Digital – Solving the Unsolvable Business Issues

It’s wonderful. Transforming to digital, solves many of the time-old organizational issues in business. The transformation highlights and resolves, when you are successful, flaws in the operations, silo mentality and command and control leadership.

I have had the opportunity to work with different leadership teams in Africa, USA, Europe, Australia and Asia and during that experience there are some common organizational issues that arise. The most common is, “how can we break the silo mentality”, closely followed by, “we want our employees to take more initiative”, “how can we be more customer centric” and “I don’t have the time”. These issues are constantly replicated, no matter the culture or location, as they are a consequence of the traditional way business are/have been conducted. They are an unwanted consequence of the current business model.

The current business model has evolved with layers upon layers being added. The unwanted consequence was additional bureaucracy and a hierarchal approach that drove people to protect their own area and to be running around managing day-to-day policy and procedures. Attempts would be made to break the behaviors that were being detrimental to the organization but they were so entrenched that most attempts failed.

Warren Buffett said it very eloquently,

The chains of habit are too light to be felt until they are too heavy to be broken.

Quality initiatives that started with TQM then Six Sigma and Lean Manufacturing, all recognized these time-old organizational issues and attempted to resolve them. For example, a core component of Six Sigma was looking at the process “end-to-end” and bringing people together from different silos to map the current and future state. This was successful but with limited impact in ending the silo mentality bad habit.

From the quality initiatives we discovered that as much as 33 per cent of the work people do in medium to large size organization is non-value-adding. This includes sending out reports people don’t read or need, redoing work that was not done right the first time, being on a conference call you did not need to be on (and spend more time emailing) or checking work that’s already been checked. Peter Drucker coined the term purposeful abandonment, to address these. This means if you want to grow your business, before you decide where and how, stop doing what’s not working.

The quality initiatives addressed these challenges but only with partial success. Digital transformation is having a significant greater success for one very straightforward reason: breaking these bad habits it’s not optional to be successful. By the way, do you notice that the word “quality” is hardly mentioned anymore!

Implementing a digital strategy into your business equates to changing your organizational business model. Why? Because to achieve what it takes to be successful requires a paradigm shift in leaders thinking and a compete restructure of the business.

Digital transformation also highlights broken information flow, issues in customer journey, transactional areas and were non-value-added we work is repeatedly being done. A successful digital business model requires:

• A change in leaders and employee’s mindset on how to compete and manage the business
• Employees to be empowered – to identify and resolve challenges
• Customer understanding – start by empathizing with your customers as an organization not a department. Design thinking has become a popular tool to support this
• Experiment with new ideas – long planning sessions are being abolished in favor of, “fail early, fail fast and fail forward”
• Culture transformation – what got you here will not take you to where you need to be tomorrow because of the rapidly changing business landscape
• Leveraging analytics to drive the business – big data has created an explosion of data and its how you use the data that’s most important
• Automation of the operations – technology power is increasing while its cost is reducing. This allows organizations to transform internal processes through process digitization. Robotic process automation works well where you have lots of people doing similar work. A digital transformation means that you have implemented technology that will enable completely new processes.
• Data visualization – the brain processes visuals 60,000 times faster than text. Friends should not let friends use spreadsheets!

Successful implementation of the above points translates to transforming your business model. This is an expensive undertaking in both commitment and cost but is quickly offset by the cost savings, (for example, an investment in RPA can be repaid within six months through cost savings), improved performance and speed of the business and the increase in customer demand. 

Radical organizations, such as Haier in China, are even completely abandoning the old business model.

Haier is now the world’s leading white goods brand with revenues of over $35 billion and 75,000 employees. It has high end market penetration, offering smart home ecosystem model.

Its digital transformation was started before most in 2010 by its CEO Zhang Ruimin. Today Haier has transformed its organization culture into a start-up factory where employees think like business owners.  To achieve this and to be more responsive in their market, it has divided the organization into 4,000 microenterprises (ME) that compete through their platforms. There are three types of ME.

1. Transforming –business that are reinventing themselves from the core so as to be more customer centric. They are expected to grow revenue four to 10 times faster than the industry average! Approximately 200.
2. Incubating – focusing on developing businesses. Approximately 50.
3. Nodes – offer products and services, (think shared services), to support to the transforming MEs. Approximately 3,800.

All the ME articulate and execute their own strategy, no head office bureaucracy. They even set their own salary and bonuses.

As a result of the transformation it has 50 per cent less employees and a staggering 40 per cent profit growth.

At the end of the day, organizations will have to be operating mush more effectively, just to survive and the end user/customer will be the winner of digital transformation as we are offered better products and services, delivered in a more meaningful and effective means.