November 26, 2018
How NOT to Effectively Transform Your Company Through Technology
CEOs in all industry sectors are now beginning to believe that software and other technical automation processes are a methodology for quickly surpassing your competition. It is not without risks however. I once worked with a CEO who, seriously, refused to buy a server or a database to run a company of 500 people. Instead, everyone’s computers were connected to one other computer of the same size, with only free firewall software that came with the computer. Everything from HR, payroll, accounts receivable and payable, to employee performance and office maintenance was controlled on Excel spreadsheets. And these spreadsheets, in some cases, were over ten years old and were simply moved from one person to the next who took over the job. People did not do backups. It was a pretty scary setup, but it worked. Until it didn’t. People lost or had corrupted files. People would then have to go back through the paper records to recreate the spreadsheets which caused a lot of inaccuracies, errors and just plain missing megabytes of old data because the paper records had gone missing. This was not a way to work and not a way to stay competitive in an increasingly high set of competitors that were SaaS-enabled, or built proprietary software to provide 24/7 service to clients.
These are the Seven Deadly Sins of what not to do when you finally decide that you need to digitally transform your organization:
1. Not Understanding What Digital Transformation Entails
There are four parts to digital transformation. They are the internet, analytics, embedded objects such as RFID tags or barcodes, and mobility. The internet is a vital part of your information delivery system, as simple as a web site and social media pages, but it also can be a very important part of your supply chain in ERP systems. Without analytics, you cannot establish a benchmark of where you started and monitor how much change you have accomplished. RFID tags, bar codes and other embedded systems can significantly automate manufacturing, warehousing, logistics and delivery. Without mobility, you don’t have access to monitoring tools that can facilitate critical decision making 24/7 from anywhere in the world, especially during a crisis.
2. Not Understanding How Technology Transforms Businesses
Everyone has heard at least one story of a tech project that went way over budget and was delivered very late and did not work as expected. That’s typically due to changes in scope, market conditions, changes in leadership, poor project management… the list goes on and on. There are three different ways technology transforms a business:
- Substitution: the technology just substitutes for, or replaces, and existing process.
- Extension: the technology’s main impact extends the company’s brand or product line into a new platform, such as the internet or mobile.
- Transformation: the company begins doing business differently.
Transformation eliminates the issues that can be automated, monitored, measured, produced, etc., in order for leaders and managers to work “on” the business rather than “in” it. They are more able to spend time innovating and creating more value for customers. Both substitution and extension are worthwhile efforts, they will not have the same impact as a complete transformation.
Let’s look at desktop publishing. When I was in college learning about graphic design, we used tables, and wax and photostat cameras. We cut and pasted all the components on a board. We spec’d type which would have to go to someone at a different company to be printed for “camera ready artwork”. We rubbed down Letraset display typefaces and added registration, and trim marks to the board and then sent the camera ready artwork to the printer. The printer would then produce a negative and the designer would go back over the negative marking with red ink anything to be removed before printing. Then the final artwork would be created and secured to the printing press, and then paper went through and your project was printed.
Once the computer came out and desktop publishing software became available, all of a sudden those printing houses had a real dilemma. Most printers invested in their own hideously expensive computers to do the work of the graphic designers and some actually hired a few, but there was a lot of really awful stuff out there in the late 80’s and early 90’s. If they did not invest in transformation at that time, they would either sell or close shop. Most closed. Others invested in more computers and digital printers, eliminating the photostat cameras and all the rest of the printing press equipment, which meant they had to find people who could operate the computers and digital printers and many jobs were lost in the process. And they are never coming back. I once visited the Boston Globe in the early 80’s and marveled at the metal type they created in slugs that would then be laid in a wooden frame for printing. That’s never coming back either. The industry was forced to transform in order to survive. There was no going back.
3. Senior Management Doesn’t Lead from the Front
You need your top level executives and board members publicly endorsing the projects as they start. They need to unilaterally understand and effectively communicate the vision of what will change, by when, by who, and how that transformation will affect each employee.When managers and leaders don’t communicate, the gossip will go nuts with crazy stories about how “everyone will lose their jobs”, or “the company is going to close down”, and even crazier comments.
They don’t need to manage the projects themselves; indeed, they are most likely incompetent at dealing with all the details and moving parts of a complex technology project and it most likely isn’t their area of expertise. Let’s say you’re an insurance company and the end goal is to make decisions more quickly for increased sales, shorten the amount of time to pay out on claims, and reduce the amount of paper in the process. Your board members may know a lot about the insurance industry but nothing about responsive software and mobile app development. But they need to stand behind and support the team making and managing the change in the organization.
4. Transformation Doesn’t Happen Overnight
For significant transformation, it may take years to find the right employees to lead the project, plan the structure, set the requirements and define the scope. Then you need to manage the change in incremental steps. Small enough for your managers to communicate the changes and keep everyone involved. Each milestone can and should be celebrated and the team publicly thanked for their efforts. Keeping everyone aware of the work is easier for employees to handle than sudden shifts with no warning. No one likes those kinds of surprises.
It’s also a good idea to involve representatives from each department in the company as their buy-in is important, and the feedback they share may be critical in all phases of the development process. Software developers may not understand how payments are made or what the accounting department wants to prioritize. Your sales people may want a way to create orders in the field while still at the customer’s office. Your logistics people may want ways to follow the supply chain in more detail. These meetings should go on throughout the planning process and also during your prototype process for user testing, and as you move towards BETA where the public may be exposed to your new technology, they may have feedback from customers, vendors, industry opinion leaders that the tech team don’t have access to. Putting a feedback loop in between sales, marketing, and R&D is the best thing you can do as a standard operating procedure with quarterly or monthly meetings to assess feedback and adjust priorities for future development. For this purpose having an online forum for all employees to provide feedback will significantly help your tech team assess and prioritize their work in progress. The kiss of death in this process is called “scope creep”. You start with one set of requirements, then marketing gets a call from a client with a cool feature they want and marketing rushes down to the CEO saying, “we’ll lose the client if we don’t add this feature!” Then the tech team is advised and it may require a complete overhaul of the entire project, essentially starting over due to the way the database was structured, or the feature would require a six month delay. Managing scope creep is your tech team lead’s super power. You need someone who can manage this effectively.
5. Senior Management isn’t Flexible Enough to Make Decisions as Technology and Market Conditions Change
The opposite can also happen. There may be a time when midway through your development, a competitor or a disruptor from outside the industry launches a new widget that essentially makes your project redundant. Think about the music industry and how they were more focused on piracy than on what consumers wanted. When Steve Jobs introduced the iPod and iTunes, the music industry had to find new ways to monetize their industry, and they have never been proactive enough to effectively transform to face this disruption.
Major digital transformation initiatives are centered on re-envisioning the customer experience, operational processes and business models. The music industry never examined the phenomena of mixed tapes – custom cassettes recorded one song at a time and never realized that the album concept was out of date with consumers. Listening to your customer complaints, providing feedback loops that include senior management on decisions that will significantly delay the project or increase the budget is important, because ultimately they are responsible for the company’s fortunes.
Successful digital transformation comes not from creating a new organization, but from reshaping the organization to take advantage of the valuable existing strategic assets in new ways. They need to envision radically new ways of thinking.
6. Sunk Cost Fallacy
Companies are loathe to quit a project even if it’s going in the wrong direction. You may have hired the wrong consulting firm to manage this process. You may have already experienced delays and cost overruns. Many business leaders think, “We’ve already spent $18 million on this. We have to finish it.” No you don’t. You need to stop and seek alternatives. Throwing money at a broken wheel doesn’t fix the wheel.
7. Not Examining All the Building Blocks of Transformation
Most executives are digitally transforming three key areas of their enterprises: customer experience, operational processes and business models. Within each of the three pillars, different elements are changing. These nine elements form a set of building blocks for digital transformation. The tenth element– digital capabilities – is an essential enabler for transformation in all these areas.