Deconstructing Digital Transformation

Background: According to Gartner “..over 70% of BI, Big-data, IoT and Digitization projects will fail to meet business expectations”. This is despite a lot of them meeting their budget, scope and time benchmarks.

Question 1: What are the reasons for and a digital transformation ?

Just look around at the global business competition created by Amazon, Uber, Airbnb, Spotify and how it has impacted brick and mortar companies and the need to digitize becomes critical. Since 2012 I have been speaking on two themes the first being 'Disrupt or be Disrupted' from 2012 till 2014 and 'Become the Distrupter so you don't get Disrupted'. Looking at the traffic light graph here we get the following, [1] 81% of CIO's say they are planning or already undertaking Iot/Digitization initiatives. [2] According to Gartner over 70% of these IoT and big-data initiatives will 'Fail to meet Business Expectations' on their approved investments. [3] If we look at SAP only customers we see around 54% of companies having started IoT/digitization initiatives and 46% currently not planning. In the last pie we see customers on digitization benefits.

Digital transformation is a strategic business objective for delivering customer facing digital excellence via designing and delivering an end-to-end digital value chain capabilities. To say you have operational digital enterprise capabilities means all of these three things: [1] Understand what business your enterprise truly is in? For example, Kodak was in the business of images and memories and not making celluloid films. Similarly, Blockbuster thought they were in the business of leasing videos and DVD’s. [2] You deliver operational real-time digital end-2-end value-chain visualization capabilities. [2] Digital workplace applications that support digital design capabilities, R&D, digital production, value-chain visibility, delivery and most importantly customer-experience tracking. All this enhanced with digitization, ML, AI driven predictive processing. The strategic aim is to enhance the total value-chain process experiences.

Question 2: Critical path to a digital transformation portfolio?

A digital transformation portfolio is a strategic initiative not just for surviving the changing global customer expectations but planning to exceed them. It includes investments into ‘design strategy’ or thinking from inside the customers mindset. It includes designing the future QSA enterprise. Without clear executive commitment and step-by-step transformation programs, with proven pre-designed-customer-experience optimizer - these programs have a 70% probability of catastrophic failure (Gartner). There is a critical prerequisite to design digitization transformation on two fundamentals [1] focus on customer experience; [2] the final deliverable needs to consistently deliver (a) higher quality products and services at (b) lower costs. 

2.a Define your Niche:  Then go and weave user excellence into it... and then become the best on the planet in that niche area. First checkpoint is to become a unicorn (with a $1 billion valuation). You don’t have to be the first but the best and most convenient.

Question 3: what are the Top 4 mistakes companies make in Digital Transformation?

Three key areas where we see digital enterprise aspirants taking their first steps in the wrong direction.

·      3.a Lack of Clear Deliverable's for Digital Transformation: Defining your actionable and bench-marked 5- and 10-year business goal via digitization is most critical. Identifying, defining, planning and bench-marking true-north identifiers on strategic business expectations via digital enablement is most critical to predictable success. One of the biggest mistakes digital transformations do is in letting their SI or IT define what these should be. IT must take the role of an enabler with business and end-customers owning ‘business-expectations’ and ‘customer-experience’ experts. Without clear end-customer driven definitions all designs and roads will take you in the wrong direction with a 70% probability. Remember Gartner’s report that 70% of these projects will fail to meet business expectations. There is a Texas utility company that worked with one of the Big-4 companies for an IoT project. 2 years and $1.2 million later the report they got was that their IoT reported that during summer consumption went up because of air-conditioning usage. Aligning your digitization investments on a path of true-north deliverable's thus becomes paramount for becoming the digital disrupter.

·      3.b Assuming Digitization is an IT and/or Technology installation: During the 2014-16 period as many as 29% of global companies started digitization projects. By 2018 this number had risen to 68%. Initially it was assumed that IoT was a silver bullet. However, early adopters soon realized that IoT was a solution looking for a problem. The Texas utility example is once again an example of ‘Let’s do an IT project- tell me how much budget you need’. So, if you did not know the problem then IoT or digitization could not solve it. Plan first on clear strategic deliverable's and only then work the step-by-step plan.

·      3.c Being #1 is not a right to Success: .. you must plan earn customer respect. Up until Steve Jobs got back to Apple success was defined by being #1. I often spoke at conferences propagating the importance of ‘R&D’ and ‘being the first’ as a precursor to success with retrograde questions like ‘Who was the second person to reach mount Everest or step on the moon?”, thus indicating that being the first was critical. However, Apple thrashed the #1 success guarantee. Apple never invented any of their products they simply designed it better with stellar user experience, i.e. no instruction manuals. In recent years we have seen exceptional ideas crash due to the assumption that being #1 is a privileged right to success. In 2014-15 it was assumed that IoT was a silver bullet, i.e. just deploy it for guaranteed success. However, early adopters soon realized that IoT was a solution looking for a problem. If you don’t know your customers problems then probably IoT may not be your solution. Another company spent over $600 million being convinced that building an app was digitization. They ended with an app that both their customers and employees never used. They did not try to solve any problem but let their SI and IT build a digital project based on ‘Build it and they will come’. So, please first and foremost discover the problem/s and only then work with IoT to deliver version 1 of any solution. Design with the end customer experience as the center of your universe.

·      3.d The billion-dollar intelligence trap:  Billion-dollar valuations are becoming more and more frequent. While some companies are exploding other like uBiome? and WeWork? have also been imploding. This does not mean they’ve accomplished anything but just that there is a chance they will accomplish something really great. However, we can no longer use the 1999 .com thinking for startups where the goal was to burn money fast so one could get the next funding. Nor can we use the pre-2008 mindset which was a controlled version of the same. Today companies have to be very cautious as they get valuated as a unicorn and/or get funded with a billion dollars. We need to use our LLs (Lesson Learned) from our history lesson and leverage the soft skills of sustainable economics that sometimes plan to a much higher degree that they spend. Today companies can have the best of ideas, get funded for a billion dollars and still fall into the trap of Theronos? or WeWork?. The world is producing STEM resources at a super rate and time and again we find that engineering only startups not working to full potential. These brilliant engineers forgot about soft skills like economics, user experience or sales and marketing. While rapid-pace pays algebraic dividends as it reflects the business generation potential it also forces companies to get into acquisitions that do not deliver expected results. DoorDash? raised 1 billion and its valuation went up to $12.6 billion. Going private is being replaced by investors and buyouts as a working model for some. The best time to raise money is when you don’t really need it. The worst way to spend money is to simply blow it thinking more will come your way.

Question 4: What are the top 3 Challenges companies in Digital Transformation?

Three crucial areas where we find stakeholders face challenges when planning for Digitization:

·      4.a Strategy, Mid-Term and Tactics: Whether you’re buying a house, investing in your child’s education or undertaking a digital transformation initiative winner always think long term. They not only think but also commit and communicate a globally shared strategic vision. In most cases digitization is not a step-by-step evolutionary process but a total transformation. A taxi company could not have taken a step by step approach to build Uber. Neither could Barnes and Nobel have delivered Amazon. A CA based global leader in networking basically had a methodology where they would fund an internal team of stakeholders to BOT (Build, Operate and Transfer) a new idea and then this company would buy them out. The company found it was consistently faster, better and less constrained by internal politics. Their strategy was to farm out strategic frog-leaps.

·      4.b: UX3: User Experience to the power of three is the proven success mantra for proactive companies. It must become the ‘center of the enterprise universe’ to all value-chain decisions. From design to support. Review the focus of successful digital disrupter's like amazon to Netflix and from Uber to Spotify and we find a common desire towards continuous ‘user-experience’ excellence. Remember that today your customers, and employees, consistently have a more encompassing experience on their personal device than they have at the enterprise level. They expect far more and that is the key to your future. User expectations, and loyalties are changing rapidly and companies that do not design for their customers experience already have, or will, find their customers collectively move to a competitor that does. Reports are last century, analytics are early 2000 and Informatics is the new BI foundation in a design strategy for customers.

·      4.c. OCM and Cost of failure: Transitioning to a real-time responsive digital enterprise built on continuous visualizations will need more than designing, strategy and planning before commencing any working the plan. In the background keep ‘The True cost of Failure‘ as a dollar in failed projects is not just a dollar lost but can sometimes mean a hundred dollars in recovery costs. We use the BI example as the cost impact is almost identical whether it is a BI, Big-Data, IoT or digitization initiative.

Question 5: Why is Digital Transformation a C-suite commitment?

Three key reasons why your digital transformation needs executive stamina?

5.a Strategic Continuity: You cannot have digital commitment without C-Suite commitment. You cannot have strategy by continuously replacing CIO’s and CFO’s as it fractures and breaks any shared vision. You cannot have enterprise alignment if the goalpost keeps shifting as new leadership always tends to draw new roadmap's as their unique differentiators sometimes at the cost of the strategic initiatives. Building a digital platform on shifting sands could very well become an insurmountable task. So keep the executives and their commitments on a level path and also keep the shared digital vision on an even kneel. Lose one and you could potentially lose it all.

5.b Know what you don’t know: It is critical for C-suite leaders to know what they don’t know as a foundational methodology to success. Proactive leaders want to do thing right the first time, every time. As mentioned earlier the cost of failure is too high for most companies to afford even if they are leaders like Barnes and Nobel, Toys-r-Us or Kodak. In may cases digitization may mean a total transformation and not an iterative process of organic shifts. Realizing this early is critical for any organization.

5.c Clear Scope and Deliverable's: It is critical for C-suite leaders involve business early through and after all digitization initiatives. A saying ‘no wind is a good wind if the captain knoweth not their destination’ is very valid reason for failures. Clear end-user experience deliverable's are the most important attribute for assuring success. While, scope is simply the design phase of clear deliverable's.

Question 6: what are the Top 3 ‘Force Majeure’ considerations?

There are predictable outcomes that companies, and their executives, could predict and mitigate and then there are those that they just cannot. Here are three examples of things beyond enterprise control.

·       6.a Broad Geopolitical Fencing: If your company is Huawei and your market is the US or its allies, or your company is Facebook or Google and your market is China then right now you are out of luck. Your product may be better in quality and lower is costs, yet you get caught between political pincers that are totally out of your control. So, part of your strategic risk mitigation plan could be planning for unpredictable geopolitical impacts or diversifying the market extensively to mitigate geopolitical impacts.

·       6.b Narrow Ripple Fencing: If your company is in a pre-IPO stage and in the HR area then the WeWork? dilemma is going to hit you sideways - as a ripple effect. If you are Workday, then it may be good news for you but if you are a new HR startup then you get caught in the high waves these storms create. Each high-profile flop will have a perceptible impact on marketability of digital transformation initiatives, be they startups or an extension of product or service capabilities. In fact, the WeWork? dilemma has impacted many startup IPO’s in the San Francisco bay area. The macro effect is that wall street banks have started to cut price valuations of initial tech startups. Beware of industry flops and subsequent buyer pushbacks

·        6.c Digital Shift: Normally digitization. In the period of 2019-13 I was speaking about ‘Disrupt or be disrupted’. By 2014-18 my communications had morphed into ‘Become the digital disrupter or prepare to get disrupted’. As mentioned earlier companies like Barnes and Nobel, Toys-r-Us or Kodak are just the tip of the iceberg. Some industries got hit the hardest while others are either transforming or lined up on the ‘stairway to heaven’. Just as a examples: the retail segment got hammered most hard and still unable to truly adapt to the storms of digital change, while the automotive industry adapted rapidly and is currently getting aligned to disrupt the disrupter. In some cases, and/or industries, incremental changes may not be adequate, where companies’ companies need to pursue transformational change at a massive scale, or they unintentionally could be planning to get disrupted.

Question 7: What does the future look like by 2025?

History is the best lesson to predict the future. So, let’s do a little history lesson on Amazon and you can stitch your own industry or company as you see fit. The future depends on your geo-location, globalization and industry. Some industries are ripe for digitization like retail while others like automotive are rapidly adapting to meet customer expectations. Still others are ripe for acquisition by the digital dragons. Digitization is changing more than jobs or industry segments it is intersecting everything that customers do or need. A prime (no pun intended) example is amazon. Jeff Bezos started in a garage packing books, taking them to post offices manually. By 2011 they had gobbled Borders and left Barnes and Noble teetering. While all this is happening, amazon had already moved to products, media and service. By 2018 it accounted for almost half of all retail. From a timeline Amazon started in 1994, by May 15th 1997 it went public. Nov 18th 1997 its share price was $4.42. By June 1998 it share-price had gone to $10.42. By Sept 1999 if had patented the ‘1-click’ buying experience. In the same month, they launched the 3rd party sellers’ marketplace. By Dec 1999 amazon got hit by the .com bubble burst with a share price at $106.69 that dropped to $81.13. Amazon laid off 15% of its workforce as Bezos comes on the cover of time magazine as the ‘King of cyberspace’. By 2002 Amazon starts selling clothing and has over 400 brands on its online store. In 2003 it launches AWS web hosting Share price is $34.07 as the analysts still do not see the full potential of AWS. In 2004 Amazon enters China by buying Joyo for $75 million. In 2005 Amazon introduced Prime and changes the total experience and stickiness of customers. Share prices start coming up to $41.28. They get a 100 million users on prime in that year at $79 per user. In 2007 Kindle come on the horizon. By Dec 2009 amazon announces it HQ in Seattle as its price goes up to $91.26. In 2008 Amazon acquires audible for audio books. The 2008 crash takes it price down to $77.70. In 2009 it buys shoe selling site Zappos for $900 million. By 2012 It acquires the warehouse robotics company Kiva systems as its share price goes to 185.52. In 2013 Bezos intends to buy Washington Post as its price goes to $300.99. In the same year Amazon starts to deliver on Sundays. Delivery speed has become the experience cornerstone for Amazon. Shares got to $354.38. In 2014 Amazon launches its first and last ‘Fire’ smartphone. It was a bog flop and cost the company to write-off $170 million. In the same year they acquire social media company Twitch for $970 mill as their share price hits $466.37. In 2015 Amazon does a ‘back to the future’ by opening its first physical bookstore ‘amazon books’ Share price hits $628.35. The same year they launch ‘echo’ as a home assistant. Share price $659.68. In 2017 Amazon acquires ‘Whole Foods’ as their share price hits $987.71. In 2018 it hits a Trillion-dollar mark fueled by investor enthusiasm and rising profits. Amazon raises minimum wages to $15/hr. as their share price goes to $1,971.31. By 2019 Amazon is fending off criticism from the president of the US, Bernie sanders, civil rights groups, anti-trust regulators and its own employees.

Amazon went from being a Unicorn to becoming a Dragon and then to introducing the concept of what I call the ‘Mama dragon’ as it moves like a digital snowball across the global enterprise landscape. On one side are businesses looking forward to when Amazon could acquire them while on the other are companies weary of when Amazon could disrupt their industry. Lots of lessons in this history brief of a single mama dragon very much a prime (again no pun intended) example of what digital disruption can lead to. A 1,000 investment in 1997 would have become $445,997.38 in 2019

So the next five years look bright for digital disrupter's, that focus on [1] user experience to the power of 3 while leveraging [2] cloud, [3] AI and [4] ML are design to become leaders in [5] analytics and Informatics. With Users experience being the most important and thus marked to the power of three. Rank your 5-year strategy against these 5 critical attributes and predict your company success in 2025.

Question 7: What will attendees learn in Q1 of 2020 at the ‘Simplify-HANA-Experience’ event in the US?

Our ‘In-memory SAP HANA’ groups event in 2020 based on our empirical lessons on what works and more on what does not work in Digitization aspirations using SAP HANA as a foundational platform. This event is free for our group members and membership is free too.

Our content is designing on a ‘pull’ principle and not a ‘push’ one. Since 2012 we have never designed sessions on what we want to sell to attendees but let attendees chose what they would like to hear about and then fill their expectations with speaker sessions.

Our intention is to deliver ‘crowd-sourced’ content on topics that are critical to attendees.

This time around it is about how to design, build and succeed in Digital Transformation. Our agenda is based on what you chose and select as your critical need and expectation.

To register join the ‘In-memory SAP HANA’ group on LinkedIn and then register as we get our dates finalized. Right now, you can answer the 2019 ‘Annual SAP Customer Sentiment Poll’ and enter your email for results. This poll will end dec 31st, 2019.

KEY TAKEAWAY's:

1.   70% of your New BI, Big data, IoT and Digitization projects will fail to meet business expectations (Gartner)

2.   Plan your work carefully before working the Plans

3.   The most important design verification is End-Customer-experience3

4.   All Digitization projects are business process projects so ensure business takes ownership and accountability of key deliverables

5. Involve Business stakeholders early, right-through and after the project.

                                              .....--ooOoo--.....

 ABOUT HARI GULERIA :: VP Customer Business Success :: PrideVel

Supporting Analytics & Digitization design and decision excellence through operational, strategic solutions, advisory & board work on SAP and SAP HANA initiatives

Hari has been assisting customers exceed BI, IoT and digitization business expectations before they became IoT and Digitization. Hari is a globally renowned thought leader in the SAP HANA world, an author and a voracious publisher of blogs and white papers. He is best known for permanently living in the future, readers say his book as relevant today as when it was written eight years ago. His designs are consistently business value focused and future compliant. Hari is an engaged, team oriented and actual-user benefit focused global solution coach and has been in successful startup phases across his many tenures and designated divisions, i.e. in IT, Analytics and building the next generation Digital Enterprise, a perfect fit both for mature global enterprise as well as start-up ideas and companies. He routinely assists startup companies design their go-to-market and delivery plans. One word that customers and team-members use to describe his is 'Trust'

Hari is the author of ‘BI Valuenomics- The story of meeting business expectations in BI’ . He is the owner of SAP’s official social networking ‘In-memory SAP HANA’ group with over 30,000 followers. He is currently working on another book called ‘Digital Shock’ a book designed for preparing companies, industries and individuals to the inevitable digital disruption that surrounds us today.

With over 10 years of executive level business experience followed by over 20 years of IT consulting leadership experience Hari has been a functional Business focused technical expert helping companies meet, and often exceed, their business user expectations. He continues to assist Fortune 1,000, and digital startup, companies crystallize and articulate their decision systems and remodel them for the disruptive digital economy, Hari applies his business, consulting experience, and structured scientific methodologies in providing consistent competitive differentiator's.

Prior to this Hari worked at three leading IT services companies, first as the Director for SAP HANA Solutions at HP Enterprise Services for the Americas, before that as director for SAP HANA at HCL Axon for North America, and prior to that as Value realization Principal Lead at SAP America. In all assignments Hari provided business focused design solutions for IT projects as the right-hand adviser to business project owners like the CFO’s and the CIO’s and their IT counterparts. Hari worked closely with the ‘C’ suite, Program directors, Business Team leaders, External Partners and customer business leads with clear road-maps and action items. The first being business benefits and the second was optimized TCO based IT deliverables, i.e. “Highest Quality at Lowest Cost”. Hari may be contacted at [email protected]