Digital Transformation, Again.

Much has been written about disruptors and incumbents. Wave after wave of heavily funded Silicon Valley start-up have upended every industry from transportation to hospitality to retail. A supercomputer in everyone's pocket, otherwise known as "mobile" was the key enabling technology for this evolution. Of course, leaders of traditional businesses took notice, and Digital Transformation became a CEO imperative: Transform or perish.

As leaders and their respective companies set out on their transformation initiatives, their first priority was always focused on the customer, and the customer-facing technologies. It was a reasonable strategy. The website needed to be re-built urgently and mobile apps needed to be launched immediately! Consultants and contractors were hired. Projects were initiated, and deliverables were delivered. Substantial fees were paid. But ultimately, very little transformation had actually occurred. Perhaps I'm being trite. Many companies that historically had little to no digital resources started to staff these new capabilities in house, but few companies went all in.

Tip of the Iceberg

There is now broad recognition that it is impossible to be a digital business without first being digital on the inside. Offering your customers a mobile app does nothing to prevent you from being disrupted by natively digital businesses who can attract top talent, get to market faster and iterate more quickly.

Deloitte introduces the concept of the Digital Iceberg:

In this digital era, business leaders are increasingly focused on the “front” end of digital—the customer experience—but they may ignore the capabilities and skills needed to support digital initiatives. In reality, as most technology professionals appreciate, the front end is only the tip of the iceberg.

The term "digital workplace" seems to be in vogue for discussing the below-water bulk of the iceberg. Leaders today who are setting out on digital transformation initiatives are fundamentally setting out to change how work happens inside of their companies. The good news? There's tremendous opportunity in all industries and all lines of business. The bad news? Unfortunately, change is hard.

Tremendous Opportunity

It would be foolish to assume that we're somehow at the pinnacle of productivity. I don't think anyone would argue that there aren't great strides that could be made in how work actually happens at companies. McKinsey has shown that we spend about 30% of our work day reading and answering email and 20% of our time searching and gathering information. Once you factor internal meetings into the mix, we only spend 39% of our time doing "role-specific tasks" IE actually getting work done. Isn't that CRAZY?!

In their book, Time, Energy, Talent two Bain consultants assert that corporations have implemented rigorous controls over financial resources, so that scarce capital is not spent frivolously. On the other hand, employees time, arguably the most important resource for companies, is consistently wasted with unnecessary meetings, inefficiencies and bureaucracy. They state that,

"The average company loses more than 20 percent of its productive power to organizational drag— all the practices, procedures, and structures that waste time and limit output. Organizational drag is an inevitable and sometimes invisible force that slows the metabolic rate of a company and affects its health. It’s a chronic illness like high blood pressure— you have to manage it all the time or it will get the best of you."

Take this hypothetical: What if instead of just 39% of employees time being spent on role-specific activities, you could boost that to say 50%. It is both entirely possible, and would also be a dramatic change in output (a 28% boost). What would that feel like for you? Your business?

Change is Hard

Without turning this article into a deep dive on change management, suffice it to say that large scale transformation that alters the way employees get work done must be lead by the executive team and include a clear communications and employee engagement strategy. We're fond of the saying "Technology is easy. Change is hard." If you believe that transformation is about implementing new technologies and that employees will flock to them, think again! Of course, good technology reduces the effort but without a coherent change program you'll never reach the escape velocity required to transform.

How work happens at large companies becomes ingrained in us as humans. It literally becomes part of our identities. "Kate distributes that status report every Thursday at 10am! It's her thing." This helps explain why innovation in the workplace is so hard. Stewart Butterfield, Slack's CEO, in his now famous essay We Don't Sell Saddles Here stated,

"The best — maybe the only? — real, direct measure of 'innovation' is change in human behaviour."

A quick recap:

1. Customer-facing digital & mobile technologies are table stakes.
2. Digital (workplace) Transformation offers tremendous opportunity.
3. Change is hard.

So, what's a CxO to do?

Focus on High Leverage Functions

Every business has one or two high leverage functions. For example, if you're Google, the engineering team that optimizes the AdWords business is an extremely high leverage function. If you can match ads to users even marginally better, you could see returns well into the millions of dollars. Therefore, anything you can do to reduce the organizational drag for those engineers (less email, fewer meetings, less bureaucracy) has a substantial impact on business outcomes. For Google, investing there first is a no brainer. Obviously, Google knows this, and has thousands of unencumbered engineers working on their ad business full time.

If you're a retailer, it's probably your eCommerce team. If you're an investment bank, it's probably sales and trading. And, if you're a tech company, it's probably your dev team. You get the idea. Figure out where you'll get the most bang for your buck if you free up time from corporate drudgery. Start your digital transformation journey there, and then iterate and extend rapidly. Crucially, don't let your digital initiative stall after its first phase. You're not a digital business until all of your operations, departments and teams are integrated and digitized.

I have three arguments for this model:

First, starting with a sub-set of your organization allows you to focus on the specific use cases and the expected business outcomes. Transformation must have a clearly articulated vision for the future state. Without a clear set of expected outcomes, people will inevitably revert to their old ways of working. As humans we always need to know, "what's in it for me?" It's a lot easier to answer that question clearly for a specific function than for many different business units with a generic answer.

Second, by focusing on a subset of the organization, you can move through the change management process more quickly. Leadership and the change team will use this as a learning experience to validate assumptions and optimize the change process for a broader audience. Resistance will be easier to work through, and ad-hoc opportunities easier to seize. You'll be set up to iterate quickly.

Third, by first transforming the high leverage functions within your organization you'll establish the credibility and importance of the overall initiative. You should also have measurable results both at the employee activity level and also on the executive level. Once your high leverage business functions have already undergone the digital transformation process, the other lines of business should be more willing to follow suit. You will also now have a validated digital transformation change methodology and financial validation for the initiative.

But, why now?

Ford recently laid off Mark Fields, a 28-year Ford veteran, in favour of promoting James P. Hackett, the head of Ford’s Smart Mobility LLC subsidiary to CEO. Ford is now a mobility business, not a car company. Let that sink in for a moment.

For CxOs, the pressure to transform or perish has never been more real. I'll highlight three factors that can't be ignored:

1. Increased Competition. If you're an industry incumbent, you know there's a dozen different startups coming to eat your lunch. Oh, and they're winning. They were built on the cloud, with integrated end-to-end digital processes. Choosing to "do nothing" is choosing to die a slow death.
2. Employee Expectations. As of 2015, half of the work force are millennials. As in, "What is Lotus Notes, and why don't we use WhatsApp instead?" Today's work force expect to use tools that empower them, and provide instant and mobile access to everything. Welcome to the work from a coffee shop generation.
3. AI + ML. Use your scale to your advantage. The bigger you are the more data you have. To access your organization's full potential look for digital solutions that easily integrate data sources to lay the foundation of a unified data set for AI + ML technologies to run on top of. Artificial Intelligence may prove to be a bigger thematic change than Mobile.

Is your organization ready to tackle the second coming of the digital transformation? Let me know what you think!

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Links for Additional Reading:

Crossing the Technology Chasm - on LinkedIn

A Millennial's Perspective on the Changing Nature of Work - on LinkedIn

Data is Giving Rise to a New Economy - on The Economist