Digital Transformation Demystified Part 2

A couple months ago I posted 3 questions and answers that summarized the digital transformation. Last week, I answered the first question in a longer post explaining what the digital transformation actually is. Here, I answer the second question.

2. Why is the digital transformation so critical?

It enables company processes with the adaptative response flexibility that is built into software development. This makes traditionally static companies insanely agile. (It has very little to do with 'new technology' and very much to do with 'new change model')

What the tech companies learned

Flickr shocked the software community in 2009 when it demonstrated that it could deploy 10+ times a day with less incidents than those who deployed once a year. In 2015, Gary Gruver and Tommy Mouser wrote Leading the Transformation where they showed that at a relatively entrenched company (HP) they could use the same tools to rapidly release a notoriously difficult part of the software chain (printer firmware). These examples show that software can transform faster than anyone could have imagined, it can transform better than anyone imagined, it can perform this transformation in places no one would pick, and it can perform this transformation on things no one would imagine it working on.

These practices revolutionized the tech industry. The underlying promise of the digital transformation is that same software practices can be used to bestow the same ability to other business processes in other industries. Key to this is stage 4 transformation, coding your business practices as software, and building your software practices in the same way as these industry leaders did to perform miracles.

The digital transformation democratizes the start-up advantage

Clayton Christiansen did not think large companies could adapt in their previous form to competitors, per The Innovator’s Dilemma. He demonstrated that the large corporations’ process of proving an initiative’s profitability is the very process that blinds it to the new markets and the competitors that will take it out (read the last two chapters again if you don’t believe me). He suggests that giving sub-units autonomy (spin-offs, skunk-works) and allowing them to iterate and adapt aligns their value streams and creates sufficient feedback to be competitive.

He cited 3 examples of successful transformations by large players. 2 were done using spin-offs and acquisitions, 1 was done company-wide, and he said it just about killed the CEO to make it happen.

This means that the tremendous financial, human, and operational firepower of large corporations has been stifled. The digital transformation may be an answer to this dilemma. Mik Kersten suggests that large enterprises can actually transform and in doing so can unleash the massive pent-up capabilities they have in reach and scale. In Project to Product, he walks through a system of thought-change and a system of process-change to make that possible. I don’t know if he realizes it, but in the first two chapters, he scuttles the traditional enterprise dilemmas that Dr. Christiansen demonstrated strangle large enterprises.

Conclusion

Imagine a 100,000 employee company operating with the energy of a start-up. This is actually happening. Stage 4 digital transformations transform companies and industries. Literally. Amazon, Uber, Etsy… Companies that can adapt faster to the market while cutting cost weren’t supposed to be possible. Now they are the new standard.

Companies that don’t understand or aren’t successful at a stage 4 digital transformation simply are not competitive.It doesn’t matter how smart their team or how good their idea is. When the world changes tomorrow, they won’t be able to change at the same speed as a competitor. Even if that competitor is dumber, and less ‘product innovative’, they will win because their process is more innovative. This is a showstopper, an end-of game move. Given, an entrenched company can use barriers to entry, market presence or reputation, or even laws and regulation to hold competition down. They have tools to prolong their existence. It still stands that they are not competing, they are surviving. Worse, brains in this world have feet and they can walk where ever the opportunity is, even across borders. If you get the U.S. to clamp down on protective laws, there is the European Union and China just a pond hop away.

If you still don’t believe me, treat this like a math problem. If you are adapting your company at a cadence of one major change every 6 months and your start-up friend is making a moderate change every week, you have about 1 to 2 years, ceteris paribus, before you are in the deep.

The digital transformation doesn’t mean flashy software and it doesn’t simply mean more technology. It means that companies can change faster and better than ever before. This is why it is critical.