Recently I posted here about how organisations can go back to basics and understand what digital really means. In the context of today’s rapid acceleration of digital and IT investments to support remote or new ways of working – from cloud to SaaS tools to desktop VC solutions – this is critical to understand.
Another key fact to consider is that some of the most successful companies ever were started during or just after times of crisis (e.g. GE, GM, IBM, Disney, Facebook).
For leaders who can seize the ‘re-set’ opportunity this crisis provides – and start to engage with more long-term, future-focused, and exploratory strategic planning with digital at the core – this presents a potentially game-changing moment.
This presents a critical question: how should firm’s approach and organise to make digital or innovation investments and transformations successful?
Whilst there is no playbook, below I pull together a number of perspectives from some of the world’s leading management thinkers and practitioners on strategy, digital, innovation and change.
Digital transformation is extremely complex and requires new ways of approaching strategy. Starting big, spending a lot, and assuming you have all the information is likely to produce a full-on attack from corporate antibodies—everything from risk aversion and resentment of your project to simple resistance to change.
Start Small, Think Big
Professor Rita McGrath calls this ongoing learning approach to strategy: discovery-driven planning (DDP). It was developed in the 1990s as a product innovation methodology, and it was later incorporated into the popular “lean start-up” tool kit for launching businesses in an environment of high uncertainty. At its center is a low-cost process for quickly testing assumptions about what works, obtaining new information, and minimizing risks. According to Rita:
By starting small, spending a little on an ongoing portfolio of experiments, and learning a lot, you can win early supporters and early adopters. By then moving quickly and demonstrating clear impact on financial performance indicators, you can build a case for and learn your way into a digital strategy. You can also use your digitization projects to begin an organizational transformation. As people become more comfortable with the horizontal communications and activities that digital technologies enable, they will also embrace new ways of working.
2. Soft and Hard Facts About Change
Managing change is tough, but part of the problem is that there is little agreement on what factors most influence transformation initiatives. Ask five executives to name the one factor critical for the success of these programs, and you’ll probably get five different answers.
In recent years, many change management gurus have focused on soft issues, such as culture, leadership, and motivation. Such elements are important for success, but managing these aspects alone isn’t sufficient to implement transformation projects.
According to consultants from BCG in an Harvard Business Review article entitled The Hard Side Of Change Management:
What’s missing, we believe, is a focus on the not-so-fashionable aspects of change management: the hard factors. These factors bear three distinct characteristics. First, companies are able to measure them in direct or indirect ways. Second, companies can easily communicate their importance, both within and outside organizations. Third, and perhaps most important, businesses are capable of influencing those elements quickly. Some of the hard factors that affect a transformation initiative are the time necessary to complete it, the number of people required to execute it, and the financial results that intended actions are expected to achieve. Our research shows that change projects fail to get off the ground when companies neglect the hard factors. That doesn’t mean that executives can ignore the soft elements; that would be a grave mistake. However, if companies don’t pay attention to the hard issues first, transformation programs will break down before the soft elements come into play.
3. Breaking Down the Barriers
According to a 2019 article from the partners from Innosight, a critical reason for businesses failing to get the impact they want is because they’ve failed to address a huge underlying obstacle: the day-to-day routines and rituals that stifle innovation.
Innosight Partner Scott Anthony talks further about this below:
4. A Systematic Approach
A study by McKinsey here of leaders post-transformation has shown there are 21 best practices for organisation’s to implement to improve the chances of success.
These characteristics fall into five categories: leadership, capability building, empowering workers, upgrading tools, and communication. Specifically:
- having the right, digital-savvy leaders in place
- building capabilities for the workforce of the future
- empowering people to work in new ways
- giving day-to-day tools a digital upgrade
- communicating frequently via traditional and digital methods
One interesting best practice was that firm’s who deploy multiple forms of technologies, tools and methods tended to have a great success rate with transformation (see below).
This might seem counterintuitive, given that a broader suite of technologies could result in more complex execution of transformation initiatives and, therefore, more opportunities to fail. But the organizations with successful transformations are likelier than others to use more sophisticated technologies, such as artificial intelligence, the Internet of Things, and advanced neural machine-learning techniques.
4. Execute AND Innovate
For any followers of the work of the late Professor Clayton Christensen on Disruptive Innovation (view his HBR collection of popular articles here), this is a fundamental challenge for almost every established firm which often becomes a matter of survival during industry, business model, technology or other shifts.
According to Alex Osterwalder:
This continues to be one of the biggest challenges we see companies face: to create two parallel cultures of world-class execution and world class innovation that collaborate harmoniously.