Digital Transformation – a Definition and Thoughts on Principles

 

In my previous post, I suggested that the term “Digital Transformation” is not well understood, and all too often misused. In this post, I’ve attempted to put a little more structure around my earlier thinking, and offer a definition, including some initial thinking about the principles that we need to guide the digital transformation journey.

One of my motivations for doing this was a recent article by Archana Deskus, Intel SVP and CIO, in which she identified what she called the 3 hard truths of digital transformation.

Truth 1You must disrupt yourself … or someone else will.

Truth 2: Digital transformation isn’t about an IT strategy. It’s about leveraging continuously evolving technologies to change your entire business.

Truth 3: Transformation requires massive shifts in culture, operations, and people – with change and culture being the toughest aspects.

She concluded the article by saying: “The leaders who embrace digital transformation as a journey versus an end-state, and who keep an eye on reimagining the norm and embracing the complexities, will find it to be a game-changing path worth taking.

The material below is part of work I’ve been doing on a couple of initiatives and is still very much work in progress. However, I   found her words so reinforcing of what I have thought and been saying for quite some time that I wanted to test it out earlier than I had planned. While quite a bit of  the material has appeared in some shape or form in earlier posts, quite a bit is new, and I’ve attempted to net it out, and put more structure around it here.

Definition:

Digital transformation is an ever-evolving digitally-driven and enabled journey of exploration and experimentation. It represents a cultural and mindset change which involves continually challenging all aspects of the status quo. It requires reimagining and fundamentally transforming government, business and society in a way that is inclusive of and creates value for all stakeholders.

Possible (areas for) Principles:

  1. Digital transformation is about much more than technology – it is fundamentally about culture and mindset and requires moving beyond a technology mindset to a business value mindset.
  2. The primary focus of digital transformation is on outcomes that create and sustain value for a broad range of stakeholders including organizations and people who are involved in or affected by the outcomes.
  3. Digital transformation’s reach goes beyond business and financial measures – it impacts, and its performance and value will be measured against the 3 dimensions of the Triple Bottom Line[1]: social, environmental, and economic.
  4. Realizing the potential value of digital transformation will require ongoing and fundamental changes to the nature and purpose of organizations, including, but not limited to their governance, business models, processes, people skills, and organization structure.
  5. Digital Transformation requires an obsession with simplicity and reducing complexity – transcending traditional roles and hierarchies, dismantling bureaucracy, and getting things done collaboratively, and flexibly through teamwork and responsible autonomy.
  6. Digital transformation requires recognizing that leadership is a behaviour that must be nurtured, empowered and rewarded throughout an organization, with leadership at the top creating an innovation-minded culture that fosters creative thinking, agility and speed based on a solid foundation of trust and empowerment.
  7. Digital transformation requires a more data-driven, flexible, and adaptable decision-making process, embracing openness and transparency, and focused much more on evidence and much less on traditional hierarchy and ego.
  8. Digital transformation requires the capability to rapidly adapt and up-scale or pivot as circumstances change.
  9. Unlearning is critical for digital transformation – it’s not what you know, but what you’re willing to unlearn, that will hold the key to successful digital transformation.
  10. Digital technology is itself neutral. When used ethically, it can contribute to positive outcomes for stakeholders. However, when used unethically, either accidentally or deliberately, its use can cause great harm. Organizations and society must be constantly aware of, and pro-actively guard against such misuse.

As I said at the beginning, this is still very much a work in process – as is digital transformation itself. As such, I would certainly very much welcome feedback or comments on the material.

[1] Source: John Elkington, “Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development,” California Management Review 36, no.2 (1994): 90-100. Also see Elkington’s “rethink” in BR, June 25, 2018 https://hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it (the title is misleading).

Digital Transformation – Breaking Free of the Industrial Age Straitjacket

This article originally appeared on the Institute for Digital Transformation website.

A search for Digital Transformation on Google finds ~500,000,000 results, which is likely close to ~500,000,000 more than would have been found only a decade ago. However, finding a clear, let alone consistent definition is more difficult. The term is not well understood, and all too often grossly misused. Part of the reason for this is that neither of its component words are well understood. The purpose of this article is to clarify what digital transformation is, or should be, and what it isn’t, and to reframe it in a way that makes it more understandable.  I close by discussing the significant cultural changes that will be required if we are to come close to realizing the full value of the digital age.

I’ll start with “transformation”, a word that  I first used more than two decades ago in the first version of The Information Paradox in the context of the three stages of evolution of the use of information technology: Automation of Work; Management of Information; and  Business Transformation. I aligned the third with the implementation of what was then an emerging type of software labelled Enterprise Resource Planning systems (ERP), which I positioned as being complex systems. Over time, I became increasingly uncomfortable with my use, or misuse, of the term. I understood why when I was exposed to  David Snowden’s Cynefin Framework. He describes four stages of system evolution: simple/ordered; complicated; complex; and chaotic. It became clear to me that what I was describing as complex were, and still are certainly complicated endeavours, often requiring significant organizational change (a requirement usually recognized too late and poorly managed). They are primarily about integrating information and making it more accurate, accessible and timely. There are proven practices available to do this, although, again,  all too often not adopted, or adopted too late. They do not essentially change what organizations do – they just do it differently and, hopefully, better. That certainly involves considerable organizational change but is hardly transformational.

Moving on to “digital” we have seen increasing use of the term Digital Transformation over the last decade. Unfortunately, in this context, the word “digital”  is still equated by most people to be just another word for information technology. As a result, digital transformation is more often than not still used in the context of the complicated work that I wrongly labelled transformation 20 years ago. This is well  described by Gartner in their Information Technology Glossary, where they say “The term is widely used in public-sector organizations to refer to modest initiatives such as putting services online or legacy modernization. Thus, the term is more like “digitization” than “digital business transformation.” [1] While likely more prevalent in the public sector, I would argue that is also more than often the case in the private sector.

Over the last decade, I have reframed the term to be “digitally-enabled business transformation”, and taken it further to describe it as “an ever-evolving journey of digitally-enabled business transformation”.  Digitally-enabled business transformation is about a lot more than technology.  While new and emerging technologies, including the internet of everything, smart everything, quantum computing, augmented analytics, AI, machine learning, deep learning, robotics, RPA etc. are both driving and enabling the transformation journey, technology is only one part of the transformation. The journey of digitally-enabled business transformation will require continually reimagining, rethinking, and reinventing all aspects of the business model. It will be about new models of how work is governed, lead, organized and managed.

Our traditional industrial age, top-down hierarchical control-oriented approach to governance, leadership and management, and the resulting organizational structures are no longer fit for purpose in in a digital world. One indicator of this is that only 30% or less employees feel engaged with their organizations (and it’s not much better for managers). In his new book, “Humanocracy”, Gary Hamel capture the reasons for this, saying that “The typical medium- or large-scale organization infantilizes employees, enforces dull conformity, and discourages entrepreneurship; it wedges people into narrow roles, stymies personal growth, and treats humans as mere resources.” He goes on to say that “…a small but growing band of post-bureaucratic pioneers are proving that it is possible to capture the benefits of bureaucracy – control, consistency and coordination – while avoiding the penalties – inflexibility, mediocrity and apathy.”[2]

The global and social context within which we live and work has changed beyond recognition. We are more globally aware and socially connected. We have 24/7 access to almost unlimited knowledge, information and expertise. As Gary Hamel’s book illustrates, we are increasingly seeing organizations exploring and experimenting with new and emerging business models. Organizations that are enabling greater engagement and two-way communication with and between employees. That are orchestrating self-managing teams who can work collaboratively in a much more agile and responsive way. That are “democratizing” their approach to leadership and governance – letting their people use their brains again with light but relevant and appropriate oversight. Organizations that are committed to continually reimagining, repurposing and reinventing themselves.

We now have a vision of what the future of work could be, but don’t see that anywhere close to being universally realized. The challenge ahead is to break out of the straitjacket of more than a century of hierarchical, siloed industrial age mindsets which are controlling, risk-averse and “know it all”. To evolve them into mindsets that are enabling, learning and willing to try new things and fail. To move to a more agile and inclusive approach to governance, leadership and management. A value-focused, data and analytics-driven, agile, sense and respond approach that transcends functional and organisational boundaries, and engages employees, customers and other key stakeholders. One that places accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input. One that can survive and thrive in an ever-evolving, complex and chaotic context.

All this will require a major cultural change. A fundamental rethinking and reimagining of how all organizations, public or private, large or small are governed, lead, organized and managed, and of the capabilities that are required to ensure and assure that the use of technology contributes to creating and sustaining business and societal value in the digital world. It will require replacing current top-down, hierarchical and siloed processes with leadership across and beyond the C-suite with leadership capabilities recognized, nurtured, and empowered throughout organizations. Only when this is done will we come close to realizing the full value of the digital age –  a new era of digital exploration, experimentation and transformation.

[1] Source: Mckinsey Information Technology Glossary, https://www.gartner.com/en/information-technology/glossary/digital-transformation

[2] Source: “Humanocracy: Creating Organizations as Amazing as the People Inside them”, Gary Hamel and Michele Zanini, Harvard Business Review Press, 2020

Fear, Frustration and Hope in a Covid19 threatened Digital World


Photo by CDC on Unsplash

We live in unprecedented times. With Covid19, we are in a global war with an invisible enemy – a war in which we are both potential victims of, and foot soldiers for that enemy. We all live in fear for ourselves, and even more so for our families – our parents, children and grandchildren, as well as for all those who are more exposed and at risk to this unseen yet ever-present enemy.

At a time like this we need strong, decisive and transparent leadership at all levels. Leadership that must also be compassionate and comforting in helping us understand that we are all in this together, and that collectively we can and must play our part in beating this enemy. Here, in Canada, and in our province, British Columbia, we are seeing that, as we are generally across Canada. But this is a global war with an enemy that moves fast and silently, and respects no borders and no-one, and that can be anywhere at any time. At a time like this, it is immensely frustrating that we are not seeing a collaborative global response to this global enemy. Instead, from many leaders across the world – some more so than others – we have seen, and are seeing: Denial instead of action; Delay instead of speed; Secrecy instead of openness; Division instead of unification; Competition instead of collaboration; putting Self-Interest ahead of the interest of the people, and (largely driven by that same self-interest) putting National Interest instead of global interest…and the list goes on.

In what we once referred to as the IT space, but what is now increasingly becoming an all-encompassing digital world, we have suffered from similar failures of leadership for decades. We have seen, and continue to see many billions of dollars spent on technology with all too often little or no value being delivered as a result of those expenditures.

In this current crisis, it is frustrating to see the inability of aging technology systems – systems that have been neglected for far too long, to respond to critical needs in an agile and timely way. We are experiencing the result of years or decades of little or no investment in maintaining and updating our technology infrastructure. Where new investments have been made, they have all too often failed to deliver the expected value – assuming that value was even clearly defined at the outset, which is generally the exception rather than the rule. These investments are often made without clear understanding, ownership and accountability from the business or organizational leadership, and without inclusive and ongoing engagement of those who have to use and live with the systems and applications resulting from those investments.

But there is also hope. During this crisis we have seen, and continue to see the ability of organizations and individuals in all sectors to pivot to new ways of delivering their products and services. As Satya Nadella, Microsoft’s CEO, summed it up, Social distancing rules have brought forward the adoption of a wide range of technologies by two years. A comment echoed by Google’s CEO Sundar Pichai predicting a “significant and lasting” impact from the forced move to online work, education, shopping, medicine and entertainment.

In the case of healthcare, digitally-enabled services that have been discussed for years or, in some cases decades, have been delivered in a few weeks. Manufacturers have retooled their production to produce respirators and Personal Protection Equipment. Distilleries have switched production from liquor to hand sanitizer.  In response to a request from local hospitals, Quinn Callander, a 12 year old boy scout in Vancouver, Canada answered a request from the local hospitals for a device to help relieve severe pain from pressure and friction of wearing masks for long periods. Working with his 3D printer, and by prototyping several designs, he developed a simple but effective “ear guard” strap. In just a few weeks, he has produced 1,700 such straps, a volunteer group he is part of has made an additional 5,000 straps, and he has made the design available for others to download[1]. Across America, makers of all ages and skill-levels have thrown themselves into helping to alleviate the shortage of personal protective equipment (PPE). Some are actually making masks, shields and gowns. Others are collaborating on designs, and making those designs public. Still others are trying to figure out how to get PPE to those who need it most as quickly as possible. These charitable tinkerers provide ground for both a deeply American sort of hope—strangers doing as much as they can, wherever they can, for the good of their neighbours—and despair, at the colossal federal failure that inspired them[2].

An article in the April 25th edition of The Economist under the heading “Creative Disruption” discusses the pandemic “liberating firms to experiment with new ideas”, and being to do so at breakneck speed, and without huge financial outlays. But, as evidenced above, it’s more than that. It is actually liberating organizations of all types, and in all sectors, as well as individuals of all ages across the world to do so. As Michael Waters said on April 30th in the Financial Times, “The pandemic is working on all the main levers that affect the pace of digital adoption: consumer behaviour, business processes and government regulation”.

We are seeing examples of outstanding leadership coming from everywhere and anywhere, but not, in all too many cases, from those in “official” leadership positions in the public and private sector. The challenge ahead, when the Covid19 crisis is brought under control, to whatever extent that may happen, is how to keep the momentum, and not slip back, as The Economist article says, to our comfortable traditional world of  ‘“analysis paralysis”, an affliction caused by top managers having pored over the same irrelevant case studies at business school.’ We need to tap in to that outstanding, yet previously unrecognized leadership that is everywhere and everywhere. This will require rethinking, or blowing up previous models of leadership and management

We need to ask ourselves, when the crisis abates, are we going to fall back to the traditional world of ineffective leadership, bloated inefficient bureaucracies, and disengaged employees and citizens, or are we going to learn from the crisis and move forward together to a better world. A world in which leadership is a behaviour, recognized, nurtured and rewarded throughout an organization, with leadership at the top playing a role akin to some combination of an orchestra conductor, and an air traffic controller. A world in which: Bureaucracy, a term coined roughly two centuries ago is no longer fit for purpose when today’s employees are skilled, not illiterate; Competitive Advantage comes from innovation, not sheer size; Communication is instantaneous, not tortuous; and the Pace of Change is hypersonic, not glacial. A world in which employees, as in the case of China’s Haier, are engaged as “energetic entrepreneurs, and an open ecosystem of users, inventors and partners replaces formal hierarchy”[3].

[1] Source: Fast Company, April 9, 2020, “This 12-year-old invented an ingenious solution to one of the biggest problems with masks”

[2] Source: The Economist, April 30, 2020, “America’s Makers and tinkerers turn their hands to PPE

[3] Source: The End of Bureaucracy, Gary Hamel and Michael Zanini, Harvard Business Review, November-December 1918 Issue

IT and Digital Failures – the Time for Study is Over – it’s Way Past Time for Action!

A recent article in diginomica, “Senate agrees to launch inquiry into Australia’s digital government failures” caught my eye. My immediate reaction was “Here we go again”, quickly followed by a somewhat more lyrical “When will they ever learn?”
The challenges of IT projects have been analyzed extensively over many decades. Most of us are familiar with The Standish Chaos Survey, the 2015 results of which reported successful projects constantly representing only ~30% of the 50,000 surveyed projects (where success is defined as on time, on budget and with a satisfactory result).

A 2012 Mckinsey article, based on research conducted on more than 5,400 IT projects by Mckinsey and the University of Oxford, found that half of large IT projects (costing >$ 15 million) massively blew their budgets. On average, large IT projects ran 45% over budget and 7% over time, while delivering 56% less value than predicted. The projects in total had a cost overrun of $66 billion, more than the GDP of Luxembourg. The impact of these failures is more than financial. In the case of healthcare, for example, the impact includes significant avoidable loss of life, pain and suffering.

More anecdotally, The International Project Leadership Academy Catalogue of Catastrophe records quite a few troubled projects from around the world, many, but not all of them IT projects. The list includes the UK’s NHS National Program for IT in Health, the original budget for which was $4.6 billion, which had risen to $24 billion when it was cancelled in 2010. At the time, and possibly still now, it was the world’s largest civil IT project.

Challenges to success – being on time, on budget, and achieving the expected value, are common across private and public sectors and across all jurisdictions. If one were to take all the studies, audit reports, and other post-mortem review of so-called “IT projects” or, more recently, “digital” initiatives, you could fill a medium-sized – possibly larger – library. The good news is that you would only have to read one or two of them to realize that they all came to basically the same conclusions, and made basically the same recommendations. It’s great business for consultants, as they can usually just dust off and tailor a previous report – a great but expensive example of re-use. Over the same time, research papers and articles beyond count have been written on this topic, and frameworks, methodologies, tools and techniques have been produced (almost) ad nauseam. Yet, despite this, very little has changed, other than that the impact of these failures, as technology becomes increasingly embedded in everything organizations do, is both more severe and more visible, not the least so in the public sector.

The underlying causes of both earlier “IT project” failures, and those of more recent “digital” initiatives are basically the same. They include:
1. A continued, often blind focus on the technology itself, rather than the change – increasingly significant and complex organizational change that technology both shapes and enables, and which is required if organizations are to come anywhere near realizing the potential value from their digital investments;
2. The unwillingness of business leaders to get engaged in, and take ownership of this change – preferring to abdicate their accountability to the IT function (I should add that I have also seen cases where IT leaders know this should be owned by the business leadership team, but do not believe that they have the competence to do so);
3. Failure to inclusively and continually involve the stakeholders affected by the change, without whose understanding and “buy in” failure is pretty much a foregone conclusion;
4. A lack of rigour at the front-end of an investment decision, including, what is almost universally a totally ineffective business case process, resulting in lack of clarity around the expected outcomes, the full scope of effort required, the assumptions being made, the risks involved, and how progress and success will be measured;
5. Not actively managing for value; and
6. Not managing the journey beyond the initial “project” completion.

A much over-used definition of insanity, commonly yet apparently inaccurately attributed to Albert Einstein, is “doing the same thing over and over again and expecting a different result.” This is certainly a good description of the where we are today. It should have been obvious to anyone reading any of the previously mentioned reports and studies that the issue of IT or digital failure needs to be re-framed from a technology delivery problem to a business problem of managing increasingly significant and complex organizational change. A business problem that has had a global cost estimated by Michael Krigsman, a respected industry analyst, to be in the order of $US3 trillion/year. And that cost doesn’t include opportunity cost – the non-realization of expected value.

So, why is it that business leaders – in both the private and public sector, have not stepped up to the plate? Despite the term “digital” now being much more commonly used – or abused –  in place of “IT”, digital is still largely equated with, and thought of as, a technology implementation issue. We certainly don’t need any more studies! As a client of mine once said, the less will we have to solve a problem, the more we study it. We need leaders to finally wake up and understand that this is not a technology implementation problem, but a problem around understanding, accepting accountability for, and managing the business change required to create and sustain business value from leveraging digital. We need these leaders to move beyond eternal studies to action. I discussed this in an earlier post, “Digital Leadership – Much More Than IT Leadership”. What follows builds on parts of that post.

In this new digital era, technology itself, how technology is delivered, how it is used, and by whom are changing at an ever-increasing rate. This is blurring the roles and responsibilities of IT and other business functions, and giving rise to a fundamental rethinking of how IT, and its delivery and use is governed and managed, and the capabilities that are required to ensure and assure that the use of technology contributes to creating and sustaining business value. The role of the CIO is being questioned ad nauseam, particularly as it relates to the CMO, and a new position, the CDO, is appearing. And, of course, let’s not forget the CTO. However, the answer is not as simple as renaming the CIO position, getting a new CIO, or appointing a few new CXOs (or now, due to alphabetic limitations, CXXOs).

I have, over many decades, used the simple formula below to describe reason for the current dismal state of affairs:

OO + NT = COO

The formula represents that simply applying new technology (NT) to an old organization (OO) results in a Complex Old Organization (COO). Gavin Slater, the new head of the Australian Government’s Digital Transformation Agency (DTA), used a variation of this formula in a recent address to the Australian Information Industry Association, in which he replaced COO with EOO – expensive old organization.

Digitization cuts across organizational silos, and across all levels of organizations. Realizing value from digital requires more than putting lipstick on the old industrial age pig, with its hierarchical, command and control approach to governance, leadership and management. It requires continually rethinking, reimagining and reinventing every aspect of our organizations. Digital transformation, or more accurately the on-going and ever-evolving digital journey towards a digital ecosystem will require digital literacy and collaboration across and beyond the C-suite to ensure that their organization has, as EY’s David Nichols said in a May 2014 CIO Insight interview, “an integrated and holistic plan to really leverage digital”. This includes questioning their very purpose, how they are organized, the very nature of the work they do, who does it, and how it’s done. It requires challenging established cultures and long-held beliefs. The digital economy both enables and requires a different view of leadership. As Sally Helgesen said in a May, 2014 article, “Leadership’ isn’t Just for Leaders anymore”, leadership no longer, or should no longer equate with positional power and has, or should become a behaviour that is broadly distributed, recognize and rewarded.

Organizations must tap into the collective knowledge of all their people…~70% of whom feel no engagement with their organizations today. As Julian Stodd said in a June, 2017 blog, “The Age of Engagement”:

“The mechanisms and mindset of engagement in many organisations lags far behind the lived reality of the Social Age: Organisations exist in a realm of expertise, domain specific input, hierarchical power, at a time when communities are rising, co-creation is maturing, and dynamism is key. The solution will not be adaptation within an existing mindset, but rather a paradigm shift to a new space: the Age of Engagement.”

Peter Staal extends this thinking in an August, 2017 article, “Organizations of the future operate as communities”, in which he says:

“Meeting the demands of the digital age will require a new way of working. Take for instance the decision-making process. Organizations no longer have the time traditionally taken up by this process through a decision tree. The future belongs to organizations which are made up of multiple autonomously operating communities forming part of the larger whole (so-called pods).”

This is not a new concept. It was original posited in the early 20th century by Oswald von Neil-Breuning with his law of subsidiarity – an organizing principle that matters ought to be handled by the smallest, lowest or least centralized competent authority. This means locating accountability and decision-making at the most appropriate level, while supporting decisions with broader and more knowledgeable input.

We could have adopted such a concept long before now, indeed, some organizations have done so. For organizations to survive and thrive in the digital economy, this is no longer an option! We certainly now have the technology available today to support such a concept. However, I’m not sure we will see this widely accepted  any time soon – likely not in my lifetime. As Steve Vamos said in a 2012 Australian Review article:

“The challenge ahead is to unwind more than a century of industrial-age mindsets at work which are controlling, mistake-averse and “know it all” and evolve them into mindsets that are enabling, learning and willing to try new things and fail.”

Laurence J. Peter, author of The Peter Principle, echoed those sentiments when he said, “Bureaucracy defends the status quo long past the time when the quo has lost its status.” The reasons for this are well laid out by Ted Bauer in an August, 2017 article, “Bureaucratic management ain’t going anywhere”, as summarized in the figure below.

As an eternal optimist, I hope that he’s wrong, but as a realist, having pushed similar ideas for many decades, I think it will take some time before we see the extinction of the organizational dinosaurs. This will certainly be the case if we stand on the sidelines and wait for it to happen. As a former colleague, Don Tapscott,  has said for decades “Leadership can come from anywhere”. We must all take a leadership role in making it happen.