How a Digital Transformation Supports a Company's Culture

In 1999, DaVita, a healthcare company providing life-saving kidney care for patients suffering from chronic kidney failure or end stage renal disease was on the verge of bankruptcy. It had been sued by its stakeholders, was under investigation by the SEC, had high turnover and was almost out of cash.

Enter Kent Thiry, appointed in 1999 to lead the company and bring it back from the brink. Thiry and his team focused on several things which they believed were necessary.?

• Attention to detail. Standards, general procedures, and compliance did not seem that common, as a consequence, exposed the company to delayed payments from Medicare or even created legal exposure when documentation was lacking or billing irregularities existed.
• Monitoring finances and better labor hour management. Labor hours and good maintenance of the machines led to less money spent on repairs, and less machine downtime. Similarly, better monitoring of the labor hours resulted in millions in savings.?
• Good clinical outcomes. Thiry clearly understood the human needs on which DaVita’s business centered around. It was all about keeping customers healthy and happy with DaVita’s services.?
• Employee Turnover. Similarly, Thiry and his team clearly understood that nurses and medical personnel are the actual points of contact with the patients, they know what the patients need, they learn about their stories and their families. The archaic decision process to do things for the patients was causing significant stress and it was, among other things, one of the leading causes of the high turnover. Nurses needed to know they were helping patients’ lives instead of making them worse.?

After understanding the issues, the team focused on the following to move forward with the process of turning things around.

• Billing. DaVita was challenged when the government decided to stop paying procedures on the claim of insufficient data. The company decided to make the patients whole and continue services while appealing. Eventually, the company won the lawsuit and the government paid handsomely.
• Continuous Improvement. Another point of focus for the company was continuous improvement, they established a practice which gave about 1,000 improvement opportunities. These were discussed at senior level and the initiatives were prioritized.
• Information Technology. DaVita’s systems were outdated, and this only exacerbated the problems in the company. By focusing on a digital transformation, DaVita was able to improve their clinical records, improve patient registration and billing.?

By 2005, a complete turnaround was in full swing, the market capitalization had grown from $200 million to more than $5 billion, DaVita had the best outcomes in the industry and their growth was the highest in the industry.

It is important to notice that the Digital Transformation initiative was one of other, equally as important initiatives that were key to the successful turnaround of the company. It was on par with changing the culture of the workplace towards extreme ownership, quality over quantity, continuous improvement, and ongoing personnel education. In other words, an impactful and successful digital transformation must support the larger themes and objectives of the company, much more so when they revolve around a turnaround or highly needed accelerated change.

Another clear example is that of Best Buy. Back in 2012 the company was in a bad situation and the new CEO, Mr. Hubert Joly, focused on five pillars for the required transformation.?

• Reinvigorate the Customer Experience.?
• Attract and Inspire Leaders and Employees.
• Work with Vendors and Partners to Innovate and Drive Value.
• Increase ROI for Investors.
• Implement Recycling Programs

Notice that all these pillars are centered on their human network: customers, vendors, partners, employees and investors.

In a time when online was beginning to take over, Best Buy saw their brick-and-mortar stores as an opportunity to grow their online share. They embarked on an integration of their online and brick and mortar stores, freely sharing the stock and letting customers know in which store they could find the items they were looking for. They could buy online and pick up at the store; this model resulted in additional sales as people purchased more goods when picking up their orders.

A digital transformation must be proactive and not reactive. It must support the objectives and higher themes of the company and must encompass the elements that will make the company competitive, that will protect its physical and digital assets, that extracts every last drop of benefit from its data, which is one of its greatest assets. It also must envision the whys, the reasons new technologies will be brought in. AI and automation implementations must have a cultural and financial reason to be, and not simply be a FOMO response.?

When AI, automation, and any other tech initiatives such as cloud or cybersecurity are implemented with these factors in mind, that is when the company will reap the most benefit. That will be when the technologies will achieve truly transformational changes to make the enterprise more efficient. That is exactly when the word “transformation” in the term “digital transformation” will show up in red, bold letters.

Sources:

• Kent Thiry and DaVita: Leadership Challenges in Building and Growing a Great Company. Stanford Graduate School of Business.
• Reinventing Best Buy, Harvard School of Business