I have to admit; I love movies. For me, it is simply an escape: a way to let my mind wander into the realm of the possible or sometimes the realm of absurdity. Movies that I enjoy I can watch time and time again. As anyone who has ever worked with me can attest, I will quote and reference movies on a relatively regular basis. Sometimes to emphasize a point, sometimes to get a laugh, and other times just to change the flow of thought.
When I think about all of the discourse over the past few years on digital transformation my mind quickly recalls a “cinematic classic” White Men Can’t Jump . Billy (Woody Harrelson), Sidney (Wesley Snipes), and Gloria (Rosie Perez) are in Billy’s car. Billy slides in a cassette tape and begins to play Purple Haze by Jimi Hendrix. Sidney, with a puzzled look on his face, says, “Hey, what is this?”
Billy replies, “Jimi Hendrix.”
Sidney, still perplexed, states, “I know who it is, but why are you playing Jimi?”
Billy, in a casual manner, says, “Well because I like to listen to him.”
Sidney, now looking a bit angry, says, “Oh, you like to listen to him. Now that’s what the f###### problem is. Y’all listen.”
Billy, now looking confused, asks, “What am I supposed to do, eat it?”
Sidney, in an animated fashion, says, “No, no, no. You’re supposed to hear it.”
Billy retorts, “I just said I like to listen to him.”
Sidney explains, “No, no, no. There is a difference between hearing and listening.”
OK, so you may be asking yourself, where is he headed with this? In today’s world full of digital innovation, our business leaders are similar to Billy. They are “listening” but they aren’t “hearing.” They read articles, and perhaps books discussing the power of digital technologies and how adopting these technologies can remake businesses and industries. They attend seminars or conferences that espouse the benefits of “going digital.” Understandably, these leaders want in on the digital action.
However, many of these leaders don’t understand how digital technologies can remake their organizations. They assume because others are adopting digital technologies, they should be doing the same. They listen, but they aren’t really “hearing.” In other words, they are “Digitally Deaf.”
Despite all of the well-deserved publicity on the topic of digital technologies, the failure rate for digital projects has been alarming. Forbes noted in a March 2018 article that companies would spend over $1.3 trillion (USD) on digital transformation initiatives and over 70% of these efforts will fail to reach their stated goals (Zobell, 2018). Couchbase, in its 2017 survey stated, “84 percent of respondents reported projects being canceled, delayed, or reduced in scope” (Couchbase, 2017). Finally, in its 2017 survey, Wipro noted “only 50% of companies are successfully executing on their digital transformation strategies despite demonstrated efforts and investments.” In fact in the Wipro study, one in five senior executives secretly believe their digital transformation initiative was a “waste of time” (Wipro Digital, 2017).
Why do organizations fail at digital adoption? What are the consequences of being digitally deaf?
I believe in our current business climate, being digitally deaf is a recipe for disaster. But, don’t take my word for it. Consider the following list of companies: Blackberry, Blockbuster, Borders, Circuit City, Dell, Eastman, Motorola, My Space, Nokia, Sun Microsystems, Toys ‘R Us, and the USPS. These companies were industry leaders and considered at or near the top of their respective peer groups. Many of these companies are out of business, and the remaining ones are struggling to achieve relevancy again.
What happened to these companies? In the simplest terms, they didn’t innovate. They didn’t anticipate changes in their customer’s tastes and needs, resulting in erosion of their customer base. They didn’t see new competitors emerging from outside their usual competitive landscape. They didn’t anticipate technology changes disrupting their industry. Moreover, in some cases, they didn’t react in an appropriate amount of time to opportunities sitting directly in front of them (inside their organization).
Many articles and books have been written about these companies. A quick Google search will reveal the stories. I am not going to spend time rehashing their troubles. However, I will point out that these once rare “falls from power” are becoming much more frequent. Why? In one word: Digital. Digital technologies are the great equalizer and disrupter in today’s business environment.
Many years ago, industry leaders were protected by their sheer size. They could keep competitors at bay because the price of entry to compete head-to-head was too high.
The price of entry is no longer an obstacle. Digital technologies are opening the door to new competitors at an unprecedented rate. Simply consider Cloud technology. Years ago a start-up technology venture had to raise tens of thousands of dollars (or more) just to establish the technical infrastructure to start building on their ideas. Now there is easy access to immense computing power at incredibly attractive prices. Cloud technology is largely responsible for the massive start-up booms in areas such as the US and India. In India alone, from Q1, 2015 to the end of 2016, over 13 billion (US) dollars were invested in the start-up ecosystem.
Data generation and collection has risen at unbelievable rates. Companies are harnessing this information and tailoring solutions to meet the needs of consumers better. Other companies leverage social networks to gain insights and personalize their customer touch. Still, others have exploited new capabilities afforded by mobile technology to win customer mindshare.
In 1975 if you looked at the Fortune 500 list, 80% of the companies would still be on the list in 1985. Today, the 10-year turnover for the Fortune 500 is nearly 50%.
In the United States, business-to-consumer (B2C) e-commerce has exploded over the past 6 years as consumer perceptions and preferences changed. From 2010 to 2016 B2C e-commerce sales nearly doubled. In that time, e-commerce sales rose by almost $250B, a 12% CAGR. A growth rate over three times that of the total US retail revenues (excluding food services)!
Times have changed. Thanks to digital technologies, an incumbent no longer holds an inherent business advantage. New competitors are emerging skilled in leveraging the digital technologies at their disposal such as mobile, social, big data, machine learning/artificial intelligence, blockchain, 3D printing, robotic process automation, voice, and virtual/augmented reality.
Think of the disruptive nature of companies such as Apple, Google, Facebook, Netflix, Uber, Amazon, Alibaba, and Helix. These are companies that have used digital technologies as the basis for driving significant change in their respective industries and in how they interact with their customers. Can you think of a single day in the past few years where you haven’t used a search engine from your smartphone or tablet to look up an answer to a question? Maybe when you were on a cruise and had no service? We have fundamentally shifted how we use technology in our everyday lives.
The fascinating thing is that most of us don’t even think about it. We just do it. The “it” factor that comes from the effective use of digital technologies makes a product or service seem indispensable to the customer. The companies that have figured “it” out are blowing away the competition and are finding new adjacencies (related products and services) to expand their market influence.
In our 2018 survey of retailers, the findings strongly supported the importance of digital adoption to company performance. As we reviewed the survey results, two distinct groups began to emerge. Digital Leaders represent those companies that are much more active in applying digital technologies to business problems. Digital Explorers are those companies that are exploring digital but have not fully committed to broad implementation.
Reviewing the financial performance of the publically traded companies in these groups, we found Digital Leaders enjoyed a 6% CAGR in revenues the past three years. Digital Explorers revenue growth was relatively flat over the same period. In addition, the average price-to-earnings ratio for a Digital Leader was over 80% higher than Digital Explorers (Stone, 2018).
However, remember, this book isn’t about the companies that are doing it well. We are here to talk about why companies often struggle with understanding how they can apply technology in a manner that would provide competitive parity or even advantage.
Many companies are just beginning to think about what “being digital” means to them. Others have embarked on ambitious technology-led projects only to be disappointed in the results. Others are hoping this is a just a fad and will go away. Regardless of where companies are in their journey, it is a safe bet they will all be impacted by the latest wave of technological advances.
What makes an organization digitally deaf? Why would an organization ignore what is happening around them or not put their best foot forward to take advantage of the changes in the technology and business landscape? It is a perplexing question that has kept me up many a night. That question is the one that drove me to write this book.
As I planned this book, I knew I wanted to pull from my experience and write the book in a way that would be meaningful for both business and technical professionals. I always believe pictures and stories work better than lectures. In addition to loving movies, I love to tell stories. Working in technology for 34 years afforded me the opportunity to see massive change. I started my career in the era of large (size) mainframes and progressed through today’s mobile, big data, cognitive, service-oriented complexity. Throughout that span of time, I have had the opportunity to observe change from both sides of the technology spectrum. Eleven years on the software and services side of IT and 23 years on the industry or customer side. I have witnessed beautifully constructed strategies leading to massive growth and have been bewildered by insanely poor decisions costing companies hundreds of millions of dollars. While no one can ever say they have “seen it all,” I have many stories that should help illustrate pertinent points. We will kick-off each chapter with one of these stories and maybe sprinkle a few others in as well.
Here is a great story to kick things off. I had a meeting with an executive at one of my previous companies to catch up on the status of technology projects. He walked up just as I arrived at his office carrying a massive 5-6” thick binder. I asked what was in the binder.
“Daily and weekly reports” he replied.
Now, few things get my blood boiling as much as paper-based reporting. Even today, many executives swear by a bevy of printed reports and are very slow to change. “Damn, that is a ton of reports. Do you carry that to a bunch of meetings?” I asked.
“All of our Monday performance meetings. You never know what will be asked, so I have to be prepared,” he replied.
As I looked at his stack of paper, nicely organized into sections within a three-ring binder, I asked, “Do you read all of those reports?”
He replied, “No. I have a few I look at regularly, but most of these are for reference.”
At this juncture, I took a deep breath and pulled out my iPad mini. “Let me show you a tool that might make this easier for you,” I said.
“Oh, don’t bother. You can’t get the level of detail we need on those. Plus, I need to make notes for referencing later” was the executive’s retort.
“Indulge me for five minutes” I requested.
I pulled up an app on my iPad that we had written using an industry leading BI tool. I showed category level sales, clicked on a graph to drill into region level data, clicked again to go to the district level, and clicked one more time to show store sales for the category. I sorted the list in a myriad of ways to indicate which stores drove the most sales with the least amount of foot traffic. Once I completed this exercise, I clicked on an annotate button, circled the top stores and wrote a note. I then emailed the screen print (with the circle and note) to the now incredulous Executive Vice President.
“Wow!” he exclaimed. “We need that tool. What would it take to get it?”
I smiled and said “We have owned it for years. I have tried for the past few months to get your staff to consider how we could use it to get rid of the paper reports in the company.”
“I have never seen anything like this,“ he said. “Can we get some people to try it out?”
“Sure. I will have it on your iPad by tomorrow” I replied.
Now before you believe this story has a happy ending, let me tell you what happened after the conversation. Even though we had a solution that would allow the Executive to get to virtually all of his information with a click of a button, he was reluctant to use it. He didn’t know it as well and eventually decided he would stick with his three-ring binder. By the way, the three-ring binder required a group of five to six analysts to build on a weekly basis and a couple of analysts to update it on a daily basis. By the way, these are the same analysts we had pitched the idea of the iPad applications to initially. As we eventually learned, the analysts viewed the app as “competition” and something that would disrupt what they did on a day-to-day, week-to-week basis, so they essentially “buried” the idea.
The executive was eventually fired. What was one of the reasons? He was always “too late” in making decisions. In other words, the opportunities were slipping by before he would react to them.
This executive was not unique. I have seen many executives who refuse to use digital tools to help with managing information. I remember chuckling to myself at a corporate board meeting where all members of the Audit Committee had company-supplied iPads. Only one of the six members used the iPad. The other five used the provided paper version.
Why is that? Before you say the executive and the board members weren’t “tech-savvy,” understand these applications (BI reporting and board documents) are not complicated. It is as simple as a touch or a click and then read. The real problem is reports. Specifically, paper reports serve as a security blanket to many leaders. We produce mountains of paper each year. While some of the reports are used for decision-making, the vast majority of it goes into a recycle container unread.
Why is this story pertinent to digital transformation? As we will discuss, digital technologies enable businesses to move in real time. Digital companies have their finger on the pulse of their business at all times. Paper reporting on the other hand, by its very nature, is obsolete by the time it rolls off the printer.
An analogy I use quite often is one comparing reporting to maps. The gist of this analogy is simple. In 1980, if you were going on a trip, you grabbed your map and planned your route. If you were driving solo, you would make multiple stops to check the map to make sure you were on the right track. By 1995 you had the option of using MapQuest to get turn-by-turn directions. While MapQuest was a considerable improvement, it still relied on paper during your drive and couldn’t account for changing road conditions (such as accidents and construction). Today, we all take directions almost for granted. We have powerful GPS systems built into our cars and our phones. These systems not only provide both visual and verbal directions but they also adjust to changing road conditions and reroute us as needed. Also, the GPS systems offer other relevant information such as the location of restaurants and gas stations as we are driving. This technology is so pervasive now that no one uses maps anymore.
Think about it. Most company executives are using reports (maps) to make decisions. This is crazy!
This discussion leads us to our first “Deaf Diagnostic.” Throughout the book, when we encounter a situation where organization behavior or culture stops the digital transformation process, we highlight a Deaf Diagnostic. At the end of the book, we will recap these Deaf Diagnostics and talk about ways to eliminate or mitigate the impact.
Deaf Diagnostic
Organizations can no longer rely on paper-based reports as the primary mechanism for executive information and decision-making. Interactive dashboards, data visualizations, and automated alerts provide more timely and efficient means to consume organization performance information.
For the first Deaf Diagnostic, I feel I should provide some explanation. You may be thinking that I am over reacting to organizations that still use paper reporting as their primary method to convey and consume information. Unfortunately, I am not.
Remember, in a Digital world, business moves in real time. Think about a simple digital transaction that occurs on a website. Since every click and web page searched is digitally recorded we have near perfect information about each customer visit. As a result, we know the customer and what products they are browsing. This knowledge allows us to instantly recommend things to the customer such as alternative products, accessories, and promotions. We know immediately if we have inventory to fulfill their order and where the inventory is located. This allows us to give the customer expected delivery times. In other words, we have immediate access to all information needed to make decisions.
Now imagine how that scenario would work if the decision-making process required someone to read and interpret a printed report. A single report on a customer visit could be many pages long. If an employee needed to read a report to make a decision on promotion or shipment date, the customer would likely have already left the website. Reporting (paper-based or electronic) doesn’t work in this scenario. As we become more digitally connected our core decision-making processes must change. In this scenario, decision-making must be performed systemically leveraging either a rules engine or some form of machine learning or artificial intelligence. Paper reports may provide some value for looking at past performance, but they are useless in driving real-time decisions.
Reporting is just one small example of behavior changes that must occur along an organization’s digital journey. Digital will require us to think and act differently. Acting differently may be uncomfortable for many people as we referenced in the story about iPad reporting. However, as we will continue to discuss, change is a necessary element of digital transformation. I will repeat, on many occasions, digital transformation is not an IT problem or a project.
In this book, we will address the primary challenges, and obstacles organizations face when trying to adopt digital technologies. In some cases, these same obstacles exist for any larger scale technology effort (such as the implementation of an Enterprise Resource Planning or ERP solution). However, there are elements of digital transformation that are different and require organizations to rethink not only their processes but their structure as well. In other words, it isn’t just about installing and using technology. It is about finding new markets, opportunities, and efficiencies.
Transforming the core business processes of an organization through the adoption of digital technologies is a complex and challenging journey. Nevertheless, many organizations attempt to undertake this journey without understanding and addressing the issues that prevent them from consistently executing the basics today. To put it bluntly, if you can’t implement a new software application without significant challenges, why would you expect to be successful in changing the core of your business through technology?
Let’s stop at that point for a moment. As we will discuss in Chap. 2, digitalization of business goes well beyond any traditional technology or business process improvement effort. There are elements of technology, business process design/change, organization change management, organizational design, performance management, culture, and leadership needed to turn technology deployments into true transformations. However, if organizations struggle with these notions on a smaller scale, how do they prepare for such a massive undertaking as true transformation?
This notion is at the heart of Digitally Deaf. To transform, we need to understand and address why we struggle on a smaller scale. Throughout the book, we will seek to identify and tackles the issues in organizations that prevent or limit the effectiveness of digital efforts. We need to understand how to take small successes and build scale that will enable enterprise level transformation.
We will start in Chap. 2 by trying to add some “flesh” to the topic of digital transformation. As we will discuss, there are many interpretations of the word “digital.” There are also many stages in the transformation process, some of which may or may not apply to a particular organization.
Digital technologies tend to build on themselves. They possess high degrees of interoperability and require forethought on the sequencing and execution of each segment of work. This forethought is the genesis for Chap. 3 in which we discuss the role of the business in “setting the table” for success. We will reiterate throughout the book that digital transformation is not an “IT” project or program. Digital transformation touches everyone in an organization: from the C-suite to the knowledge workers. This impact is especially relevant in those companies where technology is not the core business.
Chapter 4 talks about the composition of corporate boards (Board of Directors) and their role in driving digital transformation. We will discuss the role of specific committees (such as the Audit Committee) in the digital journey. Also, we will examine the tone to be established at the Board level to best position companies for digital success.
In Chap. 5 we will talk about the changing role of the leader of the technology function within an organization. In most cases, this role is the Chief Information Officer (CIO), but this can vary. We will cover the emergence of new roles within the organization such as the Chief Digital Officer, Chief Data Officer , and Chief Innovation Officer, among others. We will discuss how these emerging roles should mesh with the current IT structure to position the organization for success.
Have you ever thought about the issues you have witnessed in technology projects? Issues such as schedule misses, excessive cost, missing requirements, and poor quality. These are just a few of the issues we will cover in Chap. 6. As much as I want to stress that digital transformation is not an IT project, there will be technology projects needed to make it all work. As such, we need to understand the obstacles, challenges, and pitfalls of technology projects and how transformational efforts amplify them. We will discuss how to overcome these challenges and build an execution plan that allows your business to implement and scale new processes and technologies quickly.
Digital transformation significantly increases the pressure on IT organizations to deliver. Traditional IT approaches and organizations will struggle to deliver innovation and solutions at the pace needed to ensure success. In Chap. 7 we will discuss the pressures facing IT and the changes necessary to position the organization for success.
Transformation efforts rely on a common component: people. In Chap. 8 we will talk about the roles we all play in transformation. We will cover leadership dos and don’ts as well as how structure within the organization is essential.
Chapter 9 recaps all of our Deaf Diagnostics and discusses options to address the challenges inherent in cultural shifts.
We will wrap everything up in Chap. 10 with how to improve the communications across all parts of the organization to increase the chances of success in your digital transformation effort.
I frequently use the term “journey” to describe digital transformation. Make no mistake about it; digital transformation is indeed a journey. Let’s explore that analogy in a little more depth.
As with a journey, you begin with a destination. The destination dictates your direction and the potential paths you can take. In preparation for our journey, we research our destination. For example, if our destination is a different country we want to know of any particular entry requirements, what languages are spoken, and what currencies are accepted.
We also rely on our experience to help plan our journey. We may remember our last journey and recall the issues when we didn’t proactively place our phone on an international dialing. We also take precautions, like packing an extra set of clothes in our carryon in case our luggage is lost. In other words, we research, we plan, and we prepare. Taking these preemptive actions allow us to respond to issues quickly when they arise and still enjoy our journey.
Digital transformation should be treated in the same manner. You will research, plan, and prepare. Issues will occur along your digital journey. If you have adequately prepared, you can overcome these issues and quickly move on. I am hopeful this book will provide information and ideas that will help you better prepare yourself and your organization for the digital journey.