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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Internet of Things Strategy: It Will Determine Your Organization’s Future

Few technology developments will ultimately have the global cultural, business, and economic impact of the Internet of Things (IoT.) While today IoT still looks like an industry largely concerning itself with factory automation, connected light bulbs, air conditioning controls and so on, the eventual objective is clear even to a casual observer: Nearly everything in the world is about to become connected and data-driven, from the most trivial object to virtually every significant item in our personal and work lives.

The implications of this shift are profound: We’re about to be able to measure and quantify just about everything that exists. While there will be the requisite debates about whether this is always a good thing, the implacable march of technology development will ensure it’s going to happen anyway. When a new enabling technology arrives and is useful, it finds its way into just about everything.

The implications alone for IoT and the healthcare, insurance, financial services, logistics, manufacturing, and energy industries — to name just the most affected — are profound: For the first time in human history, most aspects of our business will be measurable, and therefore to paraphrase the famous Peter Drucker saying, they can actually be managed in a more direct and effective way than ever before possible.

Internet of Things: The Next-Generation Customer Experience

IoT will also be critical to the next generation of customer experience, allowing us create more personalized and far more useful experiences while maintaining direct and continuous connection — and most importantly, value exchange — with our customers like never before. Customer experience is the product we must all produce in the future and IoT is how we’ll realize it. As Stuart Lombard, CEO of Ecobee, noted last week during his appearance on DisrupTV.

As the current wave of Internet of Things emerged on a scene a few years ago, I wrote an analysis on whether IoT is truly strategic to the enterprise (short version: it is.) Though the exact growth projections continue to be debated, given the inevitably vast numbers of devices and the staggering data volumes they’ll create (large enough that it’s even driven the need to push cloud capabilities back to the edge of the network), it’s now evident that IoT will be the largest new technology industry to date, far eclipsing even mobile computing.

In other words, tens of billions of connected IoT devices, many streaming rich media and other high volume data types around the clock, are already in the process of arriving today and steadily over the next few years. In the process, they will remake the digital and business landscape as they do, as they represent enormous opportunity for new disruptive new products, services, and business models. At the same time, IoT will also pose very significant infrastructure, operational, management, governance, and security challenges for most enterprises due to scale, skill shortages, build-out, and related issues. Organizations must prepare at the highest level for this and put IoT in the middle of their digital value chain as they digitally transform. The resulting IoT strategies will determine their future as a business in profound way.

It’s evident that IoT is a core part of the future of digital and is the next customer experience mandate. We will simply have to be connected to our stakeholders in this way, holding them close across myriad digital channels, providing value in a way that only real, sustained, and live connectedness and engagement can.

Deep Digital Connectedness Requires a New Mindset

To help frame up this story, I was pleased to contribute recently to a significant new IoT strategy ebook produced by SAP, along with many of my industries colleagues. The book does an excellent job teeing up the mindset and thinking required to capitalize on the historic opportunity of the Internet of Things. Thanks to Amisha Gandhi, Jim Dever, and the SAP team for inviting me to contribute. Note: My contributions start on page 7.

The Future of IoT ebook itself is free, has a nice digital customer experience of its own, and covers the following topics:

Future of IoT ebook: Insights on the Future of the Internet of Things (IoT)

1. Focus Forward on the IoT and Business
2. The “Intelligence of Things”
3. The evolution of smart devices and how business will leverage the IoT
4. The Customer Journey
5. How will the IoT affect the daily lives of consumers?
6. The Internet of Truth
7. Concrete data leads to better decisions
8. The Forward Focus of Business
9. Strategic advice on the IoT for business leaders

SAP eBook: The Future of the Internet of Things (IoT), with Dion Hinchcliffe

Other contributors were an all-star cast and include Ronald van Loon, Yves Mulkers, Maribel Lopez, Bob Egan, Christina “CK” Kerley, Bill McCabe, Ahmed Banafa, Joan Carbonell, Jim Harris, Daniel Newman, Evan Kristel, Chuck Martin, Dez Blanchfield, Isaac Sacolick, and Giulio Coraggio. Brian Solis also shared his thoughts about the ebook as well.

Additional Reading

The Essential Digital Strategies

SAP Leonardo, IoT, and Digital Transformation: The Strategic Implications

Visual: The Top Digital Shifts the Enterprise Must Take On Today

The enterprise technologies to watch in 2017 | ZDNet

Tech Trends AstroChart for The New C-Suite, Q3 2017 | Constellation Research

The Essential Digital Strategies

The reality today is that despite seemingly endless advances and a steady river of emerging technologies, many of the key insights, strategies, and lessons in the digital age have still yet to be discovered. Looking back, we are frankly still early in the pioneering phase of digital, despite significant early ground being claimed and several generations of impressive success stories emerging.

Therein lies the opportunity for most of us.

Thus, despite all the esoteric talk over the years of network effects, the red queen treadmill, strategic platform plays, and winner-take-all, it’s now clear that the digital market is so fluid, self-creating, and essentially infinite, that most of the value by far still remains to be created and captured.

When I say digital age, I do mean since the advent of the Internet, which as we look back on it now was a truly epochal event whose impact will be felt profoundly for the remainder of this century, both inside and outside our organizations. This isn’t an understatement: The vast, easy, simple enabling of global digital networks of people and organizations has been a genuinely a revolutionary one. Today’s networks can be of any size, any form, and can effortlessly enable us to come together en masse and collaborate for purposes of creating incalculable human value — many of which were hitherto simply impossible, and all at a cost that relentlessly falls towards zero.

Far too many people I talk to today, including many digital strategists I find, still do not fully appreciate this time in our history. Most of us are coming to terms with and beginning to understand what digital can do, both for positive outcomes and otherwise (as all technology is a two-edge sword.)

Digital Setting the Global Growth Pace

Yet while digital in all its many forms is now well down the path of transforming our economies, enterprise, and society, we do have a growing sense of what the art of the possible is. It’s clear that digital is now of the primary aspects of how we live and work, and so we must shape it into what we want it to become. We have only to look at tech firm exemplars like Amazon, Google, Facebook, Airbnb, and the 183 companies currently in the so-called “unicorn club”, namely digital startups worth over $1 billion, to find the companies that are creating the most new large-scale business potential. In fact, over the last 10 years, digital companies have surpassed the traditional corporation dramatically, now making up five of the six most valuable companies in the world by market capitalization:

The World's Most Valuable Companies: 2006-2016 - Apple, Alphabet, Microsoft, Amazon, Facebook, Exxon

Put simply, it’s far easier — and more valuable economically — to grow a company in a digital world than it takes to do it the traditional way with physical offices, departments, divisions, stores, factories, and vast workforces to run them all so that you can build products and deliver them to customers individually. The cost of doing it the old way is by comparison simply enormous and increasingly prohibitive, even if we’re not talking about eliminating the old world entirely. An amalgam of the two is happening, as we’ll see.

Note: In a digital world, you still need people of course, and some infrastructure, just orders of magnitude less typically. A canonical example of this is WhatsApp, which only needed 50 direct employees to deliver services to 900 million users at the time they were acquired for $19 billion by Facebook.

What Are the Top Digital Strategies Today?

There have been a good number of attempts lately to quantify what the top-level “known quantity” digital strategies are, since for all the reasons above these should be the top targets for the digital transformation process within most organizations. One of the most recent examinations of this is an exploration by Jacques Bughin and Nicholas Van Zeebroeck’s what they believe today’s 6 core digital strategies are. It’s a good overview, especially the insight that for over 2,000 organizations the value of such digitalization has in general been only a little above the cost of the capital to get there. In other words, most efforts don’t generate unicorn outcomes. (Though to be fair, they shouldn’t be expected to. Digital is a numbers game and it’s why VCs invest in pools of startups than in one or two efforts, but that challenge is another story.)

However, I’d argue that Bughin and Zeeborekc’s digital strategies tend to be ones that traditional organizations would be more able to carry out by their existing inclinations and nature. It’s far easier to move into e-commerce, for example, that it is to become a platform company, as the former seems familiar to traditional organizations, while the latter has entirely different rules.

Being a truly digital organization means thinking quite differently than an industrial age organization. I find the above mentioned strategies to be less transformative and meaningfully sustainable than what is possible and evidently required to get the gains that the more green field unicorns are seeing.

The Essential Digital Strategies for Business and Transformation Today

Instead, other research has come up with a slightly different list of strategies, notably recent research by Libert, Wind, and Beck, which shows a breakdown that focuses on price-to-revenue impact. They identify asset builders, service providers, technology creators, and network orchestrators, in that order, with the latter coming out far head. As we’ll see, this identifies more strategic value creators for digital than the previous set of strategies, yet I find that it’s also incomplete in terms of describing digital strategy by not taking into account some of the more tactical approaches.

In my own work with clients, I’ve used a more comprehensive and strategic list of digital strategies — along with applied integration with some of the many proven and/or emerging digital business models that now exist — to identify where organizations should be focusing their valuable leadership time, execution resource, and organizational capacity.

The 8 Essential Digital Strategies Today

With the disclaimer that we’re learning more all the time about which are the most significant and impactful digital strategies, here’s the leading models that exist today, in increasing order of strategic value:

1. Automation

This was the first generation of applying digital to business and didn’t even require networks, though they certainly added an inflection point when they arrived. ERP, CRM, and business process management (BPA/BPM) are all examples of IT automation of the business. The growth of corporate productivity as a direct result of technology automation is a well known story. There is plenty of value here worth investing in, but primarily of the cost-cutting and efficiency variety. Automation will not even prepare organizations for their digital future, so its score is the lowest of all the digital strategies, but is nevertheless the most common form of digitalization. IT vendors such as IBM, Microsoft, SAP, and Oracle have long played a key enabling role in this strategy, but most of them have since moved their new products and services to other digital models below.

2. Legacy product/service digitization

This strategy involves taking existing products and services and putting a digital face on them. This was done by the entire airline and hotel industry in the 1990s and was finally taken up by the retail, media, and financial services industries in the 2000s, in the form of transactional Web sites. Telecom and other industries most affected by digital disruption have often done a very poor job of legacy digitization. While most organizations must look to digitize legacy products to sustain their organizations during digital business model transition, the rise of the unicorns shows us that the largest growth and value is in new markets and technologies. Unfortunately, the majority of traditional enterprise have done a relatively poor job creating effective customer experiences for digital, though the lessons are getting clearer now. Bottom line: Like automation, legacy digitization is a responsible and required investment, but not necessarily highly strategic nor likely to enable survival for the long term by itself.

3. Digital channel distributor

Getting digital products and services to market requires far more than a digital experience at a handful of touchpoints. Instead, it requires marshaling digital channels of all kinds, both self-realized as well as enabling 3rd parties, to flow value from source to customer. Digital affiliate programs (Walmart pays 4% or more gross commission to enable this, for example), marketplaces, arbitrage services, business app stores, open APIs, and other channel reach models such as Amazon’s Alexa Skills are all examples. Even the stodgy insurance industry has gotten into the digital channel game, with insurance giant Chubb partnering with Suning to distribute insurance products to the online Chinese retailer’s ecommerce network, with 230 million users.

4. Marginal market making

Once you have a digital audience, it allows you to expose them to new offerings and digital experiences. This enables incremental new gains that would have been cost-prohibitive without pre-existing investment in that digital market or channel. For instance, Amazon, a good example in so much of digital, allows any of its customers to become individual sellers, tapping into an existing marginal segment that would not have been worth the investment otherwise. While not a big business by itself, this strategy can further tip the competitive scales by generating additional revenue while becoming even more valuable to customers.

5. Technology creation

While having formidable barriers to entry due to capital expenditure, though certainly much less so on the software than the hardware side, there’s no denying that creating a must-have technology remains one of the top digital strategies on the market. Technology creation has created trillions in economic value over the years for companies that solve important problems for their customers. From hardware like smart devices to must-have apps for social networking and messaging to search and media consumption, technology creation can lead directly to value creation like few others digital strategies.

6. Digital platform ownership

Most of us are now familiar with the digital platform discussion, made famous back in the PC days with Microsoft vs. IBM, and now much more familiar to us as iOS vs. Android or Amazon Web Services vs. Microsoft Azure. If you build a platform that can be extended, instead of a just a single point technology, it can be enriched many orders of magnitude further by others, creating an unbeatable network effect over time. Apple and Google have attracted millions of apps collectively to their mobile platforms, while hundreds of thousands of businesses and software companies have built on top of AWS and Azure, making them indispensable foundations that will be vibrant and growing largely through the effort and investment of their platform partners.

7. Network orchestration

What if you could take the assets and technologies that already exist on the network, connect them, and turn them into business models? That’s the premise of this digital strategy, which the likes of Uber and Airbnb have shown pay off in spades. The essence of this strategy is the following: Use existing infrastructure and resources (connecting people who have cars with people who needs rides, for example) and make it the most appealing process. Organizations can create fast-growth new lines of business in very short amounts of time than using the traditional, slow, and out-dated approach of trying building everything yourself, a prohibitive and unnecessary cost today.

8. Ecosystem cultivation

Orchestrating your own platform and enabling it become an ecosystem is the most valuable digital strategy of all. Amazon does this with Amazon Web Services by extending it with marketplace built on top of it, as does SAP with its new but already large and growing SAP App Center. The key here is not just in owning a platform but in making it a recombinant living ecosystem that is directly enabled and extended by each and every new partner, through their own respective ecosystems. Apple does this by allowing other platform partners to build on top of it, a specific example is much of the consumer Internet of Things (IoT) industry, such as Philips Hue and other connected device product lines. Another important example is commercial blockchains, which are poised to become major category ecosystems in their own right, highlighting a path towards a major new digital future. Short version: Ecosystems are as much about their community of business partners, not just the technologies or platforms within them.

Digital Strategy: The Story of Disruptive Co-Evolution

Is this list of strategies an oversimplification? Almost certainly. Is it incomplete and will it grow. Absolutely. Yet it also provides a clear lens through which to look at the heart of an existing organizations and making momentous changes. Smart organizations will grow digital competency — largely through talent — that can quickly execute from the start to the end of this list.

How will such changes be made in large organizations? I’ve been exploring that and grappling with the means of digital transformation and the future of technology enablement in my work for years and some broad outlines are emerging. So in the meantime, brush up on these and get ready for one of the most interesting and challenging times in business history.

Additional Reading

In Digital Transformation, Culture Change Goes Hand in Hand with Tech Change

Vital Trends in Digital Experience and Transformation Today

22 Power Laws of the Digital/Social Economy

Old but still interesting: Fifty Essential Web 2.0 Strategies

Digital Transformation and the Leadership Quandary

The data now shows that a near majority of organizations today are undergoing digital transformation in some shape or form. By digital transformation I don’t mean IT automation of the business of course, but wholesale rethinking of some or all of the business in digital terms. It’s the greatest game in the business world right now, and necessary for long term survival, but such digital reinvention is also one of the hardest journeys to make.

Moreover, just like startups have a high failure rate (8 out of 10 don’t make it typically) in trying to do something new that’s relatively unproven, digital transformation is a endeavor fraught with high hurdles for success in any organization.

Enterprises, however, do have vast assets they can assemble on deck to ensure a successful outcome — everything from existing customer bases and supply chains to current market share and the ability to fund loss leadership to success. This drives the failure rate down much lower than typical greenfield technology startups. But as commentators such as Christian Frei estimate that two-thirds of companies still won’t make the journey successfully, and others have put the failure rate much higher.

Modern Digital Leadership Unleashed by Network Effects: Digital Transformation

Better and New Types of Leadership = Effective Digital Transformation

As Christian also notes, leadership is ultimately the root cause, for both success and failure in re-imagining organizations digitally:

After all these discussions, workshops, and coaching sessions, one point came out very clearly as the biggest threat companies have in this transformation.

It is not technology.

It is not their people.

It is not their business model and products.

The biggest threat and reason why most companies will fail to adjust and most likely either end up bankrupt, acquired, or marginalized…
… is their leadership mindset, which is embedded in their company culture.

The diagnoses of the reasons for implicating leadership is many and varied but essentially boils down to the reality that leadership has the most resources and control in hand, but is often lacking in digital vision and/or competency to wield these. The reality is that most leaders of large organizations today have limited experience in successfully leading either large digital efforts or enterprise-wide change efforts, and much more rarely both at the same time. While it’s likely we’ll see far more seasoned executives in this space in the next 5-10 years, that will be much too late for most organizations.

what then can leaders do now to ensure they’re doing their very best tap into and truly marshaling the deep experience, fresh thinking, and effective action they need from across their organization and indeed, from across the industry? To help address leadership in digital native terms, I’ve been promoting the concept of network leadership for some years now (and I’m not alone), realizing that all leaders must much more effectively tap into the full measure of knowledge and innovation in new channels they need to deliver on what has become the most important and challenging transitions in the history of business.

Leading (and Acting) With and Through Your Networks

Leaders have always had to work through others — their workers, business partners, and their industries — to accomplish what enterprises do. But we now have new ways and methods of doing so that are far higher scale, have more leverage, and are earned, rather than owned. Leading through the network is the only way to tap into broad enough talent, diverse ideas, and local action to accomplish the large scale changes that must be achieved today. I’ve written much about the new CIO mindset emerging and the need to better design our organizations for loss of control needed to keep up with the pace of tech change, and that these must be baked most deeply into the leadership thinking (both on high and at the root) of our organizations.

Underscoring this, I recently receive a note from a friend (who was also previously one of the top CIOs in the world in my opinion) that made me reflect that while we can (and must) let much of the network do the work for us — if we only know enough to harness it — that leadership remains critical in ensuring the ultimate outcome:

The leadership part (for what I had) was always my “secret” weapon.” Key parts of that leadership is:
– Human (recruit, develop, manage, balance)
– Technical (new and old tech, ops etc.)
– Business (core business (new and incumbent), finance and accounting)

From this we can see that people are the key to driving actual change. Technology and business, combined, are the vehicles, but not the agents of change. Leaders must cultivate, build, and tap into the best networks of people, tap into their knowledge, and empower them to create change at scale. (See the growing and vital change agents industry conversation for more thinking on this.)

Thus the essential leadership quandary with digital transformation is that leaders — formal and grassroots — simply don’t know what they don’t know yet. And many — and likely most — are simply not taking sufficient steps to learn more and faster or unleash those that know a given answer and can act.

My good friend and CIO advisor Tim Crawford put this another way today. Leaders in digital — both on the technology and business side (though the distinction is starting to get blurry these days) — must establish their network effect. For those not yet familiar with this key digital concept, it means establishing sustainable value through connection. For the CIO and other types of leaders, this means building relationship capital in all its forms (personal, organizational, industry, and digital), and then using it effectively.

Addressing the Leadership Quandary with Network Effects

As I noted in a reply to Tim, this means:

  • Engaging both upwards and downwards. Establishing deep and wide social capital in the process. Done in digital channels especially, this creates an inherent network effect when combined with the the other items on this list.
  • Being the conduit for change. By ensuring you empower and enable others through their relationship with you.
  • Sharing knowledge. By setting it free to spread and work for you forever.
  • Enabling and empowering others. Proactively, especially with change agents (which are the ones, by definition, that will effect needed change anyway).

In short, digital transformation requires a new type of leader with a digital mindset that is broadly encompassing, fueled by growing network effects, and strategically turning over non-essential control to their network of change agents to drive the many hundreds, if not thousands of local microtransformations that will collectively result in a holistic and aligned overall digital transformation. It’s a more organic, pervasive, and sustainable way and, I believe, the only real way most digital transformation will ultimately happen.

Why? Because a rich network always beats a poorly connected system in almost any situation.

Additional Reading:

How IT and the Role of the CIO is Changing in the Era of Networked Organizations

Using Online Community for Digital Transformation

How Should Organizations Actually Go About Digital Transformation?

When It Comes to Digital Transformation, Change Agents Matter Most

What is the most important factor in realizing technology change today? Is it having the right technology or tools? Perhaps leadership support, as that is cited by so many (including myself) as a top success factor. Maybe it’s the right strategy, or roadmap? However, when it comes to what actually matters most, I have found that it’s really none of these things, though they’re all important along the way, but not absolutely vital to success.

Instead, the single most important element in driving successful digital transformation, or whatever you call your large-scale or enterprise-wide technology change efforts, is the ability to execute. You can survive bad or lacking leadership, poor or no strategy, even mediocre technology, if you can actually get something done. And that requires a unique talent, though fortunately one that almost anyone can cultivate with effort. And when I mean get something done, I don’t necessarily meaning doing it personally (though sometimes it is that too.) Instead, it’s the ability to wield the environment around you to accomplish something.

The Attributes of Change Agents: For Digital Transformation or Any Business Change

Why this is so vital is something that we’ve learned the hard way over the decades from approaches like agile methods: Most of what we initially think we need to do in a technology project or change program is wrong. We can only find ground truth by acting and then seeing how it worked out. We then learn, adapt, and then try again. This makes action, or agency (see definition #2 in Merriam-Webster), the ultimate discriminator when it comes to getting things done. Without action, especially in a rapid sense-and-respond feedback loop, we can’t learn what we need to do and certainly can’t learn fast enough to matter, to ultimately drive the right changes.

What about the other components (leadership, strategy, tech?) The other pieces can literally be borne out of the proof points of real-world validation. Nothing succeeds like successful action, in other words.

The good news is that change is in the air in general. New ways of working are finding success. For example, organizations have widely (25% of all orgs by some estimates) begun using cross-silo collaboration, such as devops, to break down the long-standing sclerosis that has built up through the accumulation of technology in the proverbial Legacy Mountain. Trends like this poise change agents to have their voice heard and have impact like never before.

Who Should Drive Digital (or Any) Change? What Makes Them Change Agents?

The short answer is those who can. In a wide-ranging discussion I had recently with Gloria Lombardi, I noted that one of the biggest lessons of my career was not to try to change people who don’t want to be changed. Instead, find those that do and then empower them.

This post was inspired by an inspired Twitter discussion this morning between myself, Tim Crawford, and Jim Canto about what the attributes of a change agent are. My take is shown above in the visual, and can be summarized as:

  • Can identify or develop valuable new ideas. Change agents don’t necessarily need to have ideas about change, they just need to recognize good ones.
  • Has social capital to spread ideas. Change agents have some resources to take their ideas and convince others to join in to help realize them, especially as well-known CIO and industry colleague David Chou added to the discussion, to navigate the political waters..
  • Can communicate effectively. Having social capital is not enough however, one must also be a good communicator in order navigate the obstacles of change and ultimately gain buy-in, high low, for positive outcomes with the proposed changes.
  • Has ability to realize/drive org change. While change champions advocate for change, change agents actually are able to realize it through their actions and leadership.

My esteemed industry colleague, Eisenhower Fellow and the CIO of the FCC, David Bray, simplified this even further in the aforementioned discussion, noting: “#ChangeAgents are leaders who ‘illuminate the way’ and manage friction of stepping outside the status quo. Anyone can be a change agent.

Ultimately, in any organization, the only change happens through change agents, formal and informal, somewhere. Let’s learn how to cultivate them and enable them to help us create our digital future, at scale.

Additional Reading

In Digital Transformation, Culture Change Goes Hand in Hand with Tech Change

The digital transformation conversation turns to how | ZDNet

How IT and the Role of the CIO is Changing in the Era of Networked Organizations

Using Online Community for Digital Transformation

Driving successful change in a large organization has always been one of the most difficult activities in business. But for those who are principally tasked with carrying their organizations forward into the digital future, they are currently facing perhaps the single most challenging large-scale enterprise activity of our time. One has only to look at the short-list of needed technology adaptations to recognize the true extent of the challenge.

Part of this is because digital itself is so intangible. It’s hard to understand all the moving parts of the vast technology stacks, ecosystems, and platforms that now surround us because it’s hard to discern them. It’s often even harder to understand the diverse needs, perspectives, and skill gaps of the people that have to change along with the technology.

Thus the popular topic of digital transformation has come full circle back to the change process itself, largely because we’ve found our existing toolkit to be entirely unsatisfactory. For example, we already know that the vast majority of strategic change initiatives employing traditional methods don’t succeed. We also have an increasingly good sense of why this is, and a big part of the reason is that centralized processes break in exponential times (see Martec’s Law.) They quickly become overwhelmed by the scale and dynamics of the necessary change processes, which have to keep adapting and updating themselves in near real-time to stay relevant, often in windows that are hardly more than weeks today.

Enabling Digital Transformation at Scale with Online Community

Consequently, we’ve seen steadily emerging models for change that go well beyond the strategic initiative, the center of excellence, or incubator to push out change into a much broader set of minds and hands, far beyond what we’ve normally employed to drive change previously. I now believe that unless organizations greatly expand the notion of who is involved in change, who can drive it, and how they are enabled, empowered, and supported, they will largely underperform with digital transformation.

To determine how scalable digital change can best be realized and figure out what kind of forward-thinking constructs will be required, I’ve been experimenting for the last several years with employing the very same models that we use to engage in the digital world, to cultivate and foster more dynamic change processes. The ideas of social business and online community, which show how the most scalable, cost-effective, and rich model for working is to enable the network to do the work. I’ve now come to understand that in digital transformation, we have to let the network do the work. Put simply, there is no practical way to achieve the pace and breadth of transformation required in exponential times without using exponential tools.

In the last few years, I’ve been using online community as the platform for change, instead of creating traditional centrally-staffed change programs, and found it far more effective in general. I am not the only one that believes this is a key path forward towards new types of highly potent change models. This is an industry-wide discovery and conversation we are beginning to see emerge in general. We have moved beyond the center of excellence model, which we’ve learned soon bogs down and largely fails to address the scope of enterprise-wide change activities, to a new model I’ve called the network of excellence, for lack of a better term.

Realizing that we need to scale change on a platform

I’m not alone in thinking along these lines. For example, well-known management thinker Gary Hamel has been promulgating this very same idea, entirely independently. My industry colleague John Hagel has also been writing about many related concepts, most recently about how we can scale learning in an exponential world. The highly regarded CIO of the Federal Communications Commission, David Bray, spends a tremendous amount of his energy using social media and other channels to talk about how to broadly enable digital change agents and “intrapreneurs.” There are still others exploring this topic as well.

The subject of learning in particular is a vital one to this conversation. That’s because unless we’re prepared to radically restaff our organizations, mass education for the digital era is required to help our organizations as a whole shift our thinking, behavior, and culture. Great communication is essential also, as we’re learning it is the leading success factor in driving effective change. Both of these activities are best realized using today’s modern digital communications and collaboration tools designed for very high scale, leverage, and asynchronicity: Online communities and enterprise social networks.

While I’ve been “experimenting” with new open methods with real transformation efforts in enterprises to the extent I can the last few years, an emerging model for how to structure and wield online communities to drive these kinds of change has begun to present itself. Far from being a proprietary new way of driving large scale change, I now see that this model, and similar ones like it, are the inevitable direction that change will take.

In the very same way that open source software communities eventually transformed how most software was developed and social media revolutionized how most media content was created, and we see the same advances in crowdfunding and other crowdsourcing methods, the very same shift is now happening to our organizations’ change processes. They are becoming more decentralized, more empowering, diverse, and resource rich by using digital connections to enable wide-scale learning, alignment, communications, and execution around a change process. They are even allowing local actors — and often now even external agents (see open APIs, developer networks, hackathons, startup partnerships, etc.) — to pick up the tools, processes, and lessons learned to change their part of the organization.

Early lessons in using online community for digital change

While the methods and approach we are using to connect together change agents in a community to organize around and realize strategic change are very much still emerging, I can say from experience now that the following is generally required:

  • A community platform. This is a digital forum within which digital change agents will collaborate on and effect change, formulating plans, making joint decisions, and carrying out their efforts, often in very self-organized ways.
  • Facilitation. This is by applying what industry colleagues like Rich Millington refer to as strategic community management, actively facilitating the change process, ensuring those who get stuck get the help they need, and empowering, educating, and orchestrating many points of top-down and bottom-up change across the community, and therefore across the organization.
  • Learning. The community as a whole becomes a massive learning repository, a sort of self-documenting and emergent MOOC for digital transformation adapted to the organization, with lessons learned and best practices culled by facilitators and spread to change agents.
  • Empowerment. A community of transformation spreads knowledge, resources, know-how, and collective energy, enabled by sponsorship, capabilities, staff, and a mandate from the highest levels of the organization.
  • Communications. With rapid change comes an absolute requirement for transparency and clear, open communication. These traits are the natural attributes of an online community, as everyone can see what’s happening and why. As I cited above, this is the top factor for successful transformation.
  • Co-creation. The strongest, swiftest change happens is when there is alignment locally and globally on what needs to be done. Then everyone comes together to put together their ideas and resources to drive digital change.

I invite you to collaborate with me as the digital transformation world begins to adopt the same digital forces of open participation that have remade many industries now, and apply them deeply to our practices and frameworks. For just as the old, plodding, limited, and bandwidth-starved methods of central production are no match whatsoever for today’s methods of digital peer production, failure to adapt has very significant competitive and existential consequences. In short, online community is one of the most powerful methods for achieving almost any large-scale human endeavor, and so I’m pleased to see it arrive to help with digital change.

Can most organizations achieve this? Well, we do know that organizations can’t change unless their leaders change with them, so I do hope so.

Postscript: I’d be remiss in not citing Don Tapscott’s excellent work in identifying and promulgating Global Solution Networks as perhaps the most strategic form of using community to drive large scale learning and change at an intra-institutional, consortia, industry, government, and NGO level.

Additional Reading

A change platform is a priority of the CIO in 2016

Going Beyond ‘Bolt-On’ Digital Transformation

Is it IT’s last chance to lead digital transformation?

In Digital Transformation, Culture Change Goes Hand in Hand with Tech Change

I’ve spent a lot of time in the last few years identifying the best approaches for that urgent enterprise topic of our time, digital transformation. When I first started, I often looked to top examples of organizations that have started the transition and made good progress (see sample case studies below.) More recently I’ve derived insights from my work directly with a number of organizations on their individual transformation journeys.

Ultimately, however, I have determined that the short answer is one that you might expect: There is no single blueprint for transformation that works well for everyone.

Instead, the right steps very much depend on the organization itself. We also know now that there are indeed common success factors we can apply, if we can adapt them to our organizations. Generally, I’ve found that the best method is to employ heuristics on an established framework that takes an organization’s industry traits, cultural inclinations, organizational strengths/weaknesses and uses a generative process to create a starting point for change.

The resulting adapted framework is informed by best practices and industry lessons learned so far. A good place to start for these is Perry Hewitt’s 10 best practices for digital transformation, which she developed when she was Chief Digital Officer at Harvard.

The framework is balanced so it does not focus too much on technology or change management. In fact, the starting point must be one that steadily shifts both the technology foundation and the people of the organization in unison towards both planned goals and emergent opportunities. This starting point then continues to evolve as the organization learns from early experience. The overall process usually works best when realized on a supporting platform that enables open communication, enterprise-wide learning, digital channel leadership, stakeholder empowerment, and enablement of a network of change agents across the organization. This is the change platform I’ve been discussing in the industry lately, and is typically an online and offline community of practice.

The Stages of Culture Change for Digital Transformation

Rapid, Sustainable Digital Change Requires a Platform

Having an effective change platform is critical, as it’s the people side of digital transformation that is the hardest part by far, which we can clearly see from a great set of recent data by Jane McConnell. Far and away the most significant challenge is getting the organization to collaborate across functions and silos, given disparate priorities, timelines, and lack of mutual familiarity. Without this, fragmented results and disjointed digital experiences are too often the outcome. It’s only by having a common and participatory venue to discuss, plan, and execute that effective transformation can take place. Thus, as Ron Miller has noted: Digital transformation takes true organization-wide commitment.

I typically employ a cultural change map — generically presented above, but adapted to the specific organization — to communicate some of the key aspects of mindset that has to shift to support digital transformation efforts.

The digital transformation effort then uses strategic education, mentoring, and specific activities (these might be hackathons, MOOCs, certification efforts, reverse mentoring, and #changeagents outreach) to proactively shift mindset across the organization and build the requisite digital skills and ideas. These include counter-intuitive notions that can be hard to otherwise learn: Designing advantageously for loss of control and using the intrinsic strengths of digital technology to change more rapidly and scale out faster.

As the organization comes together and engages together on the change platform, it then generates the framework to identify their starting point and guide the ongoing process using rigorous measurement and action-taking, which are two other key success factors, though proactive communication remains the most important action to take (again, why the change platform is so critical).

An Adaptable Framework for Digital Transformation

Communication isn’t sufficient by itself however. Effective action is required. The digital transformation framework above is therefore also very focused on day-to-day operations supported by an ongoing redesign of core business processes that is adjusted continously through early data from careful measurement of early prototypes and pilots. Of course, there are more details involved, but this is the high-level process that I’ve both used and seen work at large organizations to close the execution gap and create sustained and successful transformation.

Leading digital transformation case studies

Burberry’s All Encompassing Approach to Digital Transformation

Travelex and Their Digital Transformation: Communicate, communicate, communicate

How Nordstrom executed cross-silo digital transformation for the long haul

How Tesco used a diverse “community of colleagues” to drive digital transformation

Additional Reading

The Building Blocks of Digital Transformation

What Organizations Should Do in the First 100 Days of Digital Transformation

New Methods Leaders Can Use to Drive Digital Transformation