The 7 Deadly Sins of Digital Transformation
Digital transformation is perhaps the most difficult organizational challenge executives have faced in the past three to four decades. When the dust settles (assuming it will), every aspect of a business will be affected in some way.
I’ve had the privilege of working with scores of executives who are on transformation journeys. Although many are making great progress, even more are struggling and making costly mistakes. Below, I identify the top seven mistakes executives make in digital transformation and how to avoid each one.
1. Funding projects, not products
"Show me hard ROI or you’ll get nothing and like it.”
The customer journey is nonlinear, irrational, and requires a variety of touch points to effectively orchestrate. On the front end of the journey, digital products are more disposable — they serve a purpose for a finite period (e.g., for the duration of a campaign) and then are often retired. On the backend, digital products are meant to drive repeated engagement, reuse, and advocacy. These have a much longer, useful life, and as such, executives must nurture them with appropriate financial and non-financial resources.
One common pitfall of not funding products is caused by a myopic, legacy approach: Present a business case, obtain funding, build, launch, deteriorate, and die.
Even the highest-quality automobiles on the market must be maintained, tuned, and upgraded over time (Teslas receive over-the-air updates just like iPhones). Digital products are no different.
If lifetime customer value is important, a product portfolio must be enhanced over time, and funding must continue beyond the first release. My recommendation: Develop a dedicated CX optimization team that evaluates data analytics, tests hypotheses, and refreshes product road maps with new findings. To manage risk, release capital on quarterly cycles to adjust course when things inevitably change.
2. Contracting a fatal case of “not invented here” syndrome
“We'll take care of that in house.” “We’re just gonna roll our own.” “That solution can’t be any good — it wasn’t invented here.”
Many executives lack the vision and — dare I say it — humility to actively seek ways to complement their core strengths. This speaks to establishing strategic partnerships and understanding how to benefit from participating within external networks and ecosystems (e.g., the API economy and open innovation networks).
Organizations that are changing — and doing so quickly — are creatively utilizing third-party products and services to fill strategic gaps. Even Best Buy and Amazon, two seemingly fierce competitors, struck a deal to sell Fire TV-enabled televisions in Best Buy’s brick-and-mortar stores. Will it be successful? It’s too early to call. But the formula is quite logical: Best Buy taps into Amazon’s jaw-dropping digital reach while Amazon expands its presence in the physical retail world, where customers can experience the products — two backs scratched.
My advice is this: Don’t let hubris steer you into quicksand. Sometimes the best solutions exist outside your firewall.
3. Overlooking the X factor
"All that touchy feely stuff will take care of itself if we hit our targets. If not, there will be hell to pay.”
As my mentor and CEO, Kelly Manthey, wrote in her March letter, “Never before in the history of the modern-day enterprise has culture been more critical to the success of a business.” Unfortunately, more often than not, executives either ignore culture completely or cast it off as a human resources problem. Neither is the right approach.
It’s hard to put your finger on it, but you know it when you see it — and you certainly know it when culture is missing or when it’s toxic. One of my favorite cultural nuances at Solstice is what I call the “random round of applause.” It goes like this: Someone in the office will perform remarkably for his or her team. Someone on that team will begin clapping and then the applause will go viral throughout the entire office. Some organizational leaders might look at this as disruptive behavior. For us, the organic, impromptu celebrations of success create camaraderie and a sense of belonging.
For those who struggle with the ambiguous, emotional challenges of organizational culture, I strongly recommend reading Harvard Business Review’s “The Culture Factor” for useful frameworks, tactics, and a common vocabulary.
4. Losing customer obsession
“Human-centered design will lead us to the promised land! Wait, that costs how much?”
As the leader of our customer experience practice, this sin saddens me deeply. And I see it time and again.
The story plays out like this: We begin an initiative and everyone waves the “human-centered design” flag. Those involved commit to letting the customer drive organizational direction and the related products and services. Once we get into deeper phases of development, the research insights — which describe unmet customer needs — get brushed aside in favor of delivering as many features as quickly and cheaply as possible. Eventually, we lose confidence in building the right things for the right people, and the whole effort unravels.
The impact? Poor customer experience, misdirected (or wasted) investment, and a loss of faith in a key tenet of transformation: The customer must be at the center of everything you do.
Digital transformation requires striking a balance between rapid execution and customer empathy. Sometimes you have to slow down to do the right thing.
5. Planning with narrow competitive aperture
“Which one of our five ancestral foes will beat us to market with an offering and take share?”
Have we learned nothing from Amazon? Surprisingly, many executives I speak with are looking at digital transformation only in the traditional competitive context.
When planning for transformation, leaders must widen their view on threats to their businesses. They must consider nontraditional and even non-organizational threats — such as the ever-changing landscape of laws and regulations — when deciding how to play bigger. In our financial services practice, we call this “The Big Squeeze.” Have you considered the fact that Starbucks is a bank and offers a branded credit card?
When you are trying to effect large-scale, rapid change, failing to look at your blind spots will undoubtedly create massive vulnerability.
6. Failing to communicate purpose
“Once we transform, we will reduce operating expenses by 15 percent. We will grow EBIT by 30 percent. We will crush competitor X and put them out of business! Are you guys on board?”
Most large enterprises optimize themselves to create shareholder value. Profitable growth is the name of the game.
As such, many executives speak to their employees in boardroom-level business speak. But guess what? The majority of the workforce doesn’t think in those terms (or even care to do so). The modern — and millennial-dominated — workforce is motivated by meaningful work and the ability to develop new skills. Therefore, executives have the tough task of connecting the dollars and cents with the difference they make in humanity.
Money is a tool to create prosperity, and a purpose statement must clearly define what that means for an organization.
7. Getting drunk on “quick wins” and being handcuffed to incremental thinking
“We’ll create some momentum by focusing on the low-hanging fruit.”
“Don’t use up all your resources on the easy stuff,” said Astro Teller, Captain of Moonshots at X, the moonshot factory (an Alphabet, Inc. R&D business). He sums it up nicely in his blog “Tackle The Monkey First.” By using a zany hypothetical about training a monkey to stand on a pedestal and recite Shakespeare, he nails the reasons for — and impact of — strategic shortsightedness.
Executives are incentivized to demonstrate progress quickly; are attracted to creating stabilizing, foundational forces; and love turning dependencies into excuses for evading tough, ambiguous problems.
To combat these tendencies, executives need to create the space for a dedicated portion of the workforce to be weird, be audacious, and fail forward. If they don’t, they’ll end up in a commodity-level battle for incremental, non-transformative change.