” not “how” with your Transformation Program
Be clear on the target of your Transformation. Target it to transform the “Why” of your business not the “How”. Blockbuster doomed their transformation by prioritising its Business Model. Blockbusters mission was “to provide customers with the most convenient form of media entertainment”. Prior to online shopping this was achieved by customers going to a store and renting a video. Once we moved to buying online Blockbuster should have asked itself the transformation question relating to its mission “How can we improve the convenience for our customers to rent or buy films?”. Instead they asked, “How can we get more people renting from our stores?” This failed as customer switched to online purchasing such as Netflix. Focus on relating your transformation to the why not the how. It is easy to be complacent when you own a market, courage is needed as you may have to give away some of your revenue to stop the aggressive new start chipping away at your market.
The 5 Stage model
This book describes a model that covers the distinctive stages that can deliver a successful Digital Transformation. The Build model is cyclical and repeatable. The model can be used for any organisation (e.g. not for profit, profit based) and can be any size from multi-nationals to small enterprises. The 5 stages are:
- Bridge: Bridge the gaps between your organisation and the people it is meant to serve and the changes happening.
- Uncover: uncovering your organisations hidden barriers, assets and resources that will build your route to transformation.
- Iterate: Build in short cycles, test with real users and then make changes and iterate to the next cycle.
- Leverage: Leverage successes to gain greater access to resources and scale up. Take successful Iterate solutions to scale.
- Disseminate: Disseminate new ways of working and processes to make the new way business as usual.
Real transformation does have to be driven from the top. Digital Transformation gets underway and noticed once some successes have occurred. So, it is not solely the Senior Leadership who are important to advance the transformation, however, transformation will not be sustainable without Senior Leadership support.
The reason you need transformation is due to the gaps that have formed internally in serving your external customers. The purpose of Bridge is to close the gaps that have formed between you and your customers. Customer engagement stops internal politics taking over – it is impossible to argue against the market reality and what customers are saying. Decisions can be based on what customers want and demand rather than internal political imperatives.
Gaps cause difficulty for organisations due to the speed and flexibility that Digital has enabled in the market and that organisations need to adapt too. External: gaps between the voice of the customer and Decision makers in the organisation. Internal: gaps between areas of the organisation in serving and understanding how to serve customers. Most organisations have hierarchies and structures that pre-date the Digital Age. Many have Digital skills in one area of the business leading to delay in leveraging those skills to achieve transformation.
No matter what state your organisation is today, once it did align with external conditions. The trick is to now bridge the gaps created by the new digital expectations.
Establishing hierarchies and standardising in order to be able to scale production are the main drivers of internal gaps. Silo’s exist between parts of the organisation that means information will not be shared and insights become isolated. In an external environment where customers demand (and receive) mass customisation, instant fulfillment, timely information that often cuts out a middleman and much else, the pre-Digital hierarchy internal gaps. Hierarchies drive inward facing process. The larger the organisation, the more hierarchy develops in order to maintain central control.
Hierarchies are the control mechanism for large organisations. In the Digitally enabled environment, change now happens too fast for hierarchies to be effective.Lindsay Herbert (Bloomberg)
Create a Shared Transformation Vision
A vision calls out what needs to change internally to meet external changes and is shared and understood by those who need to implement it. Get into a “Founders mindset” to create a vision. Ask why does your organisation exist? If you have a true Mission Statement that should give you most of the answer, it will be timeless and be independent of your product stable, processes and business model. Involve select members of your organisation’s leadership team to create the vision. It should be made up of succinct statements outlining the changes to improve value for customers as well as making delivery easier. It will clearly state the changes needed to bring the organisation back in line with external customer demands. Start with a draft, iterate via sharing and revise
Successful change agents are compelling; have a strong presence and can win people over. They have a great internal network and are connected to external experts. They are up to date on technology and what peers and the competition are doing
The uncover stage shows you how to structure your Digital Transformation. Internal problems are hard to see from within your organisation and Uncover is all about fleshing out the barriers to Digital Transformation. Barriers are in the organisations people, processes, business model and technology. We are often blind to our own inefficiencies causing us to fall behind and prefer to blame external change.
All organisations have internal barriers hindering the organisations ability to adapt and change
Organisations that grow via acquisition end up with a mish mash of systems, processes, cultures. Digital Technology will not transform the organisation alone. People make that happen. If people do not have the capability or motivation to make the transformation happen, then it will not happen. Political interests, agendas and motivations will need to be engaged with and understood. People become barriers to transformation by
- Missing the innovation mindset: one that is prepared to take risks and sees failure as a learning. Providing incentive and tools to innovate can help here.
- Operating with false logic – this is where the logic is reasoning is outdated and cannot see the new challenge.
- Poor accountability – if there are misalignments between the way people are linked to organisation outcomes. If people are not measured on anything tangible or measurable, they will be able to create barriers without consequence.
Routes to Transformation
You can get there by driving individual projects linked to your Transformation vision. Undertaking a series of prioritised projects will deliver results more quickly than a massive program. The routes to transformation will become clear by undertaking Bridge to understand the gaps between what the external customers are expecting and the competitive environment. Undertake Uncover to understand barriers to transformation in your people, processes, platforms and partnerships. Then combine your vision with what you have found via the Bridge and Uncover stages. The prioritised projects required will fall out of this process.
Focus on transforming the customer experience
This sounds obvious but it is staggering how many organisations become focussed on changing out platforms or implementing Digital technology and quickly lose sight of main outcome we are trying to achieve: to transform the customer experience. Customer experience is every interaction your customers have with you, online or offline through every stage of transaction over their entire history with you. Gaps that have formed over the years are the reason customers say, “this company does not treat me they way they used too”. The customer has the history and remembers it and that is their experience, not just today.
What you need to start and run your projects
Great Governance means having Transformation leadership set goals and objectives for the project teams to meet rather than telling them how to do it. Transparency and regular update to senior leadership will enable success.
- Right skills and leadership level: you need people with the relevant expertise and influence. At project level the needs become specific and you may need to hire specialist consultants.
- Systems for ensuring transparency: you need to keep the relevant people informed and allow people to see what is going on in individual projects. Transparency is achieved via automated means as much as possible or you will spend your time updating reporting systems and presenting endlessly to stakeholders. Create online space for the team to collaborate and record progress. Use collaboration software as much as possible, for design, project management and other activities.
- Governance is there to set goals and empower: Empowered teams are fundamental to success for the projects (especially when using Devops, Agile or Lean processes). Empower at team level and use leadership for goal setting.
The right way to manage Digital Transformation is via “Iterate”. Traditional approaches do not work. Traditional management creates individual business cases. This is flawed as the assumptions are unpredictable and Individual Business cases do not stack up. If there is no management then we pick exciting looking projects. This is flawed as there is no underlying vision to link the projects together or create a programmatic approach. Enthusiasm quickly wanes as the initiatives drift along in an aimless way.
When an iterative project shows sign of success, we are ready to leverage that success. When you have a successful project, check the detail of your vision and amend if nuances arising from the successful project make that necessary. This keeps vision fresh and relevant.
Results achieved in the Iterative projects offer an opportunity to progress your Digital Transformation. For example, something achieved in the Customer Service area could expand to other areas. Capitalise on project success.
The purpose is to drive data driven ways of working and decision making into business. The aim is to connect to customers and the outside world thereby adapting to change and opportunity in the external market. Also, to collaborate efficiently to produce great results and finally to achieve collective goals that drive internal and external gains and help drive the organisations mission.
In digitally native organisations staff are empowered to adjust the organisation to customer needs. The Leaderships job in these organisations is to stay out in front and spot upcoming threats and opportunities and bring in new talent and specialist skills as required.
In digitally native organisations staff are empowered to adjust the organisation to customer needs. The Leaderships job in these organisations is to stay out in front and spot upcoming threats and opportunities and bring in new talent and specialist skills as required. Digitally native and Digitally transformed organisations are “bottom up” in style. This facilitates change to happen easily and quickly. Top down management control needs an organisations leadership to spot changes communicated upward via reporting, interpret actions and send out instructions. Once those instructions have been carried out and results occurred and feedback given, then the organisation can see if it made the right move. This process is simply outdated and slow.
- Implement Universal goals: they incentivise collaboration and eliminates competition.
- Drive real time, relevant feedback: by the time you have created a report it is out of date. Real time feedback loops help people adjust their actions and behaviours. Track behaviours of customers test new solutions and monitor reactions. Think of “googling” real time data with the query you want right now rather than waiting for reports that date as soon as written.
- Simple processes and specialist skills: enable the opportunity for people to act independently whilst keeping within the intent of the group (like the individual sparrow). The more descriptive and detailed the instructions/processes then the more likely you are to create robotic teams. Flexibility encourages initiative.
Flexible systems need to be in place and have Customer Experience, Design, Devops and Insights in scope.