In Digital Transformation, The Art-of-the-Possible and Average Practice Are Diverging

I’ve long noticed an interesting phenomena when it comes to more fully digitizing our organizations. Namely, that it mostly looks like what other organizations have already been doing. Because we are all almost entirely still early pioneers in a brave new technologically-infused world, this shouldn’t really come as a surprise. Since there are an almost infinite number of directions we could go, copying that which we see that works well just makes good sense.

This herd mentality of digital actually has numerous causes: Proven best practices for digital are too few and far between, successful experiments are often hoarded for competitive motivations, digital innovators by definition take on often untenable risks we’d prefer to avoid, and perhaps most of all, we are still trying to get used to the rapid pace of learning that digital requires to stay abreast.

A big reason for this state of affairs is because digital is inherently complex in its realization, intangible by nature (thus it can be hard to study and assess), and difficult to actually understand in context since it’s now so deeply connected to everything else today. This makes it hard to identify the root cause of any desired effects. Combined with the slow rate of change in people when it comes the requisite shifts in culture, skill, and inclination for new digital ways of working, and the result has been a clustering of most organizations around a similar level of digital maturity: Relatively low.

Digital Maturity: Technology Is Driving the Leaders and Laggards Apart

Digital Maturity is a Team Sport

This was made evident a little while back when McKinsey published their in-depth analysis of 150 representative organizations around the world and their digital maturity in 18 dimensions (see graph above.) It uncovered a wide range of digital maturity, but most notably revealed a sort of inverse Lake Wobegon effect, where most organizations were in fact performing well below average.

In other words, average practice is steadily and inexorably diverging from the art-of-the-possible in an exponentially changing era of technology evolution. This is leaving a great deal of space for leaders to find the leaps forward that are dramatically better and thereby own the market opportunities.

Yet, we also know that when applied for its unique strengths — for faster growth, better engagement, reducing friction in commerce, improved efficiency, and so on — technology can be a tremendous force multiplier (something noted about a decade ago by Andrew McAfee and Erik Brynjolfsson), propelling the leaders that focus carefully on these strengths far head of the laggards. This gap is real, which we can see from the data above, and it’s growing quickly in my experience.

Nevertheless, whether I look at the digital workplace, customer experience, or digital transformation efforts that I’ve been involved in over the years, I tend to see the same thing: The application of average practice that, while proven, will assuredly put most organizations into the also-ran list and fail to propel them forward digitally in a meaningful way.

Over time, this has led me to ask what the digital leaders are actually doing that has gotten them much farther out ahead. In short, my ultimate analysis is that they appear to be learning better and faster about digital in key ways — and from a larger variety of sources — than most other organizations. They also then apply these lessons effectively to their business. Digital leaders tend to eagerly gather lessons and evidence broadly and early, especially outside their organizations. Without this, they are limited to what they’re able to learn linearly on their own, through solely their own efforts. There is also good evidence that this is what most organizations do that have survived a long time, from the work of Shell’s Arie de Geus (and which I frequently cite in my keynotes and talks):

These companies were particularly tolerant of activities in the margin: outliers, experiments and eccentricities within the boundaries of the cohesive firm, which kept stretching their understanding of possibilities.

This same line of reasoning has led industry colleagues like John Hagel to conclude that scalable learning, especially across organizations as Don Tapscott has noted in his research on Global Solution Networks, is essentially the only sustainable competitive advantage. But as I mentioned above, competitors usually don’t like to share lessons learned, and it’s often hard to transfer lessons from one style of organization to another, say across industries or geographies.

The key existential question now is this: How can we use today’s capabilities to learn much better as organizations?

Overcoming Digital Transformation Maturity Barrier with Community Learning, Outsourcing, and Copying for Fast Follower

Three Roads Over the Digital Maturity Barrier

How then are digital leaders overcoming the digital maturity better? In my experience, they are doing one of several things that allows them to pool their digital experiences and investments, then tap much more widely and sustainably into shared lessons learned that they can each use and quickly build upon:

  • Community learning. Non-competitors can come together across organizations to share their digital knowledge and lessons learned, and especially, tackle digital challenges too big even for large enterprises. This kind of cross-entity learning primary comes in three forms, though there are numerous ways to do it: Industry consortiums, which we’ve long had, as well as more digital versions of consortiums such as collaborative multi-organizational Networks of Excellence and of course, the aforementioned Global Solution Networks. These require the highest level of effort but are also the most sustainable, effective, and most likely to reduce the risk of disruption by truly capturing and wielding collective intelligence.
  • Outsourcing. Pull in expertise gleaned from hundreds or thousands of other companies by building on someone else’s mature and evolving ecosystem or digital blueprints. Amazon’s cloud stack and Apple’s iOS platform are great examples of this that countless companies are using today (Netflix using Amazon, for an industry leading example), while increasingly we’re seeing industry blueprints emerging for digital transformation of their entire organization. See the overview of my Digital Transformation Target Platforms ShortList for some details on blueprints.
  • Copying the Leaders. This has long been a corporate strategy of so-called fast followers and it works well for some. This approach basically uses 3rd party investments, discoveries, and exposure to risk in an arbitrage fashion, for their own benefit, picking and choosing what works and avoiding the downsides almost entirely, though some have certainly criticized the fast follower approach, others have cited organizations like Samsung as becoming market leaders by using it. Although technically another form of outsourcing, this model also works in a group of competitors. Downside: You won’t have any “moon shots” or big digital breakthroughs on your own and so you’re still at high risk of disruption.

Clearly, this list is in rough order of preference, though all are workable strategies and will likely be used in combination. That said, the vast majority of organizations are taking the easier routes of the second and third items on the list. This means letting Amazon, Google, Microsoft, IBM, and SAP pathfind their future and build on their capabilities/ecosystems, or being content to cherry pick from the successful digital pioneers and hopefully to attain success in that way.

Digital Maturity Requires Harnessing Collective Intelligence

The third way (first on the list), which I see more advanced and mature organizations engaging in, is to work far smarter by combining knowledge, investment, and experience as whole together, creating a network that can learn many times faster than a single entity. The competitive issues can and are usually worked out.

Are there good examples of multi-stakeholder learning? Yes. Some of the most strategic can be found in the list of known Global Solution Networks, but others that I’ve had personal experience with are the famed Fraunhofer Society, open source software projects (many people/organizations coming together to collaborate on common goals via shared technology innovation and development, and the American Society of Association Executives (and indeed, the entire professional association space, which is becoming increasingly digitized and community-centric.)

There is also a fourth route, which many will observe seems to be the case with certain top digital firms: Hire the smartest people on the planet and turn them loose. This is certainly possible, but it’s also an unsustainable zero sum game that the vast majority of organizations simply don’t have as an option to employ (the smartest people always work for someone else, it has been observed.) Instead, we need additional options for reaching digital maturity that are generally attainable by most of us.

Thus, in the flat and hyper-competitive world of the Internet, average practice is just not sufficient to thrive, nor to survive. Organizations must find ways to learn and evolve faster, more widely, and with much more scale than in the past. Cultivating change agents has emerged as one such way to actually achieve this, but these actors need a steady stream of knowledge on emerging new practices in order to drive the organization forward. This is through scalable learning.

As Scott Brinker’s now-famous law (Martec’s Law) tells us, technology changes exponentially but organizations only change logarithmically. The good news is that it’s very much not clear if this is an inherent limitation of organizations, or that’s just that way because of how we have traditionally learned and changed in the past. From my experience in the field of mass collaboration, my view is that it’s almost certainly the latter. There we now have new and better ways to change if we choose to use them.

The reality is that if we don’t find ways to change more rapidly and effectively, the results are potentially calamitous for us as enterprises and institutions. Fortunately, we now have powerful new tools to apply when it comes to digital learning and change. I believe these approaches may be enough for most organizations for now. If it’s not however, I remain confident that we will find even more and better ways to evolve and grow. The digital future is bright, if we’re ready to learn.

Additional Reading

Using Online Community for Digital Transformation | Slideshare Storytelling Version

How Should Organizations Actually Go About Digital Transformation?

The Eight Essential Digital Strategies

Digital Transformation and the Leadership Quandary

Let the Network Do the Work

The Hardest Lesson of Digital Transformation: Designing for Loss of Control

The emerging case for open business methods | ZDNet

The Top Business Trends for the New C-Suite in 2017
(See: Digital Transformation Programs, Change Agent Initiatives, etc.)

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