Managing Change in Digital Innovation

It is morning. My mind is racing. I spent the morning on calls with companies attempting to redefine supply chain processes through digital innovation initiatives. I find that there is so much that the teams do not know.... And, they are so confused by the number of people--consultants, associations, and Universities--that are trying to "help." The promise of "digital" is gaining traction at a speed that is faster than the development of processes and technologies. It is exciting and promising, but change management issues are intense. Here I share reflections from client conversations.

In driving digital innovation start by recognizing that this transformation is not an evolution of current processes. We don't have the answers, but we can see the potential. It requires casting off traditional paradigms. Let's take some examples. Recently, I visited Jabil. In their 3D Printing lab they have a fascinating showcase of how their thinking changed as they moved from traditional machining (taking away materials) to additive manufacturing (3D printing). The transformation was enlightening to me. Their thinking changed so much. A second example is Kiva. Amazon bought Kiva in 2012 for 775M$. Prior to the acquisition, the Kiva technology gained slow adoption. One of the reasons? It changed the pick. While traditional warehouse picking directed the warehouse worker to manually go to the "pick area" to put goods onto the pallet, Kiva robotics moved goods to the pick center in a sequence. It redefined warehousing and there was push back. A third use case is the role of ERP in supply chain. Over the last two decades, ERP grew in importance as the system of record. With "schema on read" and open source analytics, supply chains architectures are becoming less ERP centric.

Three case studies of changing paradigms based on technology capabilities. To maximize value, leaders recognize that the transformation is a step change. The redefinition of processes makes teams within the organization feel "uncomfortable." It requires learning new concepts and questioning the investments of the last two decades. What is presumed to be "best practices" often need to be discarded. It is hard work.

Consultants are pitching visions of digital transformation. It is a fad. Why? There is no consistent definition of digital in the industry, and many consultants are repackaging legacy technologies as digital or overstating the capabilities of new technologies that are largely untested. Digital innovation needs to be focused on test and learn. The convergence of new technologies to redefine the atoms and electrons of the supply chain is quite promising, but there needs to be alignment that:

1. Digital Supply Chain Transformation is Disruptive. Set clear expectations. Digital innovation is not doing what we are doing today better and faster. It is redefinition based on the convergence of technologies to define new capabilities. In the process, teams will need to redefine the paradigms learned over the last two decades. It is uncomfortable. Leaders need to question the known. Teams need to harvest the benefits of the unknown. Early adopters are driving innovation. Only 7% of companies are innovators while 36% of companies believe that they are laggards. As a result, many companies are vulnerable for Amazon-like disruption. Early this month, Amazon announced a push into healthcare. Last week, they challenged Fedex. What will be next?
2. Processes Are Largely Undefined. We do not have the answers. The impact of process innovation is new and evolving. Instead of approaching digital innovation as a large consulting project, it needs to be approached using design thinking with test and learn pilots. Don't make the mistake of hiring a large consulting team to drive digital transformation.
3. Testing Requires the Redefinition of Supporting Processes. Conventional procurement and business process outsourcing is a deterrent. The more that your organization has defined procurement for "global templates" and institutionalized procurement, the slower your organization will move on testing.

I hope this helps. I look forward to hearing your stories.