Digital Transformation scrapbook

Here are some key insights from articles I’ve read on digital transformation.

The evolution of (Digital) strategy

Discussions on digital: How strategy is evolving—and staying the same—in the hypergrowth digital age

“My view is that the role of strategist, first and foremost, is the mobilizer. People need to understand where the company is going and take autonomous decisions. ”

“the way to manage a company has changed a lot in the last couple of decades, from “top down, the leader knows it all, let’s execute,” to a model that’s more like a federation, where you expect empowered teams to make the right choices and follow in the general direction. So it’s even more important to have a strategy that allows that federation of little teams to do what they have to do and not refer up the chain every time.”

Be wary of taking a narrow conception of what ‘digital transformation’ is

Digital strategy: Understanding the economics of disruption

“what they had wasn’t a digital strategy, it was a list of priorities for digitization. Explicitly, it was how are we going to reduce the cycle time in our end-to-end processes, how are we going to improve the customer experience and build new apps, and so forth. It was about how they digitize. It was not actually the choices they were making about a big disruptive economic force, which is the changes that are made possible by digital technologies.”

“The word ‘strategy’ is used too loosely with digital to mean our priorities for digitization not the choices we’re going to make in terms of where we compete and how we cmopete in the face of a big disruptive force.”

“We found that going back to the fundamentals of economics, trying to understand where there is economic room to be attacked, where your open flank is, or where you could thrust a spearhead, was a much more useful way to approach the problem and simplify the problem and focus on the right priorities.”

“Do not just think digitization. Think digital strategy. How will the economics of my business change in the future? How can I change the economics of other businesses? And, therefore, what should be strategy in the digital age be?”

How companies become digital leaders

“incumbents, particularly laggards and followers, sometimes reflexively try to drive digital marketing and sales. They mistake the world of digital for the world of online-selling success. And that narrow set of levers and aspirations for digital transformation is often unsatisfying and unsuccessful. Because there is a lot of opportunity unlocked by digital: the ability to fundamentally change how productive your assets are, the ability to leverage data and your consumer base in a different way, and the ability to actually develop innovative new propositions that you could never have offered before – the world of universal connectivity and ultracheap and ultrafast processing power. the ability to do these things is often a lot more powerful than trying to get a laser-like focus on pure digital- marketing and -sales performance.”

Thinking digitally can be difficult

Achieving a digital state of mind

“One of the biggest changes digital allows is that what might have been product sales become services. … You may have bought a thermostat, but now you’re buying energy management. You may have bought a TV, but now you’re buying entertainment streaming.”

What ‘digital’ really means
“diverse perspectives [on what digital means] often trip up digital teams”

“digital should be seen less as a thing and more a way of doing things.”

  1. “creating value at the new frontiers”. This could be about developing new businesses in adjacent categories, or identifying and realising value pools in existing sectors.
  2. “creating value in the processes that execute a vision of customer experiences”. Obsessively seek to understand each step of a customer’s purchasing journey, regardless of channel, and think about “how digital capabilities can design and deliver the best possible experience.” e.g. supply chain to give flexibility and deliver the product efficiently and in a way that the customer wants.”
  3. “building foundational capabilities that support the entire structure” “Being digital is about using data to make better and faster decisions, devolving decision making to smaller teams, and developing much more iterative and rapid ways of doing things.” [see below on decision making and oversight] I.T. should be delivered in a two-stream model. Legacy systems that support critical functions should work at a slower pace, and a separate stream supports fast-moving, often customer-facing interactions.

Making the cultural case for change

Digital disruption is impacting every sector, even law firms

“We should not try to convince management of the importance of digital. Instead we should frame the conversation around their pain points and struggles. Every senior management team has certain objectives that they need to reach or barriers they need to overcome. The chances are that digital can help with those and that is how we should position it.”

Customer obsession

Achieving a digital state of mind
“Everybody will say they’re customer oriented, but, as digital leaders would say, they have to be customer obsessed. And that’s something that a lot of organizations still struggle with. So that’s where you should start. Take the customer perspective.”

How to think about building digital services

Digital disruption is impacting every sector, even law firms
Not like creating a building, where you draw up the plans, then build, then do minor maintenance.
It’s more like planting a garden. Start small, then add more elements. Keep pruning, trimming and evaluating as you go.

Design sprints

Preventing the Executive Swoop and Poop with Design Sprints

  • Takes a week
  • Uses a team of participants from different roles and perspectives in the organisation.
  • Define and unpack a problem. Built a shared understanding
  • Generate ideas and decide which ones to pursue for testing
  • Build a prototype of their ideas, and validate assumptions by observing real people using it.

This helps you escape the risk of designing by starting with a list of stakeholder requirements, which may not be correct. “Unfortunately, because there’s usually no validation process built into the conventional design process, it isn’t until late (sometimes as late as when the product ships) that the team learns they went down the wrong rabbit hole.”

“Trying out what seems like a great idea and discovering that you’re wrong is a fantastic way to learn. Doing it quickly and early in the process mitigates the risks associated with heading down the wrong paths, delivering more educational value to your organization at lower cost.”

“When an organization integrates design sprints into projects, they see a dramatic decrease in outside influencer disruptions and an increase in their design quality.”

Continuous optimisation

Optimize Customer Experiences With Online Testing And Continuous Optimization

Improve your online testing through the following continuous optimisation objectiveS:

  1. Learn from every possible customer interaction
  2. Test customer interactions across the entire lifecycle
  3. Align with a customer-centric strategy
  4. Deploy testing within every possible digital channel

Failure and experimentation

Amazon’s 2015 letter to shareholders

“failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent change of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten.”

Different types of decision need different types of oversight

Amazon’s 2015 letter to shareholders
“One common pitfall for large organizations – one that hurts speed and inventiveness – is ‘one-size-fits-all’ decision making.”
“tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. the end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.”

There are actually two types of decision:

  • Type 1: consequential and irreversible or nearly irreversible. “one-way doors”. “these decisions must be made methodically, carefully, slowly, with great deliberation and
    consultation”. A minority of decisions are Type 1.
  • Type 2. Changeable, reversible. “Type 2 decisions can and should be made quickly by high judgment individuals or small groups.”

    Data-enabled decision-making and the role of top management

    An executive’s guide to machine learning
    “Frontline managers, armed with insights from increasingly powerful computers, must learn to make more decisions on their own, with top management setting the overall direction and zeroing in only when exceptions surface.”

    How companies become digital leaders
    “Not doing anything may be the riskiest move of all.”

    Rapid development and measurement

    Achieving a digital state of mind
    “If you’re doing to do a rapid ‘test and learn’ and get those feedback cycles, the whole philosophy has got to be that what we do is measurable.”

  • martinlugton

    Some more notes:

    Telecommunications agency KPN transformed digitally by bringing expertise in-house and adopting agile working http://ow.ly/1nML309PgPD

    “we were often delivering services over budget and not always meeting the needs of the business… the only way to change this was agile”

    “You have to take it step-by-step, trusting that you will end up where you want to be. ”

    “We didn’t fall into the trap of relying on an all-encompassing plan for change.”

    “Customer and market needs are always changing. Technologies are always changing. You cannot lock yourself in at the start.”

    “It sounds… scary, but it’s critical. When people make their own choices, they really own what they are doing and work as a team.”

    Perhaps most important: “having an environment in which developers could be themselves and have full autonomy to make their own choices.”

    Moved from 5-10 year I.T. plans. Now they plan 1.5-2 years out. This helps them keep up with technological change and business needs.

    “We’ve managed to create an environment where people feel energized and motivated; we don’t need to rely on rules and reports”

    http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/putting-customer-experience-at-the-heart-of-next-generation-operating-models

    aligns strongly with the UK’s government transformation strategy
    which pointed out that more work needed to be done on back-end operations processes

    increase customer satisfaction and you’ll make more money
    [graph]

    “Many organizations simply take a “problem view”—treating internal processes as a cost that needs to be reduced, and looking for customer pain points that need to be eliminated. That’s a good place to start, but if it’s the only view, it misses out on the idea of creating additional customer value.”

    “To create a great customer journey, you need more than great touchpoints.” [see exhibit 2]

    Key journeys include: product/service use; resolving problems; onboarding

    Our research indicates that US banks as a group underperform on customer satisfaction for the two journeys that matter most: product use and problem resolution. The journeys for signing up and opening a new account also rank among the worst, often requiring customers to enter vast quantities of data and navigate numerous application forms and fields.

    A successful improvement effort begins not by taking an existing portfolio and digitizing it wholesale, but by radically simplifying both the customer experience and the product or service at its heart. One telecom provider reduced its product portfolio by 80 percent before streamlining its digital experience and supporting platform. After rationalizing its offerings, eliminating some process steps, and using readily available tools to automate others, it managed to cut its sign-up time for new customers by two-thirds.

    When companies rethink their customer experience, digitization allows them to work backward from what customers would like to see instead of getting bogged down in incremental improvements. This clean-sheet approach encourages greater ambition, not shaving 20 percent off the time it takes to open an account, say, but slashing it by 80 percent or more. When one major North American bank revamped its deposit-account journey, it managed to reduce the time from sign-up to working account from two weeks to less than ten minutes.

    Digital innovation and user feedback provide a catalyst to simplify products and customer experience, but to capture economic value, you need to take a further step: link the new experience to underlying operational processes. That requires an understanding of two things: what creates value across a given journey from the customer’s point of view (faster cycle time, personalization, cross-channel functionality, and so on) and what drives business costs and revenues (number of manual touches, extent of customer fallout, additional product sales, and so on).

    When businesses are trying to see journeys as customers see them, it can be hard to shake off a frame of mind that revolves around internal processes, structures, and KPIs. It may take a deliberate effort to stop thinking “this change might be difficult to implement” or “that cost has to be reduced” and start thinking what the customer wants instead.

    The seven decisions that matter in a digital transformation: A CEO’s guide to reinvention
    http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-seven-decisions-that-matter-in-a-digital-transformation

    digital transformations aren’t games of chance. But they do require big and bold commitments in the midst of uncertainty

    Without a transformation of the core—the value proposition, people, processes, and technologies that are the lifeblood of the business—any digital initiative is likely to be a short-term fix.

    We have found 24-hour hackathons with senior leaders to be a very effective way to break through old thinking and encourage executives to adopt completely new ways of doing things.

    A program that will deliver the needed degree of transformation is not something CEOs can delegate; they must lead the charge themselves.

    This leadership team doesn’t need to be large. In fact, it can be quite small, as long as its members, and the people working with them, have the requisite skills. At Starbucks, for example, Howard Schultz had the CIO and CDO guide a decade-long digitization effort that has driven widespread adoption of mobile payments at North American stores, tightly coupled with the company’s customer-loyalty program.8 At a European energy company, it was a COO, CMO, and CSO (chief sales officer) who led the charge.

    No matter how well a transformation effort is designed, there will be surprises and unforeseen developments. To deal with this reality, the CEO and top team need to decide on governance and escalation rules to allow for inevitable course corrections.

    Frequent check-ins—at least weekly—with senior leaders should be planned to gauge whether the digitization effort is on course and institute changes if it is not. That sounds like a lot, but devoting even one hour a week to a program that transforms the company is just 1 to 2 percent of a CEO’s time. The challenge is to book this time and stick to it.

    the CEO needs a dashboard developed to track progress on key initiatives that reflect the ambitions of the transformation. A digital transformation is a long-term effort, and as a result, yardsticks that focus on the short term, like ROI, can be misleading. Nontraditional metrics that evaluate digital adoption, such as new registrations on digital channels or digital-engagement levels, are better gauges of the progress of a digital transformation.

    The CEO and top team should act like venture capitalists by following a digital initiative’s progress closely, pulling the plug for projects that lag expectations, and investing more in those that do well.

    This requires speeding up budgeting processes, which at large companies tend to follow annual cycles. During a digital transformation, budgeting should shift from annual to quarterly or even monthly cycles.

    More than 70 percent of transformation programs fail.
    http://www.mckinsey.com/business-functions/organization/our-insights/how-to-beat-the-transformation-odds

  • martinlugton

    “The digital reinvention of an Asian bank” – Interview with Piyush Gupta, CEO of DBS
    http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-digital-reinvention-of-an-asian-bank

    Didn’t want to just put on digital “lipstick.” “tacking on a bunch of digital apps at the front end – that’s the easy bit”

    They took transformation right through the business. “We wanted to go all the way through to middleware and the back end.”

    “this focus on customer experience and innovation turned out to be good.” Gave freedom to innovate, as long as it helps the customer.

    Transformational KPIs, e.g. to run an experiment, and to own an employee or customer journey, forced experimentation into cultural practice.

    Classroom sessions didn’t work to upskill people. Instead, they ran a series of hackathons.

    Measuring revenue impact can take time. Start off measuring acquisition, transacting and engagement.

    “The key questions are cultural—are you able to create a company that has got adaptability, energy, and nimbleness…?”

    “We felt that if we didn’t lead the charge, frankly, we might die.”