Digital transformation must be an enterprise North Star, writes Yuri Aguiar, Chief Innovation & Transformation Officer at The Ogilvy Group, in an excerpt from his new book.
A recent memorial honoring the armed forces on the 75th anniversary of D-Day brought to mind the tremendous ingenuity of the Allied forces. Their creativity, imagination, and willingness to innovate changed the course of World War II. They were truly brilliant and fearless in their approach. Many paid the ultimate price, yet they will be long remembered for their struggle to liberate a continent and restore freedom to millions of people.
I visited a World War II museum not too long ago, and reflected on the terrible paradox of war, which brings out the worst and the best in humanity. Focusing on the best of outcomes, the war motivated people to innovate in thousands of ways, both big and small. From their efforts sprang better antibiotics, advanced forms of surgery, pressurized aircraft cabins, microwave ovens and practical electronic computers. These innovations launched an economic revolution that changed the world.
Seventy-five years later, we have a very different landscape but are seeing a similar drive to innovation. Unpredictable changes to business models have caused the face of innovation today to be largely in the realm of digital, where most organizations strive to achieve three fundamental objectives:
- Better conversations
- Faster transactions
- Precise information
Achieving these facets of modern business through available technology is often referred to as digital transformation. However, if you ask a group of 10 business leaders to define digital transformation you will get 12 different answers—and none will be wrong. Although the term itself is abstract and general, each and every instance of digital transformation is concrete and specific.
Vision First, Mission Second
It was Dwight D. Eisenhower, the 34th U.S. President and a General during WWII who said, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”
Digital transformation requires more than grit, tenacity, and optimism. You need a single strategy to guide the multiple components of transformation in a holistic and coherent manner across the enterprise. A transformational strategy must be your North Star across the enterprise; transformations that are limited to lines of business or functional areas of the organization are unlikely to deliver the desired results. Once the vision is established, the mission, milestones and a cadence for delivery becomes more realistic. Planning is indispensable.
Modular, not Monolithic
Today’s incarnation of digital evolution relies very little on legacy solutions. It’s almost as if there has been a change in our DNA, a shift from making individual building blocks, to putting the blocks together in new ways to create the ecosystems that deliver value. Modular ecosystems with interchangeable components that allow for open integration also allow for swift response to change, the ability to scale and the freedom to innovate. They provide a predictable cost basis as well as a far more manageable change management approach. Monolithic solutions, while relevant in some cases, do not allow for nimble responses, carry heavy cost burdens and usually scale in one direction – up.
There is a higher potential for innovation with modular architectures because the role of transformational technology is not building systems, but creating digital experiences. Instead of helping the company search for customers, we’re helping customers find us. We’re setting up digital ecosystems, enabling us to meet and interact with our customers where they live, work, and play. And that means touch points that may not have been considered before – in their browsers, their apps, their game consoles or their VR headsets.
Data as a Strategic Asset
The output from a digital ecosystem is data, not information. And data can be used as a strategic asset. A study by Dr. Nils Olaya Fonstad at MIT CISR shows that companies that treat data in this way can improve margins by over 19 percent.
Now that we are creating environments for our customers to digitally interact with us, enabling the fastest possible transactions, these vast volumes of data need to be able to tell a story, shape the conversation, provide management with indicative trends, improve the supply chain, make decisions on investments, and so on. That’s up to the quality of analytics that we can churn out, which is no small feat.
While businesses may have different data needs depending on industry, a universal analogy is that of a smart city ecosystem. IoT sensors will most likely be built into everything from traffic light triggers, lane keeping mechanisms, e-commerce from a moving connected vehicle, speed tracking built into street lights, pedestrian heat tracking sensors in cars, autonomous vehicles, electric vehicle charging stations, smart keys, vehicle remote controls apps and various other safety features. The data output from these various sources needs to come together rapidly and often quite simply to either elicit an immediate response from a driver or guidance to a vehicle to take immediate action. This would be similar to aircraft anti-collision technology but at a much higher rate of transmission due to the volume of vehicles in close proximity. This is just one example of data as a strategic asset in the use of public service and safety.
by Andi Mann
Determined or Distraught?
This raises these existential questions; how does it all come together and what is the best approach to a strategy?
To get to the bottom of it, I spoke with Meredith Whalen who is chief research officer at IDC. Whalen shared her team’s research and one data point in particular summarized it most succinctly. Organizations with transformational goals fall into two categories: the “digitally determined” (46 percent) and the “digitally distraught” (54 percent).
“When we looked at the data, we saw common threads,” Whalen explains. “The ‘digitally determined’ organizations make sure they’re really executing on one strategy, one vision for digitally transforming the organization. They have an integrated enterprise-wide digital strategy.” By contrast, she notes, the “digitally distraught” organizations had multiple strategies. In some organizations, it seemed as though “each line of business or each functional area had its own digital transformation strategy and its own digital roadmap.”
In our conversation, it became clear to me that leadership is a critical differentiator between “determined” and “distraught” organizations. An enterprise-wide vision and strategy is crucial before any impromptu digital initiatives start to diverge from a singular strategy.
While not every aspect of these organizations works perfectly, they have developed a mindset and strategy that ensures alignment at almost all steps and back that up with a governance model that keeps the plan on its flight path. The obvious area where transformations typically fall flat are when business strategies are disconnected from execution plans. While these obvious disconnects become apparent early in the journey, the truly dangerous ones are when the strategy is more subtly disconnected from the execution.
Issues that can derail a transformation project:
- Lack of process governance
- Minimal operational cadence
- Lack of formalized outcome tracking
- Vague predefined benefits identification
- Weak or non-dedicated project management
- Too many consultants and too few doers
- Lack of specific goals for key staff
- Poor technology decisions
Any of those issues has the potential to create redundant efforts, missed deadlines and significant delays. Worse yet, endless rounds of “busy work” can yield the false impression that progress is imminent, despite the absence of measurable achievements. This leads to companies stopping their efforts at the first sign of trouble while the more coordinated strategies power through and even increase their efforts. A follow-up IDC study in 2020 indicates the longer-term impact of a determined vs. distraught strategy.
COVID-19 IMPACT ON IT SPENDING Survey, IDC, July, 2020.
Metaphorically speaking, when businesses deal with wave after wave of disruption, innovation is a driver that can get us through. Great leaders not only approach innovation and transformation with a cohesive strategy, they don’t ignore the importance of motivation either; they strive to maintain high levels of engagement, especially during periods of rapid change like we’re experiencing now. This helps companies stay the course on transformation efforts because it’s the right thing to do.