Addressing the true challenges of digital transformation
It is said that Albert Einstein, by the end of his career, got the question of how he would solve an earth critical problem – in 60 minutes. He concluded to spend 55 minutes to understand the nature and complexity of the problem, and the rest of the time to solve it. Regardless of whether Albert Einstein actually received the hypothetical question or not, it highlights the importance of understanding the challenges and nature of a problem before attempting to solve it. However, companies today use the opposite approach of using 55 minutes trying to fix a problem without adequate investigation. It is almost an obsession to find simple solutions to complex problems – the “silver bullet” solution.
Digitalization is the most complex business challenge today as its nature and complexity changes over time and address. It challenges the foundation of business and how companies and organization create value and experience to customers in a fast-moving environment. It is estimated that 50% of fortune 500 companies has disappeared since the year 2000 due to this disruptive business trend. Still, many companies invest in quick solution (technology) while neglecting a proper analysis of the root causes and impact of digitalization on their business. Why is that? And what are the effects of this unhealthy behaviour?
Digitalization: Integration of digital technologies into everyday life by the digitization of everything that can be digitized.
(businessdictionary.com, HBR.com - 2016)
In 2016, I was invited to a Swedish telecom company to discuss digital transformation and the new market conditions. I had the opportunity to meet their digital transformation team and they proudly talked about their new technology platform as part of their new digital strategy. New technology was the way forward! But when I asked how long time it would take to respond to a new opportunity or threat in the market (with new digital service), the response time was calculated to an astonishing 18-24 months – approximately 4 times longer than their fast-moving competitors. The fact was that they would always be 2-3 product cycles behind their competitors. We concluded that the frequency and magnitude of digital threats and opportunities are most likely would increase over time. The thing is that more technology was the normal (and comfortable) approach when addressing a business problem – but did, in this case, not take into consideration the true challenges of a faster and unpredictable business environment. It is not an uncommon approach – to focus at what you are good at, rather than focusing the true challenges. How to create value and experience of its customers.
When studying organizations and recent research, I see a worrying scenario. Approximately 30% of all IT/Digital investment does not truly address the overall strategic challenges of the organization. It is the consequence of not understanding the nature and complexity of the business dilemma – the digital transformation. The result is investing in short term and one-time solutions (“silver bullet” solutions) instead of seeing digitalization from a broader and continuous perspective. Learning how to analyse and prioritize over time in a structured way with accurate data and information. Much of the energy, money and effort is therefore wasted – and competitiveness is lost. Digital transformation is not expensive when knowing where to invest and focus the energy.
The short-term approach is not difficult to understand. When running GooDIGITAL Digital Capability Assessment in various companies and industries, we see a trend of heavy focus on operational tasks (way of working and tool) rather than conceptual or contextual (strategic – where we are heading and why). We need to understand that value is created by operations, but the levels of value is determined on conceptual and contextual (strategic) levels. We can have a fantastic effective car, but if it doesn’t take us where we want – then it is of no use. When discussing the topic with an IT manager in the bank & finance industry, he captured the essence of the problem very well:
“We only have time to deliver and solve problems quickly – not able to raise our perspective to understand where we are heading and why”.
The key challenge is about lack of time and analysis capabilities in organizations – today limiting managers and employees to see and assess the complete picture, and understand the true challenges going forward. Understanding how value is created beyond traditional budgeting and Excel sheets. The quest for productivity gains easily turns a thinking and learning organization into a process oriented and rational organization. Unfortunately, the later organization is incapable of supporting the digital transformation requiring fast adaptability for future competitiveness. An interesting paradox is that that ‘thinking and learning’ organization are proven (by recent research) to be more cost efficient than the ‘process oriented and rational’ organization. That is something to think about!
- Understand the root causes to the current digital business challenges. One idea is to address the challenge with a series of “why?” (at least five) to find the underlying causes.
- Come to a common understanding in the management team of what customer value actually is and how it is created. Customer value is changing over time and it is important to understand what drives the change.
- Consider to free up time for managers and employees to reflect on their current challenges and change journey – avoiding costly “silver bullet” solutions.
Albert Einstein correctly highlighted that it is in the definition and analysis of the problem that the solution can be found. Einstein himself said he did not have any special skills apart from being passionately curious – and it was his curiosity and ability to make time for insight that made him one of the brightest. My question is how culture, leadership and governance in traditional companies allows employees to be bright, creative and find solutions that actually address the true nature of digital challenges.