Digital Transformation: The Great Lie - Part 1. The 3 steps of Digital Transformation

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Lisa Gansky Non-Executive Director
5min read

A three-part series by 11:FS Non-Executive Director, Lisa Gansky

Part 1 – The 3 steps of Digital Transformation

To set the scene...

The year was 1989, and I had a hot movie date with my then 85-year-old Russian grandmother. It was Saturday and the banks, of course, were closed. All I had in my pocket was a measly 36 cents. So, I made a quick detour to the bank. My Bubbie, thinking our movie adventure was doomed before it even began, clucked her tongue at what she thought was my poor planning. My shame was allayed when I realized suddenly: she had never used, or maybe even seen, an ATM. Sticking my card into a brick wall with colored buttons on it, I smiled as she watched, wide-eyed and jaw agape, the brick wall popping out a modest wad of cash. She then smirked, nudged me and said, “... Now, do it again!”

And, the bank comes to you

There are many flavors of business transformation. The most urgent and predictable are where we simply replace a manual something for that same thing, only automated. This innovation fable says that automating what we currently do makes processes faster, auditable and less costly to operate. While the initial idea may have been to “simply” find and replace inefficient manual processes, technology always brings with it a new lens to imagine “What if” well as a line up of naysayers and anti-change agents. One of the unadvertised byproducts of introducing technology to remake one juicy process is the forced reexamination of all of its former touchpoints. The ATM is one such innovation. Over decades, banks trained us to go to them when in need of their services. With these distributed, secure kiosks (aka ATMs), you can rapidly get cash and make deposits without going all the way to the “bank.” In essence, the success of ATMs posed the question, “what exactly is the bank?” Grocery stores and other retailers should be asking themselves similar questions as they stare into the global digital logistics master disguised as retailer, Amazon. Technology pries open a hidden set of questions many business leaders shy away from asking. One of my personal favorites is: “If we were only beginning to offer our services today, knowing what we now know about the world, our business and customer — what would we do?” Now, you can deposit and withdraw money from your account anywhere in the world and in the local currency whether or not your bank is open. From the bank’s perspective, ATMs require less retail space, are less costly to operate, and automatically track transactions, manage security and expand the bank’s brand and geographical reach. How many banks starting today would bother with physical branches? In 2017 ATMs are old school.

Big data accelerating digital transformation

Thanks to big data and machine learning, the current forms of Artificial Intelligence began around 2010. In those intervening years, the pace of digital transformation has accelerated almost exponentially, yet not everyone is keeping up as well as they think. Whether we’re talking about transportation, finance, retail, manufacturing, healthcare, government or the energy industry, long- heralded business models and go-to–market strategies are being upended. This shake-up isn’t due to a singular crisis, obstacle or new technology. The era of central command and control is over and is giving way to a network based, hyper-connected collective of agile teams. What this means to you is that everything "business-as-usual" has a perishable runway, and incessant experimentation and scalable learning is the only way forward. Practically speaking, we are being dramatically invited to identify and unbundle value (assets, talent, relationships, capabilities and trust), and reframe why customers would want what you’re offering. This redesign demands rigor, honesty, courage, confidence and creativity and, perhaps most of all, stepping into your discomfort zone to see the world anew.
"The pace of digital transformation has accelerated almost exponentially, yet not everyone is keeping up as well as they think."

Deconstruction as a means to achieve reconstruction

You’ve probably heard peers talking about innovation, disruption and digital transformation. These faddish buzzwords make the journey sound like a thing or prescription. It’s unfortunately not that simple. This remaking of your business has several discrete phases. Our tendency as humans is to want to know how long it takes, what investment is necessary and perhaps most urgently, when we’ll arrive. To succeed here we need to be open to learning in a way that sequentially informs the journey, route, destination and obviously investment in time and other flavors of value. Difficult? Yes. Necessary? Definitely. The reason is that what you are about to embark on is a deconstruction of what made you and your company successful. You already know companies that are doing this – some who have happily blundered a project or partnership. In the business of the journey, these bruises are hard won badges as road rash would be for a cyclist. Buck up. Here’s the skinny. If you plan to survive and thrive in our next future, this journey isn’t optional.
"The very essence of “future” is . . . not knowing what is going to happen."

Three ways to achieve digital transformation

There are three distinct ways to understand the depth of this work. If I said to you that you’ll love it when you get there, just get on the bus . . . we don’t know where we’re going, and I don’t know when that might be ... I’m betting no one gets on the bus. As humans, we’re addicted to certainty. We want to feel that we have some idea about what will happen next. The truth is, the very essence of “future” is not knowing what is going to happen. To prepare for this moment- by-moment anxiety of not knowing, the best we can do is learn to respond to predictable and unanticipated news with agility and grace. If your central nervous system is organized at all like mine, it wants to know what’s next, damn it! This biological bias of ours makes us lull ourselves into false comfort by pretending that the future is a little different than what we already know. It’s not. Our propensity to make ourselves cozy invites serial harsh blows as formerly flourishing business models expire in your arms. As the chief innovation, digital or corporate development officer, chances are that you have a boss and team anxious to learn how it’s going, to know when we’ll see profits and how much longer this thing will take. There are three discrete ways to frame what many tend to call a digital transformation.
  1. The Digital Makeover

Pick an existing offer or process and make it go faster for less money. Congratulations! You've likely just automated a business in decline. Simple digital animation of a lagging process is what many business teams think of when they deliver the low-hanging fruit version of digital innovation. Though technology was involved, this find and replace move is not transformative. Here, we’ve landed squarely on the game board of efficiency. There is nothing strategic about these digital updates. In fact, they are simply projects with a beginning, middle and end. Theoretically, it’s easy to budget, manage and declare victory on this type of program, as built into its design is the idea that what you are solving for is already well understood. Real innovation, unlocks a never-ending question and your business will evolve from there. When current industry leaders realize they’re not learning as quickly or effectively as more spry upstarts, they attempt to quell their fears by launching programs labeled as digital transformation. Scanning a package when it ships out of your warehouse allows for customers and your company to track and measure the process of delivery. Customers may feel a new level of confidence thanks to their increased visibility throughout the process. "I can see where the replacement battery is for my e-bike as it travels from Melbourne to Oakland.”
"True transformation requires a leap of faith — of trust in the team and in your ability as an organization to identify, observe, identify, invent, act and learn again and again."
Dig deeper. What can you do with that data beyond tracking and verifying your supply chain? Complex questions lead to more refined ones which, if successful, generate experiments, insights, late nights, more questions and bold new promises. Data from deliveries can improve work schedules for drivers, reduce pollution via more efficient routes, discover new partners and enable the company to precisely guarantee delivery times. While we take all of these for granted today, none would be possible without reengineering the business promise, not just the process. True transformation requires a leap of faith — of trust in the team and in your ability as an organization to identify, observe, identify, invent, act and learn again and again. Take digitally-shared music versus recorded CDs. Once we all have the right hardware, a seemingly endless array of awesome tunes are yours for a fraction of what it would have originally cost to amass such a diverse collection on physical CDs — not to mention, you don’t need rows of cabinets to store them. But that transformation — decoupling the product from its previous physical format — had massive ramifications outside of faster, easier, and cheaper access to music. In the second class of transformation, industries — such as Amazon, Google, Apple, Facebook, Spotify, Netflix and Uber — do more than the simple “one and done” digitizing of a process. I like to call this form of transformation “the joy of decoupling.”
  1. The Joy of Decoupling

We've all experienced this as a customer: you arrive at the restaurant only to find that there's a line and your table won’t be ready for at least thirty minutes. You don't want to just stand there nor do you want to lose your place. In the not-too- distant past you would have had to do one or the other, and the restaurant would risk losing a possible customer to a mismatch between supply and demand for available tables. No more! Now the host simply asks for your mobile number and you are now free to hang out at the bar, or explore the park across the street until your table is ready. You're liberated, without losing your tether to your next meal. Or say your company produces loads of events. These are spectacular places for networking and, as anyone who’s attended such a function can tell you, lunch plays a crucial role in making the experience run smoothly. Even with steep entrance fees and RSVPs, it's still really challenging to estimate how much food you'll need. Running out is not an option, so event producers err on the side of engineered surplus. Food waste, however, is increasingly taboo and pricey in many ways. Using technology to manage food logistics and distribution, Copia connects companies with a fresh food surplus to local food banks and people in need. Technology has illuminated waste in time and place so that it’s now possible to match supply and demand even when perishable. This is an example of refashioning an old paradigm, process and perspective. Here transformation has reshaped the question and begins to unravel the old way of seeing value, risk, waste, reputation and customers.
  1. Is that Even Legal?

The final and most extreme stop on the transformation journey is what I like to call, "is that even legal?" These are innovations that completely redefine risk, value, customer, provider and trust across whole industries. A central aspect of this type of transformation is exploring and unearthing new formulations of a former business or industry. In the process of developing the “is this even legal?” level of transformation, foundational elements of former models and assumptions must be unabashedly devoured — no folding or bending here. We aim to decompose the customer’s challenge and prepare to imagine daring new offers. This class of transformation is an unadulterated leap. It emerges not by replacing what we know today, but by returning to the question of why someone wants this promise in the first place. Who is this for? What would thrill them? Why haven’t others already delivered this? This type of innovation dissolves the padlocks of previously-adored offers, processes, customers, and systems. Examples include Netflix streaming content, Skype p2p communication services, Tesla’s over-the-air updates or m-Pesa’s turning parent Safaricom from mobile operator to mobile bank.
"'Is that even legal?' A central aspect of this type of transformation is exploring and unearthing new formulations of a former business or industry."
Consider many of the ways we transact, move about and experience work and play these days: BlaBlaCar rides, Citi bike share, Tesla over-the-air vehicle updates, Venmo, Airbnb, Goteo funding, co-working spaces, music on tap all in your pocket. . . . This category of innovation is harder to evaluate in terms of its contribution to your business, because it’s not an improvement to net profits or a customer base. It’s a whole new reality. Before these new models take hold in our lives, they inhabit the hazy space between “brave long shot” and “utter nonsense.” In this class of transformation, we’re tasked with a certain suspension of disbelief because the new behavior and related promise is made possible by technology that does far more than replaces an old behavior. Here, a successful and mutually beneficial relationship between company and customer requires either unbridled enthusiasm for the exploration or an irresistible promise, produced by:
  1. a crisis arising from the implosion of trust or performance in the historical offering plus urgency or;
  2. the fascination of early adopters, aka people who overpay for things that don't work well yet, who seek out half-baked ideas or new experiences and are satisfied even if it breaks on the way to greatness.
Next week:Part 2- How do I know if I'm on the right track? Lisa Gansky is a thought leader, speaker, investor, entrepreneur and founder of Mesh Ventures and Instigating+co, and best-selling author of The Mesh: Why the Future of Business is Sharing. She has also recently joined the board of 11:FS.