This is the blog post version of my lightning talk at this year’s Enterprise 2.0 SUMMIT Paris. My script for 43 slides in 10 minutes, PechaKucha style, and I finished ahead of time! My purpose was to do three things:
- Spend five minutes giving the Agile Elephant view of the current complex and disruptive digital landscape. There is a wave of change affecting every business and some key issues to be understood that are driving the need for digital transformation in every industry, every style of business.
- Then spend another five minutes presenting 8 strategic building blocks to enable transformation, with the emphasis on practical things you can do, and specific areas or factors that your organisation needs to address.
- Lastly, leave you with a core message that is vital for the 21st century enterprise.
First I need to start with this quote from Alvin Tofler, well known author of Future Shock:
“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”
That idea of continuous learning is a taster for the core message, but highlights the dramatic changes that we are living through. Let me start by trying to explain the digital business landscape. We’ve been talking about it for 20 years. It was back in 1995 that Nicholas Negroponte collected together his articles for Wired in to the book Being Digital and talked of moving bits and not atoms. That is the basis for the digitisation of business that we have been living through for two decades. It affected the world of media and retail first, and then the music business and the film & TV business, but now it’s reaching every part of the business World. Fast forward to 2012 and Marc Andreesen wrote about software eating the World, and then last month my friend and fellow Enterprise Irregular Dion Hinchcliffe used this graphic to explain the complexity and many ingredients of Digital Business.
The one thing that is certain – your business model is under threat. Some smarter, more agile business is aiming to sneak past you and take your market. What are you going to do about it? Well, there is a great saying that necessity is the mother of invention. That means that when your back is to the wall, you will find a way to make it happen. Well I want to subvert that phrase and turn it in to the mantra:
“Reinvention is the mother of necessity.”
To explain the current, disruptive business landscape we think of it as a Digital Enterprise Wave. You can ride it, or go under! There is a set of economic, technological and human factors including an ageing population in the OECD countries, outsourcing, offshoring and low cost manpower in Eastern European, South & Central American, or Far Eastern countries. Add to that we can begin to access almost everyone, everywhere in our connected World, and then add entrepreneurship, crowdsourcing, and our millenial generation which is growing up digital. Together these provide the ideas underpinning books like Thomas Friedman’s The World is Flat, Chris Anderson’s The Long Tail, or Clay Shirky’s Here Comes Everybody. That’s the foundation of the wave.
Next comes the triple disruption of Cloud, Social and Mobile. For the last 5 or 6 decades we lived with Moore’s Law driving ever increasing computing power and a technology disruption every 5-10 years. We moved from mainframes, to minicomputers, to the Personal Computer. Then we networked PCs together, then we had the era of client/server computing, leading to the first version of the World Wide Web, followed by the dot-com boom and bust leading to a more interactive Internet that we called Web 2.0 for a period. During each of these disruptions large companies failed and new companies emerged from nowhere. Smart businesses thrived and made use of the new paradigm at each transition, but others couldn’t live with it and failed. However we’ve never had more than one technology disruption happening at the same time…. until now. Now we are living through a time where all IT is moving to the Cloud, at the same time as the explosion of Social Media, at the same time as the shift to Mobile. Most of the world is connected on mobile phones, and a significant proportion of us are walking around with the Internet in our hands with smart phones, iPads and tablets. The confluence of cloud, social and mobile changes everything – technology can now form a major component helping just about any type of business you can think of. We’re not in Kansas any more… this forms the middle layer of the wave.
But there’s more! We have emerging technologies – the Internet of Things, Big Data and the associated Analytics, Artificial Intelligence and 3D Printing. We are in the early stages of each of these, but each one of them has the potential to change things dramatically yet again. For example, when 3D Printing comes of age, the World’s supply chain will suddenly be disrupted. Predicting even the near term future of how these things will develop is incredibly difficult. These emerging technologies form the top of the wave.
All of these interrelate and combine to form what we call the Digital Enterprise Wave and they present a formidable challenge for every type and sector of business.
In the face of the Wave, business as usual has little or no future. Legacy systems of record won’t be able to cope with these new demands. Adding a dash of social on top of your conventional apps won’t cut it either. You will have to think differently. We need Digital Thinking for this Digital Transformation – that’s where the 8 building blocks come in.
But before we get to that, let me quote our great hero of business management Peter Drucker:
“The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.”
Next I want to highlight a book from 2013 by Jaron Lanier called “Who Owns the Future?“. It looks at the impact of this digital disruption we are experiencing. I tried to find one sentence from the book which encapsulates its thesis:
“At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion. They even invented the first digital camera. But today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for $1 billion, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?”
Lanier’s book highlights some key sociological and business issues around our new connected 21st Century. The way companies are now valued, the new business models and the way we are using increasing levels of technology is squeezing the middle class more than any other demographic. If content like news or music or films are “free” how do the writers and artists and their surrounding industries survive? Those changes were just the beginning as new “sharing economy” companies like Uber and Airbnb are demonstrating. Added to that there are what Lanier calls Siren Servers who want your data, and provide you with “free” services in return. We want those services, but if we don’t pay for them, suddenly we have become the product. This is the technology landscape and business world in which we are trying to find customers, create value, reduce costs and make a profit.
Yet another dynamic is what our friend Professor Vlatka Hlupic of Westminster University calls The Management Shift, in her book of the same name. She has researched companies who have been tackling these big shifts over a number of years. She references more than 20 companies using her approach and leadership model. They are from small to large, in various sectors and include a FTSE 100 Company. She has categorised their management styles in 5 stages or levels from Traditional to Emergent. The smart, successful companies have an emergent management style characterised by an unlimited mindset, strong team cohesion, unbounded culture, inspirational leaders, a strong sense of purpose, and a passion for the work. These are the characteristics we need in our 21st century leaders and managers.
I’d also like to recommend Leading Digital by George Westerman, Didier Bonnet and Andrew McAfee. It is one of the best books published around the digital business topic in the last 12 months. It has a wealth of good case study examples and categorises the topic in two dimensions. One is your company’s digital capability – the “what” of using digital technology to transform the business, and the other is your leadership capability – the “how” of successful transformations, where managing the change is much more important than the particular technology involved.
Putting all of these aspects together tells the story of the complexity of the Digital Enterprise Wave that we are facing and the resulting business turbulence that we need to surf through. How do we do it? We believe there are 8 strategic building blocks that you need to invest time and effort and resources in to enable successful digital transformation. Let’s go through them.
Peter Drucker supposedly said Culture eats Strategy for lunch. In truth your company strategy is very important too – this isn’t an either or situation. However, in transformational change the company culture is a vital factor. Successful companies have a strong identity. The founder knew their “why”, their reason for being, the core purpose of the venture they started. He or she may still be involved or they passed on the values to the new leaders, in to a set of behaviours and beliefs (or maybe they didn’t). In carrying out digital transformation you need to work with the company culture to enable change, or begin to change the culture in the right direction if it isn’t aligned to the digital shift that you need to take. In all of the companies we’ve with worked with, or the case studies we’ve seen, culture is one of the primary building blocks.
To transform your company you need strong leadership, but it has to be the right kind of leadership. The digitally savvy companies have leaders with vision who promote a mindset encouraging teamwork, explaining their purpose with clarity, and promoting an environment of openness and sharing. The particular organisational structure that you have is less important than getting the culture and leadership to encourage the right behaviours of your managers, team members and other stakeholders. You should be looking for the emergent leadership characteristics we discussed earlier at all levels of your organisation.
No One Size Fits All
There are no one size fits all solutions. Every company is different. Every company has legacy systems, to a lesser or greater extent, that you’ll need to work with because that’s where the current, vital business data and intelligence resides. There aren’t any panaceas, or a particular social & digital business platform that has all of the answers and works well for most types of business. Actually there are a plethora of platforms, from complex to lightweight which are usually very good at a few things, but not so good at others, and as of today none of them do all of the things you’ll need. In any case you will need to integrate to data in existing systems and link the new digital approach directly to existing business processes. You need to assess the business, look for where you can generate most value, and plan to adopt new platforms and system enhancements accordingly.
End to End Solution
You need to think in terms of an end to end solution. Adding a social business platform or new digital business components on top of existing systems can provide some help, and even give short term benefits in key areas, but to really transform you need a holistic approach. We use the McKinsey 7s framework because it’s been tried and trusted over decades. It works. It covers both the hard factors and the soft factors of your business. You assess the business in terms of Strategy, Structure and Systems, and then Staff, Skills and Style, as well as looking at the Shared Values (which these days is increasingly called culture) of the company to get a complete picture. Following this approach leads us to consider all of the factors you will need to address to add value, find efficiencies and make a real difference. You don’t have to use this particular framework, there are many others you could use, but you must think end to end. Focusing on organization structure, or people, or culture, or systems on their own is not going to work. Focusing on one bit of the value chain won’t either.
In the 80s and 90s we focused on quality management and quality circles and talked continuous improvement. For digital transformation we want you to think Continuous Reinvention. As we said before, your business model is under threat. If you aren’t thinking about new business models you are in danger of losing out to a smarter, more agile competitor. Innovation has to be at the heart of your approach to your business. You should be reinventing the business and competing with yourself to do better, and then rethinking again. I started this post with that quote about learning, unlearning and relearning – you need to open your mind and think Continuous Reinvention.
In a world where there is a perception that information is free, new ideas are the weapons that add value. In a world where your competitors can harness cheap resources, or Amazon’s Mechanical Turk online crowdsourcing marketplace, or Artificial Intelligence to automate processes, how do you compete? All of these techniques started with the particular skill of a person and that skill has been automated or sent to the lowest cost of production. Somebody made the first widget or carried out the first translation, and then their process was automated. To compete you need to change the game with new ideas and different thinking. You need to get creative. But creativity shouldn’t be confined to some product design department. It shouldn’t be a one off, quarterly or annual brainstorming event. We are living in, arguably, the most disruptive time of technological change ever – we’re living with the Digital Enterprise Wave and it’s getting closer! The last comparable time was the early industrial revolution, and that wrought huge transitions. To compete you need creativity to become an everyday thing in your company, applied to every part of what you do. You should encourage it and make it part of the DNA of your company, but also recognize that not everything will work. Your approach needs to involve experimentation and recognize that some of the ideas will fail, and that’s perfectly acceptable, because others will succeed. Innovation and idea generation should be an acceptable part of everyone’s daily work-flow. To do that you need to be promoting thinking skills in your company. You need mechanisms in place to encourage people to speak out about doing things better. You need tools to help you capture those ideas and the creativity of your workforce. Look at the smart companies – that’s what they do. Change your approach and get creative.
Balance – Inside and Out
If you look at the material on digital transformation from a lot of the key consultancies, service providers and analysts you will see a lot of talk about the customer experience, omni-channel marketing, digital touchpoints, and customer facing use of digital tools. All that is important but you have to get the balance right. Your transformation approach needs to look inside the company as well as out. You need to be enhancing the experience and the digital journey of not just the customers, but your employees, suppliers, partners and other stakeholders that support your business too. We use the term “business as a social object” – unless business is as fluid as the outside world it will flounder.
It’s not enough to optimise your current business. The best way to survive the future is to invent it yourself. For effective Digital Transformation you need to encourage Design Thinking. Some of the building blocks we’ve already covered are key components in that mindset, but you need to pull them together in your end to end approach. Wikipedia says Design Thinking is defined as combining empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality in analyzing and fitting various solutions to the problem context. It is a formal method for practical, creative resolution of problems and creation of solutions, with the intent of an improved future result. You need to apply that thinking not just to the product, but to all of the processes supporting your company.
And finally – the Core Message
So these are the 8 building blocks which you need to work with to create a coherent, holistic, end to end strategy for the digital transformation of your organisation, but I would highlight one of them as the core message, the most significant change of mindset that you need to address, and that is Continuous Reinvention. The successful 21st Century organisation needs to be thinking differently, and then rethinking continuously to stay ahead of the competition.
Continuous Reinvention – to survive change needs to be a constant.
(Cross-posted @ Agile Elephant)