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?

It’s Time to Transform ERP into a System of Engagement

The IT industry has steadily been moving beyond its roots in data management and record keeping for a few decades now, approximately since the advent of corporate e-mail. As I’ve tracked over the years, this trend is more broadly known as the shift from systems of record to systems of engagement. Over the years, we’ve witnessed how the value of IT systems grows dramatically when they focus as much on connecting people and systems together with as little friction as possible, as they do on storing and retrieving information.

We’ve also collectively learned as an industry that one-size-fits-all technology, especially in the enterprise, often ends up fitting the needs much fewer people than we expect. Put simply, despite all countless industry lessons learned, enterprise systems are still far too unwieldy, adapted poorly to individual users needs, difficult to use, and an impediment towards value creation, especially at the edges of our organization, where key business activities such as sales, marketing, service delivery, and customer care take place.

Today’s Successful Enterprise Systems Engage Effectively

In recent years, new highly personal forms of digital engagement have demonstrated a new path to us through the large scale global success of social media, use-anywhere smart mobile devices, and consumer apps that are essentially effortless to acquire and use.

When I look at most enterprise IT today however, it’s clear that the buyer is not the end-user but IT departments and other stakeholders who won’t have to use the systems themselves. The traditional ERP system, which runs much of the mission critical infrastructure, is possibly the worst offender and most in need of remediation in today’s era of highly consumable personal IT, which runs rings around most enterprise technology when it comes to usability, personalization, fitness to purpose, and responsive design.

The Contemporary Enterprise: Systems of Records and Systems of Engagement

Certainly, enterprise systems often have a very different set of goals than consumer IT, including much higher levels of security, more rigor in data structure and quality, complex operating requirements, and other factors that consumer IT simply doesn’t have to contend with. I’d argue these are, however, just not valid excuses for meeting the standards of modern IT systems when it comes to improving productivity, usefulness, and effective results in our organization. As I’ve long argued, we need to unclog the arteries of enterprise IT for competitive reasons as well as basic employee retention, given trends I’m seeing in end-user expectations of how IT systems should work.

At this point in IT industry evolution, I’d argue that the nature of the enterprise procurement process, along the roles of those typically charged with IT acquisition each conspire against the kinds of systems that users — and the business itself — would find more useful and productive in getting their work done. Plenty of evidence now shows that usability and accessibility have large benefits when it comes to getting results from enterprise IT.

An actual data point from the respected Nielsen Norman Group serves to make the point here: Allocating a mere 10% of the budget of your IT system to usability will approximately double the quality metrics for the system. Yet few projects allocate anything like this amount, especially to off-the-shelf systems.

Modernizing the ERP for Engagement by Augmenting It

So how can we overhaul the poor effectiveness of today’s ERP systems and bring the latest advances in today’s systems of engagement to bear to increase the poor usability of ERP systems that Jon Innes famously lamented back in 2010.

Given the slow rate of change in the usability and reach of ERP systems over the years, I’d now argue that we’re not going to see a major improvement in the design of ERP systems themselves. Instead, I now see that enterprises, which have invested enormous amounts in their existing enterprise systems, have little choice from most of the leading vendors. Instead, the typical ERP system should instead be augmented with the capabilities that will provide the full measure of value creation that was originally hoped for.

To this end, I’ve authored a new white paper that lays out my analysis that we’re about to enter a new era of enterprise IT. One that is not just more consumerized and highly usable, but focused on both the needs of the business and end-user both. By augmented ERP with effective systems of record, most organization can now take the power of today’s sophisticated ERP systems and extend them to wherever they are needed in a far more personalized, dynamic, and focused way.

As a new generation of IT thinking emerges, I now see that this will be the pattern of ERP and most enterprise IT systems, in that they will become a fusion of capable foundational systems of record and systems of engagement. The latter will either be purpose-built or developed by a new generation of enterprise IT companies that understand the new generation of IT, consumerization, design thinking, and usability on top of traditional IT requirements.

How ERP Will Become the New Systems of Engagement White Paper by Dion Hinchcliffe

Credit: I’d like to thank Capriza for making my time available for the research and analysis that went into this white paper, which is freely available for download.

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

Vital Trends in Digital Experience and Transformation in 2016

This year I was invited again to come to Dreamforce in San Francisco and present on the latest developments in digital experience and digital transformation for the conference’s Emerging Tech Trends track. Surprisingly well-attended given the satellite location of the track at the Hilton Union Square, having to prepare this session is always a good opportunity for me to go over my research in the last year and map out what’s likely going to happen next.

For myself at least, it’s clear that human change has become closely linked to and as important as digital change, so I have divided up the trends list in the last two years into a tech dimension and a human dimension.

The bottom line: How we think, work, and react as people has tremendous impact on the usefulness and effectiveness of emerging technology. It’s what separates the digital native from those who are just beginning the journey. For example, those not inclined to share information won’t get much use from the technologies and techniques of social business, nor will those who are uncomfortable and unused to spending time in virtual worlds be able to take advantage of the rich opportunities of virtual reality. And if we’re not changing our leadership skills to be more network-centric as opposed to hierarchy-centric, then much of the business value of digital experience and engagement is wasted on us. The list goes on.

What’s more, not only are we co-evolving with our tech, but we need to understand how we need to change just as much as the technology is changing. This is required in order to a) understand the art of the possible and b) to be able to access technology’s unique and historic new value propositions.

What's Next in Digital and Social Experience and Digital Transformation in 2016

Another point I make early in the presentation is the technology is changing exponentially right now and has climbed into a rather steep part of the curve, yet our organizations just don’t change on the same curve. Instead, we change far more linearly, at best logarithmically (see slide 8.) That’s not to say that that enterprises can’t organize themselves to change much faster, but in order to do so we must employ fundamentally new ways to transform organizations. Certainly, some organizations are adapting faster and digital transforming more sustainably (see data on slide 4.)

Sidebar: I’ve recently been exploring what these new models for sustainable yet highly scalable models for digital transformation, even proving them out on client projects I’ve been working on over the last few years. The key seems to be a more network-based, decentralized, and emergent approach I’ve called a Network of Excellence.

Emergent Tech Trends Inputs

For this year’s round-up of emerging tech trends, in addition to original research, I used as inputs several items:

Major new additions to the list include digital assistants/bots/chatbots, blockchain, omnichannel, workplace app integration, and collaborative EMRs, along with significant tweaks in a variety of the existing trends.

You can see the whole deck with an overview of each trend on Slideshare. I’ll post any video that is produced as well.

Also, in other Dreamforce news, you can review my live blog of the main Dreamforce keynote as well as my current assessment this week of the Salesforce platform and ecosystem.

Additional Reading

Digital priorities for the CIO in 2016 | ZDNet

The Building Blocks of Digital Transformation: Community, Tech, Business Models, and a Change Platform

The Building Blocks of Digital Transformation: Community, Tech, Business Models, and a Change Platform

I’ve been making the argument lately that the single largest obstacle in successful digital transformation is change itself. Surprisingly, the arrival of new technology is generally not the large hurdle to becoming more digital in a meaningful way, though it certainly represents a large and growing learning curve. Yet learning the new technology is manageable by most organizations in my experience, if they have the will to do so.

Finding the right business models can be a bit more of a challenge, but the process of discovering the best ones is increasingly well understood these days. One somewhat ironic lesson is that we’ve also learned that we usually have to build an audience first, often well before we decide on new digital business models, that are centered around some activity or capability of significant shared interest with the market, before we can experiment and find the right path forward in terms of generating value, such as revenue from sales, subscriptions, advertising, etc.

Online Communities Are the Business Construct That Create the Most Value

From my Enterprise Digital Summit 2016 Paris Keynote Deck

Why Digital Needs a New Mindset

It actually turns out the most important and challenging building blocks for digital transformation is people and the processes that can change them. Thinking in digital terms requires a significant shift in mindset, such as designing for loss of control, understanding the power laws of mass connectedness, the startling revelation that the network will do most of the work, and understanding how open participation is the key to unleashing digital value in scale to our businesses.

However, shifting the mindset en masse of the large number people that exist in the average enterprise (i.e. tens or even hundreds of thousands of workers) is not something that can be done to them, but can only be done with them as Euan Semple frequently likes to point out. So, what’s the single best venue in which to engage significantly in a time efficient and sustainable fashion? I now suggest that the most likely and cost-effective vehicle for this that we know today is online community.

The building blocks of digital transformation is a topic that I recently had time to study in depth as I prepared my closing keynote for the always terrific Enterprise Digital Summit 2016 (formerly the Enterprise 2.0 SUMMIT) in Paris this month.

Step 1: Gather Stakeholders into Communities of Digital Change

The fundamental building block of digital transformation is therefore not technology, but people, a much more challenging proposition. However, if we can somehow connect the collective workforce in the organization together in an effective fashsion to begin a shared and dialogue-based process of learning, understanding, experimenting with, and then carrying out the tasks of digital transformation across the enterprise as a much more aligned and self-supporting way, then we are much more likely to succeed. As I’ve discussed, we’ve even started to witness evidence that IT is shifting in this direction steadily, with the rise of empowered change agents and even unexpected source of pre-existing tech change using forces like shadow IT as a key resource for creating decentralized technology adaptation across the organization.

But it all starts with community, for which I believe the evidence is now clear is the most powerful way of organizing human activity and creating shared value yet developed.

Step 2: Assemble a Modern, Market-Facing Technology Stack

From there, we do need to look at the technology lens at what our business does and how it does it. We can no longer realize all tech change ourselves, as our competitors have already learned that the single greatest force for value creation is capturing and wielding community contributions of customers by the millions via mass co-creation, and business partners by the thousands (see APIs + hackathons). I recently summarized the many other emerging enterprise technologies we must consider all the time as well, but the most important ones are customer facing and involved in co-creation.

We therefore must instead now becoming highly competent in building strong and effective architectures of participation, as most digital leaders harness the vast capacity of the Internet to do most of the value creation:

The Digital Business Stack: Marketplace Driven Engagement & Value Creation

Step 3: Create and Nurture Digital Experiments

From there we can combine people-led digital change at scale with a portfolio of digital engagement and experience technologies and processes — that must prominently include market-facing community — to begin creating, launching, and growing healthy and vibrant new products and services. Growing hacking in fact, has become an important new technique used by top Internet companies to ensure early lift and adoption, and has been a key subject of interest by top technology leaders like Microsoft CEO Satya Nadella. So grow the results of digital transformation this way, then generate revenue:

Digitally Transforming a Business with Growth Hacking, Business Models, and Community

Step 4: Get Serious About Revenue Models

Finally, the last building block is digital business models, which one the service has a successful audience or community, can be experimented with and validated, though certainly some services, such as sharing economy ones, can monetize from the outset, though often at break even levels. Below is a representative list of some of the most common Internet business models, though by no means all the possibilities. For example, there are at least 18 separate known business models for open APIs alone. The high level Internet business models break down like so:

Common Internet Business Models

For a more complete exploration, please view the video of my closing keynote on this subject in Paris on June 2nd, 2016:

Or download a copy of the Slideshare deck that I presented with.

Additional Reading

How IT Can Change For the Digital Era and What Leaders Can Do About It

The digital transformation conversation shifts to how

More Evidence Online Community is Central to the Future of Work

Within the last month, two new industry reports have been released that shed important new light on how we’re going to be organizing and operating our organizations in the coming years. Many of you know my point of view in this regard: Social technology has at this point largely transformed the consumer world, yet the increasingly outdated digital landscape of business frequently continues to rely on creaky and rather limited technologies such as e-mail, document repositories, intranets, file sharing, and so on. So it’s always instructive to see how far we’ve actually come in places, and how much we have left to go.

The first report is The Community Roundtable’s excellent annual State of Community Management for 2016. While I’ll provide a fuller write-up on ZDNet soon, it’s clear from this report that the model of online community continues to rise in prominence and attention as a superior operating model for activities that involve a large number of people that have common interests and need to work together on shared objectives.

As my industry colleague Alan Lepofsky likes to say, without aiming our new digital technologies and cultures purposefully, there is little point.

Key Aspect of the Future of Work: Online Communities Aimed at Shared Purpose

Particularly significant in the report was this year’s exploration on the oft-discussed and little resolved issues of calculating hard return-on-investment (ROI) for community. While in my experience online community is a far superior — albeit still emerging — new way of working for a wide variety of use cases than traditional methods, both internal and externally facing, The Community Roundtable tackled the issue head on in this year’s report to determine ROI from this year’s participants in the survey:

While there is a wide range and many communities do have negative ROI rates that are likely due to their young age, small size or immaturity, many more demonstrate compelling returns that should satisfy stakeholders.

Successful internal communities are more valuable, on average, than their external facing peers and those community programs that addressed both audiences had an ROI in the middle. Overall, communities average an annual ROI of 942% – suggesting that most community managers have nothing to fear from calculating their community’s ROI – remembering that it is the start of an ongoing dialog about value and how to grow it.

The numbers overall are impressive, and shows what I’ve seen consistently: The return on community is not only enough to justify the initial investment and is superior to most competing methods, but is also more than enough to properly fund the ongoing effort with a properly sized team. This especially means dedicated, professional community managers, which are perhaps the top success factor for communities, yet too often neglected in my experience. In short, we can now quantify how online communities and enterprise social networks offer significant value to the typical business. In any case, the numbers make the case on their own:

The ROI of Online Community by Use Case

From here we can see from the data, which Rachael Happe indicated to me recently in a discussion was from their largest sample size yet, is there is serious, immediate, and significant value in both internal and external communities. This continues to validate why online community should be a central plank of your digital strategy, and a core component of your digital transformation efforts.

Also, it’s worth noting that online community is also a key platform for enabling digital transformation, a key topic that came up last week in Paris by many practitioners at the Enterprise Digital SUMMIT, where I was speaking. I’ll explore that issue in more depth as well soon.

The value of social in the back office

The second report is “How social tools can reshape the organization” from the McKinsey Global Institute. Authored by well-known McKinsey partner Michael Chui — whom I finally got to meet recently in New Orleans at the Enterprise150 event — and several co-authors, the report delves into some recent findings on business impact with community and social tools that is worth exploring.

Social Tools and Community Enable Digitization and Performance

Particularly notable was the report’s finding that for any business activity which has been digitized, on average half report that incorporating social improves the digitized process even more, whatever the process. What’s more, specific business activities show a much higher level of improvement if they are digitized and made social, both (see chart above.) These activities include order-to-cash, demand planning, research & development (R&D), supply chain management, and procurement. These aren’t necessary glamorous aspects of our business, like marketing or sales, which are more often associated with social business performance but they are vital and important:

To digitize all processes, both internal and external, the results suggest that social tools can help. For every process where their companies are digitizing and using social tools, respondents agree that social technologies have enabled their use of digital overall. This is true even for the back-office processes where few respondents now say their companies are using social tools. In fact, social’s effect on digitization is greatest for the internal processes where social tools and digital activities are least common.

This data clearly shows that many efforts could be seeking higher levels of easily accessed value in places other than where we’ve traditionally focused. This also means that if you’re already digitizing something, it makes sense to make it social too.

Additional Reading: Enterprises need a (social) platform to drive change

In short, the case of online community is now stronger than ever: More data is available than ever before which shows substantial, sustained, and transformative value can be created by working in more open and highly participative models, as long as we’re sure to connect our activities to purpose. One of the things that struck me most in Paris last week is how many use cases that the latest case studies cite, far beyond simple knowledge sharing and management that used to be the central business case. It’s very encouraging to see our industry reach a new level of maturity and data-based value, though to be sure, there is still much more to do in most organizations.