Why 95% of Transformation initiatives are doomed to failure
Digital Disruption caught a high speed train. It's in town peering around corners and peeping through windows. Companies and their Boards’ should be afraid of Disruption. Market Disruption is never kind and no company, big or small, is immune. The question is, how will they react to their fear? Will they circle the wagons and digitally shore up the plumbing hoping the Digital Wolf moves on? Will they grab Digital by the throat and becoming Disruptors themselves?
I’ve recently engaged with (3) companies failing Digital Transformation. Their Goodbye is highly predictable and the root cause is the wrong CEO.
Company #1 is attempting to jump markets without understanding the required digital technology that enables Outcome success. The CEO “has an idea’ but mistook CRM for a customer contact solution. Given AI and AR disruption, there will be little to no need for contact solutions within (2) years. The CEO is not a technology or software experience leader and he is not a transformation leader. The company’s operating plan and RTM are dead wrong for their market and costs will likely burn them up before disruption gets them. Bad Operating Plan.
Company #2 is attempting to jump markets and enter the low cost lead generation sector. A very crowed market with a customer ROI running between 2% and 6%. Given Cognitive Software and AI disruption, lead generators will disappear within (3) years. This CEO comes from a Big Ticket Destination Website background where customers transact every 3-5 years. The new market's customers must generate (8) daily transactions to survive. This CEO did not know the basic financial metrics of the current business and is unable to effectively harvest investment funding new business. Bad Market Assessments.
Company #3 has a rare perpetual license giving them the cognitive search component of IBM’s Watson software. The CEO thought IBM would blow the Watson opportunity and even emailed IBM’s CEO to let her know she was clueless. Yesterday IBM announced Watson’s new security threat management capability and disrupted the entire security industry. This CEO fell in love with satellites and is driving his company to become the search provider for satellite mobile users. He’s investing in ground station servers to accommodate his Vision. Satellites cost roughly a billion dollars to launch and drones are quickly adding wireless hotspots in remote areas. This CEO was given the Cognitive Threat Management Vision but chose Satellite Mobility instead. Bad Vision.
Transformation is the new Buzz Word and companies are scrambling to execute Digital Transformations.
Businesses like jumping on Hot Phrases to ensure that they have the "it factor”. Too often they fail to understand what is really happening and leave their customers, employees, and partnerships confused.
Transformation is not just a misunderstood Phrase... it's a misunderstood critical skill essential to company sustainability / long term survival.
Compounding the lack of clarity is a significant lack of Executive Transformation skills along with actual Transformation Experience.
This article first address's Transformation and next Digital. YES, they are separate things, rapidly coming together to drive massive market change.
Too many companies will fail to execute Digital Transformation simply because the concepts are misunderstood to the point of predictable failure.
Digital Transformation represents an incredible make or break era that will define every business's individual viability.
It's important we understand,
Specifically trained by IBM as a Transformation executive, I learned a precise definition of Transformation along with proven success Transformation methodologies. I had the good fortune to lead IBM’s Digital Solution Group (establishing IBM’s e-commerce portfolio - and the market’s first Digital Platform) for the Small Business Sector.
Definition: “Transformation is a New Market approach that Provides Existing Customers Something Entirely New". Transformation relies on,
The ability to predict where a market is headed,
The skill to implement tactics to get there first.
Transformation is a defined business process. Managed correctly it harnesses innovation without pigeon holing the initiative.
Transformation is a cohesive company wide process that is,
Transformation is not Reinvention and Must Occur within the existing P&L,
Transformation Must be based on an entirely new set of market requirements,
Transformation Must provide a new and defensible competitive advantage,
Transformation Must be Sustainable,
Transformation Must be generate 30% existing customer adoption within (3) years,
Transformation Must be Scale to Net, New Customer Acquisition within (2) Years,
Transformation begins in the "Innovation Quadrant” and proceeds rapidly to the market "Dominance Quadrant".
Transformation begins first and foremost as a pervasive internal "buy-in” and adds key constituencies at the get go,
People (culture, skill, commitment, execution),
Systems (configuration, pricing, job descriptions, compensation, logistics),
Structure (GTM, organizational alignment, operational excellence, Financial Road Map),
Education (vision, strategy, operation, and financials commonly understood across the entire company),
Current Customers, Partners, Alliances, Suppliers, are essential “buy-in” components to success
A True Transformation Process has (3) primary Starting Block Tools,
“Strategic Characterization Matrix”, by Micheal Porter,
“Meta-Planning”, strategy session facilitation process,
Accelerated Change Time Table, (“ACT”), created by GE .
Very Few People have the natural skills to be transformative (its a brain orientation),
Turn Around Leaders make the worse Transformation Leaders,
The Ability to Articulate in a simple, cohesive, action based manner is essential,
Broad Company “buy-in” with a “followship” commitment defines success or failure,
Customers, Partners, Alliances, Suppliers must be part of the Transformation team.
A brand new, profitable revenue stream,
A new or defined extension of a company brand,
A new market category,
A defendable, dominant market position.
Before Digital Transformation (please see my article, "What is the Cloud and Where did it come from" on Linkedin) there was a similar Hot Phrase, “E-Commerce”, known during the “Dot.Com” era. In essence both phrases signify the ability to conduct commerce via the digital network versus the original analog network.
E-Commerce and Digital Transformation are essentially the same. These phrases define a business that utilizes the internet / web / glass network / Cloud... to sell, deliver, manage, process, and support business offerings to customers.
The advantages of Digital to Sellers and Buyers are enormous,
Massive Reduction in FACE to FACE customer engagements reduces SG&A by 75+%,
Speed of Delivery moves from months to hours and even seconds,
Products and Solutions can be remotely configured, deployed, updated, and fixed in a Just-in-time (JIT) capability,
Order Management, Procurement, Processing, Billing, and Collection are done realtime / live over the network,
Down Time Reduction / Problem determination and resolution can happen instantly without scheduling onsite appointments.
Digital Transformation is a big deal
Digital is highly scalable,
Digital reaches new markets and customers in a rapid, affordable way producing sooner and larger ROIs,
Digital Levels the Playing Field between large and small companies producing strategic innovation proliferation and competition across every market,
Digital allows businesses to focus on the Value Add of their offers through instant, interactive communication with customers, partners, suppliers,
Digital allows business to bundle their own Sales, Marketing, Advertising, Branding, and Social actives cohesively in a sensical manner,
The list is endless.
BUT, digital itself is not Transformation and nor is innovating existing business with Digital Technologies.
“Digital” is best viewed as a consortium of commerce enablers,
Creating Significant New Market Opportunities,
Provides new Routes To Market (RTM),
Delivers Optimum Business Performance Metrics,
Extending Market Reach,
Capturing greater Customer Detail and Understandings,
Enabling Superior Customer Relationships.
Digital Transformation requires both Transformation Skilled People and Technology Skilled People to help companies,
Scale to New Heights,
Deliver Defendable Market Positions on arrival.
The critical intersect between Transformation and Digital, the intersection that creates Digital Transformation, exists in the Reality that Digital is a 2-Way Channel.
This intersection is were innovation and process meet in an entirely new way. Like the childhood phrase, “I’m Rubber, Your Glue, What Ever You Say Bounces Off Me And Sticks To You”, every business action now has the ability to come back full circle, creating interactive dynamic dependencies.
The 2-Way Channel Reality changes everything. It Means,
Every Business Discipline can be dynamically linked between companies and customers,
Every Transaction can be personalized, managed, traced, archived, recovered, evaluated, strategized, and operationalized for excellence,
Open System concepts can be driven past architecture requirements into Commerce Relationships,
Customers will invariably gain power and control over broad scale solutions and minor attributes,
It will end legacy systems for ever,
Companies will compete and drive themselves to providing the simplest and easiest solutions,
Market dynamics will become real time and drive instant, reactive behavior,
Speed of transactions will become a definition of success (think today's “Wall Street” trading platforms).
The list goes on… and thus companies must get this right. Unfortunately Digital Transformation skills are in short supply.
Key Digital Transformation Leadership Skills,
A Brain orientation that sees Outcome first and Process as a means to Outcome,
Vision Skills, the ability to evaluate trends, conditions, and emerging technologies and predict where the markets are headed,
Strategic Skills, the ability to quickly create new, differentiated offerings and supporting plans that place companies in winnable, defendable positions,
Tactical Skills, the ability to define the Essential and Non-Essential elements of a strategy support plan,
Operational Skills, the ability to define and establish the critical links that make tactics cohesive ensuring alignment and excellence,
Financial Skill, the ability to calculate and define a clear ROI and weave that ROI implicitly through Vision, Strategy, Tactics, and Operations into a defined outcome, the ability to use the financial plan as a predictive story,
Communications, the ability to clarify, inspire, and coordinate through internal and external actions and words and place people collaboratively on the same page.
Yes, these are common (although high skill) categories, but the abilities within these skills are uniquely distinctive. Transformation Leadership skills are easily tested via conversation. Effective Transformation Leaders are conversant,
They Rapid process new information,
They Quickly Link New Information to trends and patterns,
They Easily Grasp Core Meanings and Market Values,
They are information hounds who can’t get enough knowledge,
They are engaging seeking value from everyone,
They are broad topic capable.
Determining intuitive and linear thinking through conversation is the primary test for spotting Transformation Leaders,
Do they describe the “What” in one big Holistic Picture,
Do they get excited when encountering new market opportunities,
Do they quickly describe the market value of new opportunities,
Do they describe the “How" required to make Vision a Reality?
The conditions for company failure are the highest in history. No company is immune from the innovation and disruption Digital Transformation will bring. Businesses are on the precipice of “One and Done” market responses.
Get the outcome wrong and companies will follow DEC and Wang into oblivion. Each of these companies was thought too big ($50B+) to fail. I had the good fortune to lunch with Ken Olson, DEC’s founder, who told me, "... vision and innovation built his company and process blinded his team into ruining it". Ken turned his company over to the wrong CEO and he was bitter. He did not say he chose the wrong CEO, he simply blamed the CEO for closing the doors on his greatest business achievement.
Failure is failure. Boards need to diligently review,
Company Digital Transformation Plans,
CEO Transformation Leadership skills,
“C” Level Digital Skills,
Company Digital Disruption and Transformation Readiness Assessments.
Focusing on the Process of Digital versus the OutCome of Transformation sets the stage for a historically high number of failures.
Process is critical, Transformation is essential. They can be separated and misunderstood, or powerfully combined.
The Most Important Digital Transformation Lessons Learned,
Relying on process minded people to deliver Digital Transformation yields the ultimate “no go” decisions marred in project delays, death by change management, cost overruns, different end game results, misunderstood threats, misdiagnosed market assessments, and unanticipated outcomes.
Placing leadership responsibilities on skilled Transformation Executives leading Digitally Innovative teams, puts the “horse before the cart” and yields best possible outcomes with lasting, defendable market positions.