Transformation is on the agenda of nearly every company.
Disruptive technologies and the accelerating pace of
change are constantly threatening to undermine legacy
businesses. No industry or geography is immune, and even
pure-play companies that were among the earliest technology
disrupters are being forced to re-evaluate their strategies.
However, some companies have been at this longer than others. Brick-and-mortar
retailers continue to battle Amazon by creating and evolving
e-commerce strategies. Travel and hospitality companies have adapted to
decades of disruption from Expedia, Priceline and other early online travel
businesses. Financial services organizations have been disrupted by E*Trade
and others for years. The music industry has had to respond to challenges on
various fronts — from illegal downloading and sharing to streaming services
— while the publishing industry has had to adapt to the growth of digital reading
devices and content aggregators.
What experience have these early movers gained that can help others as they
undergo their own digital transformation? We spoke with six digital veterans
about their experiences: What they did right, what they would do differently,
what they learned along the way and how these experiences will inform their
future. Based on these discussions, we have identified five key lessons for
making faster progress on digital initiatives.
- Articulate a digital strategy that positions technology as a differentiator
- Structure for speed and agility: Challenge the org chart and
standard processes
- Lead from the front: The CEO and senior team must champion change
- Inject change-makers and digital influencers throughout the organization
- Create a company culture that nurtures innovation
Business growth is a fragile endeavor. Cultures must constantly shift and leaders
must adapt to new threats. Perhaps these lessons will help others avoid
some common landmines.
With no playbook to draw on, leaders of early companies in digital embarked on
a multi-year journey to transform the business, figuring out things as they went
along. What they learned — and what remains true today — is that digital transformation
is as much strategic, organizational and cultural as technological.
Articulate a digital strategy that
positions technology as a differentiator
Changing consumer expectations is a key driver of digital
strategy for many companies, which strive to
provide an exceptional — and consistent — customer
experience regardless of channel. Without a coherent
strategy to guide how new technology is adopted and
delivered to the consumer, technology solutions can be
hammers in search of nails, and there can be a temptation
to grab the “shiny new thing.” The right strategy
identifies the digital forces that are impacting the
company — e-commerce, social media, big data,
mobile devices, cybersecurity, the Internet of Things or
cloud computing and storage — and addresses the
opportunities or threats they represent. For some
companies, the opportunity may be to bring products
to market faster, gain efficiencies through automation
or leverage new platforms for customer acquisition and
engagement. Other companies may find their very business
model under attack.
The desire to provide a consistent customer experience
is spurring initiatives such as Wal-Mart Stores’
“One Wal-Mart” and U.K. retailer John Lewis’ efforts
to build an omnichannel retail experience. These strategies
help shape each business’ digital identity,
provide a vision around which to rally the organization,
and influence decisions about culture, processes
and IT investment.
"Digital isn’t really about the pipes or the mobile
device or the connectivity or the cloud or any of that.
It’s really about the collection of changed expectations,
and those are the changed expectations of
people, in their roles as consumers or members of the
organizations that we’re seeking to lead," said Neil M.
Ashe, president and CEO of global e-commerce for
Wal-Mart Stores.
A bold, well-articulated strategy puts the organization on
notice that transformation is coming. Wolfgang Baier,
former group CEO of Singapore Post Limited (SingPost),
said a bold and clear vision to digitize the business is
one of the most important decisions the board and
management team have to make. “Initially, people
smiled when presented with the e-commerce vision and
did not believe it; when they saw how much we invested
into pursuing the new area and the new talent joining,
they realized that there was no turning back.”
Motorola Solutions' "single view of the customer" strategy, articulated in a formal whitepaper, drove
changes affecting every part of the company, including
culture, talent decisions, organizational structure and,
of course, IT investment. “I’m a big believer, as you
embark on a transformation, in stepping back, working
with the team to state a point of view for the company.
We started that exercise by saying, ‘Let’s throw away
the playbook and any preconceived notions about what
the company is or is not, and think about how we
would transform the company through the application
of technology,’” said Eduardo Conrado, executive vice
president and chief strategy and innovation officer.
Structure for speed and agility:
Challenge the org chart and
standard processes
As digital disruption accelerates change, many companies
find that their traditional organizational structure and
processes are incompatible with the innovation, speed
and agility necessary to keep up. Speed is an imperative in
a digitally driven world, said Baier. “As leaders, we cannot
hesitate to make a decision; we must move quickly, check
things out and learn. We need to fail fast, learn from failure
and then move on.”
In response, companies have moved to streamline
their organizational structures and decision-making
processes. Brazilian airline GOL moved away from a
matrix organizational structure, which mired digital
initiatives in lengthy approval processes, and created
standalone innovation teams to facilitate faster implementation
of new ideas and technology. “We had some
cases of innovative projects that weren’t released
quickly due to the procedures of the matrix organization
structure of the company,” said CEO Paulo
Kakinoff. With its more agile structure, GOL can move
more quickly. “The distance between an idea and its
digital realization is smaller.”
Telecommunications company Axiata Digital Services
reengineered its processes to improve its agility and
speed. “A nine-stage gate approval process for major
decisions and five-page job applications were just too
slow and cumbersome.” Today, “if we have a great
idea, we can test and launch quickly,” said CEO Mohd
Khairil Abdullah.
Motorola Solutions has adopted a two-speed approach, accelerating
the delivery of customer-facing initiatives through the
use of a faster, agile methodology, but maintaining the waterfall
approach for back-office technology development projects.
This approach drives creativity and speed, while offering stability
to those parts of the organization that need it.
"Some paradigms must be broken, like the matrix organization
structure for the approval of innovative digital projects associated
with the waterfall development model. These are
incompatible with the concept of disruptive innovation," Kakinoff said.
Also incompatible with innovation are functional and business
siloes that get in the way of collaboration, or communication
protocols that slow decision-making. Digital at its core
connects the customer and company, and this requires robust
connectivity between functions within an organization.
Functions and business units must work together as never
before to plan and execute programs and remove barriers to
information- and data-sharing.
Lead from the front: The CEO and senior
team must champion change
For digital transformation to take hold, senior executives must
lead and model change. “The CEO needs to be the chief digital
officer of the company,” argues Ashe. “You can’t outsource it.
It’s not like a channel or another line of business. It’s like
water; it permeates the organization everywhere. How do you
think holistically about your customer proposition, your associate
population? How do you manage and lead? How do your
HR systems support change? The deeper we get into it, the
more everything gets exposed.”
CEOs who “get it” spend time with digital teams. They pay
attention to digital trends. They’re curious. They’re empathetic,
because change is hard on the organization, and have the ability
to bring people along on the transformational journey. They
engage people at all levels of the organization on the need for
change, and are willing to admit what they know and don’t know.
“All initiatives for innovation must always be sponsored by the
C-level leaders of the company,” said Kakinoff. “This is the best
way to foster new ideas, regardless of whether the agent of
transformation is an old or new employee in the company. We
encourage our leaders to make decisions and take risks.”
Beyond being a visible champion for transformation, CEOs must change the way they
assess culture and current leaders and hire new executives in order to drive organizational
change. The first step is to define the elements of culture that must change to support the
transformation agenda. Because the CEO and other top leaders have a disproportionate
influence on the culture through what they emphasize and the examples they set, the CEO
should prioritize the hiring and promotion of leaders who will serve as catalysts for change.
These leaders should possess the style preferences of the ideal culture, but also have the
influencing skills to model and bring along others in the organization.
Without the commitment and support of senior leaders, digital transformation is
doomed to fail. So, CEOs should move quickly to make a change when a leader can’t or
won’t support transformation initiatives. As one executive told us, a leader who does
not have a change mindset may be more damaging to the transformation agenda than
having no leader at all.
Inject change-makers and digital influencers throughout
the organization
What skills are needed more broadly to lead change in a digital environment? Legacy
companies have learned that a transformational mindset is a must, as is the ability to
nurture innovation and make fast, nimble decisions. “I always hire based on a person
having a transformational mindset. They need to have courage, digital understanding and
be able to manage a P&L. We need leaders who can play the incubator rather than just
the expert role,” said Baier. And, at Wal-Mart, “digital is creating the need for a new type
of manager, one who is able to work at this pace of change,” said Ashe. Hiring innovators
is far more important than industry experience. Innovation, by definition, drives first-tomarket
changes, so finding talent within the industry who has already driven this change
is an oxymoron; companies must look outside to find the disruptor.
Communication skills are a key part of leading change and building a shared understanding
of the customer. Paul Coby, IT director for John Lewis, notes that, despite the
explosive growth of online shopping and the omnichannel revolution, the basics of his
business have remained the same: “What you’re trying to do is understand the customer’s
journey,” which has always been the task of company leadership.
Injecting fresh skills into the organization through the infusion of new talent can serve as
a spark for digital transformation. According to Conrado, Motorola Solutions evolved
quickly after making the decision to bring on a new CIO with a different set of experiences,
positioning IT teams to become partners in strategic conversations about the
business. Similarly, Axiata began to evolve after hiring a new head of finance and creating
teams devoted to innovation and strategy.
In addition to recruiting qualified leaders from outside their organizations, companies
also must be able to identify potential leaders within. GOL actively seeks new leadership
internally. “We observe initiatives aimed at digital and identify who are the agents of
change within our company,” said Kakinoff. Creating teams with diverse skill-sets and
moving people around the organization can expose more people to new ideas and get
people working together on digital initiatives.
Create a company culture that nurtures innovation
Disruption, speed and agility are ingrained in the DNA of technology startups and other
companies with roots in digital technologies. But for large companies with legacy
non-digital businesses, whose success has come from optimizing a stable and efficient
process to deliver incremental results, developing these traits requires a concerted effort
by top leaders, moving people and hiring talent from the outside the organization to
build the right culture. Resistance to the adoption of new ideas is a major impediment to
success of digital initiatives, leaders agreed. Legacy companies have learned that culture
can be an obstacle to keeping pace with change, and that a company culture that fosters
and rewards creativity and risk-taking is necessary for innovation.
Encouraging innovation means giving people the freedom to try out new and revolutionary
ideas — and the freedom to fail. At Axiata, this has involved rewarding new ideas,
regardless of outcome. “We changed performance management to reward people who
fail as long as they learn something,” said Abdullah. At the highest levels, the board gave
leadership the freedom to experiment and take risks that might not pay off right away.
According to Abdullah, "I was able to say to my group CFO that I will deliver you NOP
after tax for the next few years — it’s just that in this case NOP meant ‘negative operating
profit’ instead of ‘net operating profit!'"
Before launching their omnichannel shopping system, leaders at John Lewis had to overcome
cultural resistance to change within the company. “People within the organization
were thinking, ‘Why on earth would people go online if they could buy things in a store?’
You can’t try them on. You can’t see them.” Overcoming this resistance required a paradigm
shift that came from the top down. GOL had to overcome similar internal
resistance to their innovative paperless ticketing system. “The resistance to the adoption
of new ideas and implementation of new technologies is one of the main impediments to
success,” said Kakinoff. Its digital strategy a success, the company now needs to find
ways to maintain the startup culture as the business scales ever larger.
How can companies evolve their cultures to nurture innovation? At SingPost, the leadership was
able to transform the company culture quickly from the top down. “The board and management
had a strong vision, five core values that include total customer-centricity and a one-team
approach,” said Baier. Communication was crucial to getting everyone on board, and worth the
investment of time. “The biggest and most lasting change is that the organization has a can-do
mindset. People have embraced the idea that they can really change things.”
Ashe agreed that communication is essential. “You have to be able to find a way to find a
common ground to build a shared understanding in order to achieve a common objective.”
As part of its transformation, Motorola Solutions leaders concluded that they needed to invest in
new collaborative technologies to match the culture they wanted to build. “We defined what we are
and what we aren’t, and that led to a redesign of all of our systems. We said, ‘We’re a mobile-first
company. We’re video first. We don’t just collaborate on email, we’re social-centric. We’re going to
minimize conference calls,’” said Conrado. “That led us wall-to-wall wireless coverage, optimized
for voice, data and video inside the company. We went 100 percent voice-over-IP in North America.
We moved to video as our primary mode of communication in the company and put 600 video
rooms in the company and ability to communicate via video from every employee laptop.”
Finally, accept that transformation is
an ongoing process
The experience of early movers suggests that, when it comes to digital transformation, questions
about leadership, organizational structure and culture can be some of the most challenging —
and critical to get right. Those organizations that are most likely to be successful place those
issues front and center; they articulate a bold strategy; challenge organizational structures and
processes that get in the way of change; have strong CEO and management team ownership of
the transformation agenda; get the talent mix right; and build a culture that supports innovation
and change.
But experience also shows that simply mastering the moment will not be successful over time,
as technology and human behavior rapidly evolve. Digital transformation is not a “project”
with a finite end. New disruptive technologies will emerge and customer behavior will continue
to change, so organizations must be able to evolve and find new ways of doing business.
Success over time requires ongoing attention to leadership, processes and culture to ensure they
continue to support the digital business strategy. Companies also should take a hard look at their
talent management processes. The war for talent is real, and organizations that aren’t able to
recruit the best and the brightest are doomed to failure. The best organizations adapt their
human resources practices to shorten recruiting time, think creatively about compensation and
organizational structure, and continually assess the elements of culture that support and impede
digital transformation.