The fallacy of (digital) Transformation

As Carrie Bradshaw says
“the more words we invent, the harder it becomes to define things”.
She talked about relationships, I’m talking about strategy.

In this short post ( I needed to get it out of my system), I’d like to point you to 4 common mistakes and misconception that lead to poor thinking in organisations.

1. DIGITAL DOESN’T MEAN ANYTHING

Digital doesn’t mean anything, because it means too many things to too many people. Latest executive research performed by INSEAD & this fluid world provides valuable insights.

“Digital” does not have a universal meaning: the research identifies 20 key categories of engagement in digital with multiple subcategories of varied levels of complexity”

I invite you to read the research here.

arnie-levin-can-of-soup-with-label-that-reads-digital-soup-zeros-and-ones-cartoon

2. DIGITAL IS CONFUSED WITH TECHNOLOGY OR DEVICES

idea-spoon

Common mistake being made between the artefact and the underlying process.

The term “digital transformation” is essentially preempted by IT firms in order
to sell their services (check for yourselves). Again, see recent INSEAD & this fluid world research or insights from 2014 Altimeter research (mentioned here)

Success is perceived as being rooted in leadership and management, yet a significant proportion of respondents feel this gets insufficient attention

 

3. DIGITAL IS CONFUSED WITH INNOVATION

Screen Shot 2016-06-14 at 17.04.32

Digital is not just another app, or a connected device…
Just like electricity is not just a fridge or a TV set…

Although digital enables some components of innovation
(see 10 types of Innovation graphic below) – it must not be confused with innovation – innovation being “the creation of a new, viable business offering.”

The most important word in that phrase is viable: innovation must result in the creation of new economic value – for customers but also for companies.

10-types-of-innovation

 

4. INNOVATION IS CONFUSED WITH STRATEGY

Strategy is getting the job done –  that means winning competitively in a given situation.

There can’t be one strategy, but there needs to be a portfolio of strategies depending on:

  • the breadth and depth of a companies products and services and markets served
  • the predictability of the business environment
  • the shape-ability of the business environment
  • the favorability or unfavorability of conditions

 Innovation is the component of your strategy that allows a company to adapt
its capabilities, assets and processes to continue to create value for its customer.

Because strategy is about making choices, innovation is also about making choices.

Evidence-based research led by Larry Keeley for his book demonstrates the superiority of
strategy combining multiple innovation tactics across more business components than product performance alone.

aaeaaqaaaaaaaaylaaaajgiyytcynte5ltgxnzitnduyms04odg2lwjmzgqxyjewnjzhoa

Finally, this means Strategy guarantees survival – and poor choices lead to death.

As Martin Reeves explains in his TEDTalk : “transformation is about survival”.
Not competitive advantage …but survival. If you need to transform… you probably made some poor choices, and you’re paying the price.

In a world that is more complex, strategy has changed and how you think about strategy
needs to change. strategy is not a luxury: it’s a requirement.
As french poet Nicolas Boileau explains:

Whatever we well understand we express clearly, and words flow with ease.
(Ce qui se conçoit bien s’énonce clairement – Et les mots pour le dire arrivent aisémement.)

I thought it was worth a post. So next time we talk about digital or transformation, let’s be specific.

sources & links:

Advertisements

Courage is the new competitive advantage

A lot is currently written about challenges mature corporation face to innovate : various mavens and gurus exemplify Uber, Airbnb (add yours here) as models to follow, urging businesses to disrupt themselves and behave like startups.

techcrunch-disrupt-sign-5-24-11-large1

There a is indeed a wide broadcasting of this polarised view of old world vs new world, without much thought being given to the underlying laws of strategy and business at play nor long-term impact on wealth, labour, society, etc…

We are hammered with the transformation imperative, with an obsessive focus on technology and a total ignorance of the challenges of adoption inherent to human behaviour.

Big players create research lab, corporate accelerators, hackathons to look like startups:
it seems it is more important to appear innovative, then to actually do the hard work of rethinking the way you do business.
They spin off digital academies, digital or disruption days, visits to Silicon Valley, or dedicate a section of their executive training programmes to this thing called “digital”.
It’s like going to visit the gym – only once – to get an idea of what it could look like to be fit.

fake-muscle-shirt
Less than ten years ago, I remember a client of mine at Nokia stating that Nokia was now an ”internet company” (today, the equivalent is “everlasting startup”).
Makes me smile: You can mimic the looks of an internet company or a perpetual startup, but you ain’t one: you copy the artefact, not the underlying “reason why”.

As I’ve stated this previously:

  • mature organisations are good at executing a business model, but not good at innovation (mostly because they tend to only focus on one type of innovation: product)
  • Startups are good at creating products, but not good at operating at scale.

Both mature companies and startups both face a common challenge:
how to design an organisation for scale in a highly unpredictable environment,
when obviously organisations models inherited from previous ages do not work anymore.

Our current model of how a company works is inherited by previous industrial revolutions, and a “machine view”: a business is a well-oiled machine, with multiple parts, each assigned to a specific task. Inputs/Outputs.

“The mechanistic view of the world that evolved in France after the Renaissance maintains that the universe is a machine that works with a regularity dictated by its internal structure and the causal laws of nature. This worldview provided the basis not only for the Industrial Revolution but also for the development of the machine mode of organization (Gharajedaghi and Ackoff, 1984).”

Therefore you “just” need to optimise the parts to run at maximum efficiency.

But as the company grows, so does complexity, and the common solution is to increase processes and procedure to control chaos, by limiting the autonomy of each part.

And we roughly end-up with two types of control:
– monolithic and central: senior management reviews all tactics, lots of buy-in meetings, slowness increases with size.
– independent silos: everyone does their own thing, alienation and suspicion between departments.

Efficiency trumps flexibility. In a fast-paced and unpredictable environment: the company become irrelevant.

“The most stubborn habits, which resist change with the greatest tenacity, are those that worked well for a space of time and led to the practitioner being rewarded for those behaviors. If you suddenly tell such persons that their recipe for success is no longer viable, their personal experience belies your diagnosis. The road to convincing them is hard. It is the stuff of classic tragedy.” (Charles Hampden-Turner and Linda Arc)

Contemporary research in various fields indicates that this machine view is flawed: the interaction of the parts (ie. the dynamics of the system) matters more that the intrinsic performance of individual parts:
Proof is recent news about Google’s Aristotle Project, IMD’s or MIT’s research on collective intelligence cognitive diversity team performance

I also find Netflix’s culture deck very insightful in this matter:
“context, not control”: clear and articulated context allows autonomy and relevant, decentralised decision-making
“highly aligned, loosely coupled”: all parts are aligned to deliver on clear strategy and specific, broadly understood goals. Teams interact around strategy and goals, not tactics.

 

Screen Shot 2016-03-31 at 14.34.40

To thrive in complexity, companies need to be purposeful systems and have a purposeful strategy: be able to produce the same outcome in different ways in the same environment and different outcomes in the same or a different environment.

t306_2_042i

To achieve that leaders and managers need to become designers : learn how to use what they already know, learn how to realize what they do not know, and learn how to learn what they need to know.
Producing a design requires an awareness of how activities of one part of a system affect and are affected by other parts.
Unfortunately, the task is not just an academic discourse; it demands enormous emotional struggles and a huge cultural challenge. Engagement in this process, in addition to competence, requires courage.
I guess courage is the new competitive advantage.

(to be continued)

Recommended links:

[Thoughts] Think like a startup… or why you need to doubt to be lean in the corporate world

I cannot count the number of times I’ve heard that phrase: “think like a startup, act like a startup”… I guess you stopped counting too.

But this imperative calls for a deeper question, why is it so hard for existing businesses to do so?And aren’t we underestimating the harshness of being a startup?

You need to start with the definition of a startup: A startup is an organization formed to search for a scalable and repeatable business model (according to Steve Blank, in “The four steps to Epiphany”)
Read it again. The startup is formed to seach
The establish organisations isn’t formed to search – it’s designed to execute.

Startup entrepreneurs undergo tremendous pain and agony through the growth process between idea and product/market fit and revenue generation.
They will have to go through  the hard questioning, doubting, hole-poking and criticism inside an accelerator to make the venture even stronger.  I haven’t met any manager or executive in established businesses willing to go through such pain… because they don’t have time to do so, and they have no incentivized to do so.

So maybe for established businesses to think and act like startups, they need to institutionalise some time to doubt, to assess wrongful assumptions, challenge their limiting beliefs, articulate their intuitions, raise questions (see leads of belief change in one of my previous posts).

Dare to doubt

As I write these posts and continuously research and read about contexts and behaviours enabling innovation and creativity, I have found doubt/skepticism and questioning at the foundation of most approaches.

It is the framework which changes with each new technology and not just the picture within the frame (Marshall McLuhan)

To harness doubt in a positive way I often suggest this framework:

  • the things you know you know: norms, rules, bright spots, best practices…

check that these facts are still valid or true against data (see my previous post here)

eg. This mobile carrier brand is destined to young adult and teenagers (Sosh by Orange)… when it actually observed great take-up with unemployed population.

  • the things you know you don’t know: these are the additional questions and assumptions you’re trying test.

Try to answer the question through further analysis with the data you already have…

eg. How sensitive are our Mom consumers to the presence of this ingredient in our recipe, given growing negative buzz around the topic.

  • the things you don’t know you know: that’s you’re intuition, your know how

Try to identify and normalise it to improve effectiveness, efficiency and transferability, Turn your hypothesis into evidence

  • finally the things you don’t know you don’t know: that’s you blind spot.

This is the area where you need to accept to doubt and put your discovery skills to practice (the why? the how? the if?)

This is also where the opportunity awaits.

It is a huge task. Startup entrepreneurs have to do it, or they will fail to find a market/product fit and scalable business model or pivot to new markets.

Established businesses have a market/product fit and business model but are alienated by them, and will fail to survive if they don’t adapt to a fast moving and uncertain environment.

Data informed vs Data Driven

In both cases – this framework has to be data informed.

I’m purposefully writing “data informed” and not data-driven as I’ve encountered many data-driven-ish companies loosing sight of the bigger picture, trapped in analysis paralysis or worshiping irrelevant KPIs in the scorecard. I have so many stories it is embarrassing.

The reason I suggest data informed framework is because good metrics change the way you behave, they are a driver of action and incentive specific behaviours to create better alignement with strategy. They make you accountable.

As Jedi Master Yoda would say: “Good metric is the path to the Force. Good Metric leads to clarity, clarity leads to accountability,  accountability leads to alignement”

If you have found an nugget, idea, insight or opportunity during this discovery process it is either in line with your current product/market fit and business model – … or not:

  • If you’re a startup, that’s the opportunity to pivot it into a new market…
  • if you’re in an establish business, good luck: you are kryptonite (unless you work a P&G) – get an executive sponsor and make sure everyone else knows you’ve got one.

Measuring what matters: Debunking a few myths

  • Brand Awareness/Top of Mind: Actually consideration is a better proxy for sales and marketshare in most industries I’ve been working with
  • Number of Fans, followers, Likes: that’s a typical vanity metric. If you can’t get them to do something useful for you, they are useless
  • Number of contacts in database: as previously, useless unless you know how many will open an email for eg. and act on what’s inside.
  • Number of visits / Market Share: is it one person who visits/buys a hundred times or a hundred people who visit/buy one time?
  • Number of downloads: Downloads alone have no value. Activations, ARPU do.

Now ask yourself this question – and feel free to contact me if you wish to discuss this further:

  • What are the metrics you are working towards?
  • How are they aligned to what your business – startup or established is trying to achieve today, tomorrow?
  • How many help you make business decisions?
  • Can you kill the ones not adding value?
  • Some industries use a single or aggregated success metrics for e.g.. NetAdds or CLV or ARPU… would it be possible for you?

[Thoughts] The good, the bad and the ugly in idea and best practice management

I have now worked long enough in and with global and complex organisations to notice the same challenge come again and again: How to identify, share and reapply ideas, innovations and practices… across countries and functions.

Having worked for a few years in companies that were great at doing it – namely Agency.com and then a management consulting firm, I was surprised to see how many other industries and organizations failed at capturing and transferring that kind of knowledge (call me naive or idealist)

“If only HP knew what HP knows, we would be three times more productive”
Lew Platt / Former chief executive of Hewlett-Packard

The biggest barriers to transfer lie in:

  • ignorance: people just don’t know the knowledge exists (and everybody keeps reinventing the wheel in their little corner of the world)
  • capacity: people know the knowledge exists, but have neither time, nor money nor details or skills to implement
  • lack of relationship: people don’t know who to go to access that knowledge, or where is the opportunity to connect

Whatever the solution put in place, adaptation will require from people in the organisation to, learn the process and the systems, but most importantly to understand the principles behind it.

What is a best practice / good idea, anyway?

Not only best is a moving target, but what is best is also situations specific. Therefore you need to define the levels of best practice.

  • Industry Best practice: This is based on both internal and external benchmarking work, including the analysis of performance data. At this point, everyone should agree that it should be a norm basically.
  • Local Best Practice: as above, but for operating company or department level
  • Good practice: technique, methodology, procedure, or process that has been implemented and has improved business results for an organization.
    This is substantiated by data collected at the location.  A limited amount of comparative data from other organizations exists. It is a candidate for application in one or more locations within an operating company or department
  • Good Idea: Unproved, not yet substantiated by data but makes a lot of sense intuitively; could have a positive impact on business performance. Requires further review/analysis

 

How to identify them?

Find the bright spots, i.e. focus on the areas where dramatic differences in performance point to a real underlying process/behavioral difference

Most companies do so within geographical or category specific clusters, but I’ve noticed they tend to disregard what you could call similarities, eg. clusters of countries, or industries or categories which have similar challenges.

One of my clients – in a previous life, was willing to design a central marketing strategy for a cluster of 8 countries.
Unfortunately, the marketing managers had very different challenges in each of the countries, but these could be easily distinguished between mature markets and fast-growing markets in terms of sales for the product.
We used additional criteria to manage the complexity of challenges and narrowing them to a limited number of “contexts”. The identification and replication of good ideas and best practices became more valuable and relevant for all as we avoided the “not invented here/not decided here” syndrome and provide a greater common denominator for all.

 

How to replicate them?

For each of the similar contexts or clusters where we identified “bright spots”:

  • determine where it fits (local best practice, good practice, good idea)
  • qualify the explicit information available
  • identify the implicit & tacit information available (the know how)

In the example I provided above, smaller groups of marketing managers and teams were gathered to identify the bright spots. Real transfer is a people-to-people process. We used technology as a catalyst, not a solution – as we combined social enterprise applications on top of the best practice/idea database as they provide:

  • User experience as the ones used in personal life : People/places/relationships/expertise/areas of interest/content sharing and rating/highlighted activities and streams…
  • Internal directories(experts/champions/multipliers)
  • Market place for expertise request and offers

 

Reward sharing

Most of the time new idea management and sharing is rewarded collectively through awards.

I’m not criticising awards, but it is difficult to focus people’s efforts and will for a gratification that occurs once a year and for which they might not even be invited.

In order to change and reinforce expected behaviours you need a short feedback loop.
The most critical part is to be able to reward the individual behaviour as well as the adoption.

We embedded collaboration indicators pulled from the social enterprise platform (e.g.. contribution in posts, comments, likes, projects…) into the formal performance appraisal of marketing teams and managers. One could imagine going even further and integrating learning and sharing KPIs in leadership remuneration in order to get total alignement, commitment and support.

It is also critical to be able to work with executives and leadership to embed this way or working in day to day work and methods by removing the blockers and redesigning the procedures accordingly and facilitate training & development.

Different context but good idea: One of my friends at Google shared with me this great practice – when he joined the company. He was managing a large team, but was able to identify the members who demonstrated best behaviour and skills through a program which allowed other departments to nominate people in his team for a small (let’s say couple of hundred pounds) financial reward. A perfect example of how internal norms facilitate and reinforce expected behaviour

 

Source:
Switch: How to Change Things When Change Is Hard | Chip & Dan Heath | Crown Business; 1 edition (February 16, 2010)

 If only we knew what we know: Identification and transfer of Internal best Practices HBRCases| Carla O’Dell, C. Jackson Grayson Jr. | Apr 01, 1998 | Apr 01, 1998

[Thoughts] The OCD of CDOs

Two pieces of informations came to bug me recently.

On the one hand, Innosight’s executive briefing on strategic readiness and disruptive change stating:

  • Fully 85% of respondents say their organizations need to transform in response to disruptive change
  • yet only 49% say that feel very confident or confident that their organizations are prepared for transformation in 3 to 5 years.
  • That number drops to 42% in a time frame of 5 to 10 years.
  • Only 12% of organizations have a formal growth strategy with at least a 5+ year time horizon.
  • The remaining 88% either have no formal growth strategy or it is shorter term.

One the other hand, the rise of the Chief Digital Officer …:

  • 25% of companies will have a CDO by 2015 as reported by Gartner in 2012
  • the number of Chief Digital Officers in 2013 doubled again in one year—to a total of 500. And the CDO Club is conservatively projecting that number to double again, to some 1,000 Chief Digital Officers by the end of 2014.

As if the answer to the increasing need for lasting transformation is to be addressed by this new created role of the Chief Digital Officer.

Now when you look a CDO Club figures, CDOs were predominantly represented in the following industries/categories

  • advertising sector, at 36%
  • media at 18%,
  • publishing (13%), nonprofits and municipal (10%),
  • and financial (8%).

68% of them are in the US, 23% in Europe (mainly United Kingdom, France, Spain, Italy and Germany).

Now that bother’s me. So I tried to understand what CDO means and what is their remit, given the 3rd industrial revolution that is taking place is impacting many parts of the organisations value chain, not just Marketing and communications.

Russel Reynolds, the executive leadership and search firm explains that “traditionally, digital was positioned as part of the marketing function within the business, responsible for driving the organization’s online presence. The last two years have seen the rise of the Chief Digital Officer, a senior executive who sits at the right hand of the CEO and is seen as instrumental to the future of the organization.” Gasp!

Understandably “For many companies, especially those in the retail and leisure sectors, digital is the fastest- growing revenue stream, and a Chief Digital Officer (or, sometimes, SVP Online) is extremely important in driving that growth”. But according to Russel Reynolds, CDOs will “be the executives with the operating experience, management skills, strategic mindset and vision to lead businesses in an increasingly technological future.” (…) and the role will “require change management capabilities that can impact the whole company” (also they mention this specifically for traditional media industry).

Although I understand the need for companies to realign their business models, and processes to address their customers. But Digital Transformation goes beyond MarComms function.
In his post about the 2014 State of Digital Transformation, @BrianSolis form Altimeter group makes an interesting point:

  • investing in digital technologies does in of itself not equate to digital transformation
  • digital transformation has become yet another victim of the technology first efforts that miss the human mark, i.e. how people in organisation use tools and techniques to get the job done
  • true implication of digital transformation spans beyond technology on the real of infrastructure, organisation and leadership – across “everything from HR to collaboration to sales to supply management and beyond”.

Erik Brynjolfsson – director of the MIT Center for Digital Business and a research associate at the National Bureau of Economic Research (see the video in footnotes), explains that 120 years ago, when American factories began to electrify their operations: productivity did not increase in those factories for 30 years. “That’s long enough for a generation of managers to retire.

the first wave of managers simply replaced their steam engines with electric motors, but they didn’t redesign the factories to take advantage of electricity’s flexibility.It fell to the next generation to invent new work processes, and then productivity soared, often doubling or even tripling in those factories.”

and just as the earlier generations of managers needed to redesign their factories, we’re going to need to reinvent our organizations and even our whole economic system.
He’s TED Talk explains brilliantly the cascading effects of technology, and the specifics of what he calls the machine age, i.e.the revolution supported by machine computation (see my previous post: “I don’t believe in Digital”): replicable at no cost, exponential and combinatory.

SO even though CDOs might be useful, for some companies and businesses – as is, i.e. eCommerce and Marcomms roles to engage with digital customers at every touchpoint of their journey, I doubt the creation of the role alone will be sufficient for organisation to understand and act upon how they need to transform and survive in the long term.

When the Wise Man Points at the Moon the Fool Looks at the Wise Man’s Finger

 

Digital MarComms, Social Media, technologies are the finger. They distract us from understanding the profoundness of the disruption taking place.

As Gary Hamel states in his HBR article:

Until we challenge our foundational beliefs, we won’t be able to build organizations that are substantially more capable than the ones we have today.

That’s all folks!

Sources:

Innosight:  The Strategy Confidence GapResults From Our Survey on Strategic Readiness and Disruptive Change
Gartner: Every Budget is Becoming an IT Budget
CDO Club: Number of Chief Digital Officers Doubled in 2013
Russel Reynolds Associates: The rise of the Chief Digital Officer
Altimeter Group:  2014 State of Digital Transformation
Erik Brynjolfsson: The key to growth? Race with the machines
Gary Hamel:  The Core Incompetencies of the Corporation

[Video] Ricardo Semler: Leading by omission or… why change and disruption can’t happen from inside

I’m exceptionally posting two videos today. Another talk from Ricardo Semler – see my previous post for newest talk at TEDGlobal – and yes, it’s official I’m in love with that guy.

This talk was originally given at MIT Sloan School of Management in 2005.

There’s “something fundamental about organizations and ‘ leadership that makes it almost impossible for people inside a business to change their own industry.

Ricardo Semler discusses why it is difficult or impossible to innovate or disrupt from inside the organisation – giving examples in Automotive and legacies of military hierarchies. Although I don’t agree with his point on intuition alone, I cannot but agree with his point on wishful thinking for having experimented it in multiple companies.

source: MIT Tech TV

[Thoughts] Quantum physics, The Matrix and the corporate world

The problem with beliefs (see my previous post “I don’t believe in Digital”) is that beliefs determine your reality.

I am surprised that as individuals and as a human society, we have not learnt of the implication of Quantum Physics and it’s multiple repercussions in all fields of human activities ( but that’s another topic and if you’re interested you’ll find wealth of material on the Internet and a documentary in the footnotes).

Quantum physics has left scientists all over the world baffled, especially with the discovery that our physical material reality, isn’t really physical at all.
So belief in a material world we can grasp through our sense and common sense is flawed. Deeply flawed.

Interestingly enough, it’s the discovery of quantum physics that has led to invention of computer (1939), transistor (1947), WWW (1990), laser (1960) and can therefore be considered as the impulse of the digital disruption currently at work.

“Welcome to the desert of the Real” (Morpheus)
Everything we call real is made of things that cannot be regarded as real.

We like to think we are rational, but that’s just because we are not aware, and have not been made aware of our cognitive and heuristic biases.
To make sense of the world around us, we tend to simplify, use shortcuts to manage the complexity of our environment. Most of the times it’s a good thing and allows us to function (ie. we don’t need to think to breathe to breathe). But for more sophisticated cognitive processes – ie. making decisions it can be a problem.
If you’re not familiar with the the concept, there a neat list here.
And you can find examples in corporate life in this article from CFO/Mc Kinsey

My biggest concern – as a professional – is how badly the corporate world is equipped to face this reality, recognize the risk and minimize its devastating consequences on business strategy and execution.

If you don’t have a framework to re-assess and test the rules of the environment you’re operating, how can you decently expect to decide, adapt, grow and survive.
A company that is not able to envision, express and vocalize what the digital disruption means – for its business, market, product, techniques and processes, employees, stakeholders… – is a company that is doomed to die from irrelevance.
And if this vision starts and stops with digital advertising alone and just cool shiny objects it is already dead.

“Most organizations still rely on a way of working designed for the industrial age. Their operating models have barely changed since they were invented over 100 years ago” (Undercurrent)

Therefore the first step towards evolution and change is to test the belief system of your company, department, team… even yours.
And there are 6 leads of opinion or belief change – that I’ve discovered this week in an EdX course on Heuristics and Biases by the University of Queensland, Australia

  1. what do you believe anyway?
  2. how well based is the opinion that you already hold?
  3. how good is the evidence? Is it based on experiments? Is it based on that personal experience? How good are the data?
  4. does the evidence really contradict what you already believe? Is there a way of reframing the issue, of stating the evidence in a way that allows you to use this new information, this new evidence, rather than just rejecting it outright?
  5. given the evidence presented, if that’s not enough for you to change your mind, change your opinion, then what would be enough?
  6. is it worth finding out about, or is just a case of why not? Why don’t I just continue to believe this stuff? What’s the cost? Can I just persist in this belief?

And good opportunity to test your belief system – applied to marketing  would be Dr. Byron Sharp‘s book “How brands grow”.
It is a myth-busting book, in the tradition of classic scientific discoveries. Unlike most business books it’s based on extensive data, on real world buying, and is based on decades of research that has progressively uncovered scientific laws about buying and brand performance.

Equation-for-ChangeThat’s all folks.
I hope to develop further in the next posts re: cognitive bias and the equation for Change

sources: