Digital isn’t about digital – it’s about improving things for customers. Put more concretely, digital is about using systems to collect information on your operations and your customers’ behaviour, and using it to make your products and services better, faster, cheaper and more sustainable. But the digital part is only ever a means to an end.
For example, a traditional car manufacturer would make a car, ship it and hope for the best. Then sometime in the next business cycle, they’d look at high-level results. But now, using on-board digital systems, a manufacturer like Tesla can collect information in real time on how customers are actually driving its cars, which features they are and aren’t using and how every component is performing.
It can then cycle this learning into product improvements, release them, and immediately start collecting new information on those. The key point here is the dramatically shortened time frame between releases, feedback data and improvements, which supports a massively accelerated speed of learning. This speed enables Tesla to keep making its products better and faster than the competition.
A naive CEO might rush to launch high-tech products, while a more sophisticated one would focus on digitalisation and data. But a wise CEO would recognise the need for a human infrastructure to align the data and champion continuous learning.
The insight that digital transformation requires people isn’t always welcome, and many companies make these common mistakes:
Acquiring a digital start-up – only the start-up’s business model isn’t to make the company more digital, and the two quickly find themselves speaking different languages. The start-up dies and the company remains unchanged.
Hiring a digital guru – the company brings in ‘the guy from Amazon’ as a CDO-come-digital messiah. But the messiah doesn’t know the business, lacks internal leverage and struggles to get stuff done.
Buying some new IT – readily supplied by software consultants, who like large-scale overhauls. But these are expensive and can take two years, by which time the company’s needs have moved on.
Launching an innovation hub – filled with pricey people and set up outside the business. But far from real customers, these hubs are often left wondering what to innovate, while the company’s existing departments warn them to stay away from their core markets.
There are two striking things about this list. First, these failures are all human, not technological in nature. They stem from human foibles and communication and political challenges. And second, they’re painfully familiar. Numbers on digital transformations are a little soft, but researchers typically suggest 70-90 per cent fail. Harder evidence for us is that almost every large company we speak to bears the scars of one or another digital initiative that cost too much and didn’t deliver.
There’s no magic bullet in digital, but there are essential principles. These include:
Be customer focused – because customer feedback drives the all-important cycles of learning and improvement; ie, it’s never about tech for tech’s sake.
Be data driven and cross functional – because it’s not data for data’s sake either. Information needs to be collected, connected up across silos and used collaboratively to develop solutions.
Work in short delivery cycles – because the strength of digital is being able to release fast and get feedback data in real time. This is what drives the all-important speed of learning.
Start small and scalable.
The last point is perhaps the most misunderstood. For CEOs, it’s easy to think either that the digital challenge is big and so needs a big response, or that these digital projects are small and therefore playthings. Both thoughts are dangerous.The advantage of starting small goes back to people. With a small team, you can completely change the way of working, and in a way that’s simply not possible when dealing with a workforce of, say, 10,000. You can implement the data systems and feedback processes at low cost, start testing improvements and then, by working up close with customers, get a happy customer response impressively fast. This generates positive energy, which gives you buy-in for the change within the team, and the whole thing starts running like a flywheel. More improvements follow and get refined, low-cost systems get built up, and people become more and more convinced.
Then when it comes to scaling, as the last two decades have shown, digital start-ups can scale at extraordinary speeds through competitive markets. Think how much faster a digital initiative can scale through your company. Because when you’ve got the buy-in, the business numbers and something that really works for customers, the people change starts spreading by itself.
Alexandra Jankovich, Tom Voskes and Adrian Hornsby are authors of Disruption in Action. Jankovich and Voskes are also co-founders of SparkOptimus