Research shows that 70% of complex, large-scale digital transformation projects fail, but understanding where they went wrong may help others succeed.
This is the thinking behind a new book, Disruption in Action, a collaboration between two ex-McKinsey analysts-turned-digital transformation consultants (Alexandra Jankovich and Tom Voskes) along with author Adrian Hornsby – and follows on from the duo’s first book – Make Disruption Work.
Voskes’s and Jankovich’s experiences of advising large-scale enterprises, such as eBay, IKEA, KraftHeinz, Unilever, Nestlé and Heineken, on digital transformation projects are distilled and brought to life through seven fictionalised case studies with the help of Hornsby’s storytelling finesse.
The reader meets several semi-recognisable archetypes along the way: the risk adverse CEO of a ball bearing company who feels the best way of transforming the business is simply to find a chief digital officer (“Searching for the digital messiah”).
Then there’s the mountaineering CEO of a Swiss baby care giant who comes to the gradual realisation that obtaining market share through the acquisition of an online baby clothes retailer with a cool algorithm is only the first step in a very long scale to the top.
Our favourite? Tenacious product launch manager Pavel, who bites off more than he can chew when he agrees to head the digital venture within a corporate food and drinks giant.
Pavel learns from each hurdle he faces and ingrains them into a set of digital principals which start off as soundbites but, through each hoop he must jump through, slowly become more meaningful.
When Voskes chats to TechInformed, he explains that these stories “are designed as learning points for the change-makers and business leaders looking to make digital work for them.”
TechInformed: Why did you decide to write a book on this subject?
Tom Voskes: It’s a collection of projects that we’ve worked on at SparkOptimus [The company he co-founded with Janovich]. When we started out in 2010 digital transformation was not a big topic and we tended to work with the pure tech companies: ebay; Bol.com, loads of smaller, sized fast growing tech companies.
After a while we peeled off the onion and figured out what made those companies disruptive – why they were growing at 30% a year and surpassing traditional companies – it wasn’t about the technology, but improving the proposition for the customer, which is what our first book was about.
However, when it comes to larger global companies the ‘how to’ of that is complex; there are lots of learnings here – and we’ve seen so many good things but also bad things going wrong and struggling multi-billion companies making such pivotal mistakes that it delays their digital transformation for years.
The book, in its short story format, aims to bring some of the dilemmas these companies face to life. It also allows us to have a more content-based discussion on how to do these things right without wasting tons of resource and budget.
TI: In a nutshell, why do so many digital transformation projects fail?
TV: First, most companies and most managers are doing this for the first time. This is not helped by the fact that people rarely travel outside their own verticals. Travel and media are more digital transformed, for instance, than food or professional services. But people typically don’t tend to share this learning across other sectors.
The second reason is that digital transformation not about technology or digital for digital’s sake – it’s about improving the proposition for customers. It’s really about business strategy in the digital age – yet most digital transformation efforts focus on the tools and technologies without a clear business goal.
Another mistake that happens quite frequently is that digital transformation projects are delegated to someone without core business responsibility, for instance, a chief digital officer that understands digital but doesn’t understand business. And this rarely achieves the right results as we discuss in the first chapter (Searching for Digital Messiah). Once businesses realise that it’s about changing the way you interact with customers in their many different markets in their many different categories and routes to market, the CDO is often overwhelmed by the complexity of the ‘how to’. It is only 20% about tech and 80% about people and that’s where the real complexity lies.
TI: In a few of the stories you write about, the wrong people were hired – what qualities should a leader possess to successfully manage a digital transformation project?
TV: Leading a digital transformation requires a strong understanding of your customers and your markets but it also requires a vision of future possibilities so an openness and curiosity to learn – like I said it’s very rare that people have previously carried out transformations and in the same industry that’s almost unheard of. It’s a joy to work with clients like Parvel and the Mamma Bear CEO, who are of course intelligent and sociable but who also have this constant openness to learn and to change and to figure it out on the fly and not get too stuck in old habits.
TI: The pressure to deliver seems to force organisations to eschew best practice for quick delivery – why do so many companies rush into things without a proper strategy?
TV: People in the global centre, the board, they get all the difficult questions, and they get all the pressure on digital from their shareholders or their supervisory board. But people in the markets – they run the business as they always have, and they make the money, so they are proud of the way they run the business. So, for the people in the centre, it’s difficult to activate the many markets and change their whole way of working particularly if you don’t know what to change it to.
Very often they focus on what they can deliver at speed – which are things like partnerships, tech suppliers, applying systems and tools and push them out to the markets and invest in ventures that don’t interfere with the core business but that seem to be innovative in the sector – it’s the easier way out.
TI: So, what does a proper digital transformation strategy look like?
TV: Real strategy is much more business-like and entrepreneurial. We start by categorizing initiatives. One is initiatives that optimise your current business; another is things that really transform the way you do your business and interact with your customers and then there’s the one that really disrupts your own business and business model.
For each of those you need to go to the customers in your company that share the same needs. You may have key account customers, SME customers, pet owners or people young parents. With those customers you then need to then try to understand how digital and data can really make their lives better. And then, you need to develop a simple version of that. And test it with real customers in real markets. And you test and you optimise until you get it right.
TI: There’s more test-and-learn in digital, more iteration – but the traditional way of doing things is to research, carefully plan, make the right decision, execute it and then move on. So that’s a cultural mind shift…
TV: It’s a fundamental mind shift – most enterprises are used to building up to a big launch– all working towards big bang moments; but in most digital businesses it’s better to delegate test and learn to a lower level within the organisation to have teams figure out how to do things smarter than they did them yesterday. And they have the data to test and learn.
Even if you serve 1m people through a digital platform you could isolate a 1000 of them or 500 of them and serve them a slightly different version of their platform and see what the difference is whether it’s an improvement or not. And the speed of this learning means that every small change that you make is a very small change in sales and market share so the faster you’re learning the faster your growth is.
Therefore, digital companies feel the urge and build their whole systems to get to this learning as fast as possible and that’s why they delegate it to lower levels – because you create a bottleneck if every piece of test and learn must go through management again.
TI: Another issue seems to be the KPIs, and business models used by the digital world are different to traditional business models. What can digital leaders and management do to ensure that they’re on the same page?
TV: Driving a digital transformation is colouring outside the box because you are about to change the operating model and the business model that has been developed and optimised for decades to serve customers in a certain way.
So, at the minimum a DT project should always get sponsorship and support from the highest level. It’s even better if it’s driven by the CE – because you will constantly have to think across different functions, think above current KPIs and incentives and think about how you should change them.
You also need to face the fact that the workers of your own company may still be driven by certain incentives. If you work with sales, for example, they may get incentivized by the amount of visits they do per day; but in the new system maybe it’s not about visits any more but about adoption of digital platform or a share of the wallet of the platform – so you do need to adjust things like this at every step along the way.
TI: In terms of the tech, the other 20% – the advice you give is for companies to work with flexible, modular systems – rather than proprietary code and patches. And yet, in their haste to transform many companies seem to end up with the latter…
TV: An important notion in technology is that it’s never done. IT architecture is a continuous operation, and the end complexity is not something you can design on day one entirely. So, what you do want to have is certain architectural principles that you work toward. Modularity is a very important one. The reason for that is the different elements of your IT can have different strategic intent. Some of them you might consider so core that you really want to customise according to your own business needs and strategy; others are less core and it’s easier to buy them off the shelf because there is a market out there that innovates them at a constant rate. So, modularity is a way to separate strategic intent of each of the underlying parts, but it’s also a way to be able to keep up with high innovation speeds.
But all in all, tech is a continuous journey, and it is never really done and yes, that requires a new mindset too.
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