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?

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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

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.