McKinsey & Co., characterizes the opportunity as follows:
Digitization often lowers entry barriers, causing long-established boundaries between sectors to tumble. At the same time, the 'plug and play' nature of digital assets causes value chains to disaggregate, creating openings for focused, fast-moving competitors. New market entrants often scale up rapidly at lower cost than legacy players can, and returns may grow rapidly as more customers join the network
Today’s software-first model demands that our customers, employees and partners scramble from software to software and community to community to get work done. But digital transformation puts a network centric model in place where the right communities of experts, data, process and content wraps around the individual’s needs.
BUT: to truly get this right, we need to understand inefficiencies at a functional level, to meaningfully transform how we engage and serve customers, how we collaborate as employees, and how we procure or manufacture materials.
Customers are driving digital change
Our customers have begun this journey. Kaeser Compressors, Inc, a global manufacturer decided to change its business model from selling air compression systems to selling compressed air as a service. To change the DNA of a very product-centric culture to one of selling a service, the sales, support and partner distribution functions needed to be re designed. Specifically, customer service was now as much a part of the sales process and had to morph from being a reactionary function to one that would now be the central trigger for growth and retention.
Service and support now drove annual contract values and renewals, requiring a re-thinking of how networks of internal experts and partners, real-time analytics and content needed to be re-assembled to ensure customer success. SAP Jam’s work patterns for informal learning, collaborative account management and service was layered on top of SAP CRM to accomplish two things: 1) create a collaborative learning culture and 2) to re-assemble its network of internal experts, customer intelligence and analytics and live CRM data to empower everyone to participate in a service-based culture.
The perils of sexy job titles
Digital transformation is now the newest contender, infiltrating the C-Suite with the newly minted Chief Digital Officer (CDO) position. According to Gartner Research, 500 CDO's have already popped up.
Your performance goals need a goal postOct 1 2013diginomica.comThere most certainly could be a single governance role so that the left hand knows what the right hand is doing. I’m relieved to see that even Gartner suggests this role not be one of significant ownership, but rather one of co-ordination. But I worry that excessive top-down ownership just won't have the needed contextual depth to move the needle.
We've seen this movie before. Every time we let a new category of software run up the hype curve, we declare the need for another C-level Executive. Here are a few:
- 1990's: Knowledge Management - Chief Knowledge Officer
- 2000's: Innovation - Chief Innovation Officer
- 2010's: Social Business - Chief Social Business Officer
The assertion was super compelling for each of these. Back in 2002, Dundas, Ontario-based Intellectual Capital Research put forth incredibly compelling statistics for the need for a Chief Knowledge Officer, such as 25 percent of Fortune 500 companies currently have CKOs, and 80 percent of Fortune 500 companies currently have KM staff.
Fast-forward to 2014: the CKO has long disappeared in most industries, save for a few such as the professional services businesses where people and knowledge are the product.
I mean no disrespect to the Chief Innovation, Knowledge or Social Business Officers who are successful in these centralized roles. Your company culture should be commended for taking the long view on how business should be done. But it's the exception rather than the rule.
Digital is about mandates, not business cards
The problem with these centralized roles is that the focus is on the management part of <insert-hyped-category-here> management as a way to centrally design and execute a program.
Centrally managing knowledge, innovation or 'social business' often ends up being an inch deep and a mile wide. To truly thrive just as Kaeser has, these new ways of work need to be ingrained deep into functional areas or at the edges, where transformation matters and is measurable.
You may select technologies across your organization to reduce silos as Kaeser did. In fact, the true value comes from going across functions. But the discipline needs to be driven by standard functional KPIs that already exist or represent the functional transformation you seek.
A strategic mandate is absolutely necessary but without deep domain context and follow through, digital transformation will never been accomplished by simply waving a wand from mahogany row. I like what John Hagel refers to 'scaling at the edge' in this highly practical interview about digital transformation:
Since central politics can get in the way of transforming the enterprise, the best way to drive change is by going out to an edge, which can scale and ultimately grow into a new business core. This allows change agents to demonstrate innovative approaches to the business and pull people and resources from the core to the edge.
We've tried to bloat the C-suite before. This time, I really hope that we learn from the past by understanding the needed balance between C-level sponsorship, the right technology platform and applications, and finally, ruthless functional execution. Failing this, digital transformation is likely to be remembered as yet another promising management evolution that progress left behind.
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