Digital technologies — analytics, automation, cloud, cognitive computing, mobile and social — are disruptive and hot, and I see a lot of companies implementing these technologies to achieve better business results. I also recognize that many digital initiatives quickly lose momentum, ending up in what I call the “digital trough.” Some even lose funding. Others complete the project but achieve only minimal results. As a top executive in your company, how can you ensure your digital technology initiative will actually achieve the desired results?
Companies undergo big technology efforts with the objective of becoming more competitive. Before digital, companies underwent a similar situation with ERP systems. Those systems had the promise of enabling companies to run world-class processes. But despite spending hundreds of millions of dollars in implementing ERP, many companies realized only modest improvement in their processes.
Now with digital technologies, companies have the promise of improved performance in customer experiences, efficiency models and competitive position. But in and of itself, the technologies don’t drive those results. In fact, numerous studies find that only a third of digital projects even get to completion. And of that third, only a very small percentage achieve a performance breakthrough that is a change in the competitive posture of the company.
At the core of this phenomenon of not achieving desired results is the fact that most companies think digital is about a technology. That’s a mistaken mindset. It’s really about changing the fundamental business to be digital.
Yes, technology enables change. But the change is primarily an organizational business model change. The business model needs to drive the technology, instead of the technology driving the business model.
The Wrong Approach
One of the issues is that companies tend to move to a new business model through an 18-month waterfall-type of process. They come up with a vision, build a business case for the vision, fund the business case and then work on a the two-year or 18-month plan to implement it. This approach has a very high proportion of failures.
Proven Approach for Success
The alternative approach starts with figuring out the performance change you want to have. Next, determine how to measure that performance change. Then identify catalytic mechanisms that will cause your organization to change to align with that desired performance.
I’ll share three examples of a catalytic mechanism.
- Life Insurance Company. For a medical underwriting organization in a life insurance company, the catalyst was changing the control point — the point where they organized the supply chain or service chain for medical underwriting. They changed it from the agent to the lab. They recognized the lab was in a position to manage the underwriting component and drive better information and coordinate more successfully than the individual agents were. Shifting the organization philosophy around that was the catalytic mechanism that allowed them to completely transform the medical underwriting process for life insurance.
- Microsoft Azure. Another example of a catalytic mechanism is what happened at Microsoft. When its Azure group decided to fully embrace agile and DevOps, the mechanism they leveraged was restructuring teams. They moved people out of offices into small working communities of 15 or fewer people. This necessitated changing the hierarchy, eliminating all titles except for two: product manager and engineer. Changing the working team arrangement, both physically where they sat and how they were organized, was a catalytic mechanism that allowed Microsoft to drive to a successful DevOps implementation.
- Collaborative software company. Another example of a catalytic mechanism was when a collaboration software company forced everyone in the company to use its collaboration software on a day-to-day basis. This exposed the holes in the software, and the whole company recognized the issues. They fixed it quickly, galvanizing the organization.
Work in Sprints
After you identify the catalytic mechanism that will enable employees’ acceptance of the change, break the transformation journey into short sprints that can be achieved quickly while you plan the next sprint. Instead of an 18-month waterfall approach, you’ll achieve greater success if you run a transformation project as a journey with a series of sprints, each with concrete objectives.
Here’s a recap of the six keys that are necessary for achieving the desired value from a digital initiative.
- Recognize that a digital transformation is not about technology. It’s really about changing the fundamental business to be digital.
- Determine the performance breakthrough you want to achieve.
- Determine how to measure that performance.
- Identify a catalytic mechanism that will help build acceptance of the change in your organization.
- Coach your teams on achieving the change.
- Break the journey into short sprints that can be achieved quickly while you plan the next sprint.