Author: Eugene Khazin, Principal and Co-founder, Prime TSR
Here are two words that have been completely misunderstood and misused in 2019: They are “Digital” and “Transformation.” You may also know these two words when put together as “Digital Transformation.”
What’s also interesting is that if you ask any Chief Digital Officer what their job is, they will tell you that it has almost nothing to do with their digital strategy. It’s all about transformation.
So, now Digital Transformation becomes Transformation Transformation, which I’m sure means “We mean business and want to disrupt everything.”
In all seriousness, I wanted to tackle a big myth about digital transformation in 2020 that any company pursuing a digital transformation must overhaul everything to compete. And in reality, that is far from the truth.
In fact, anyone pursuing a complete overhaul will find themselves on an island.
Myth #1: Digital Transformation is all about disruption
The truth: Digital doesn’t have to be disruptive to make an impact.
When GE announced its massive digital transformation, they had a big goal to “own the industrial internet.” They built a software platform for the industrial internet, called Predix, to lead the charge. They created a separate department called Deloitte Digital and employed thousands of people to run it.
There was only one problem. Nobody used the platform. Not even internally. There are plenty of stories of developers and product managers who said they were forced to use the platform, but never understood the benefits of it. So the developers and product managers prioritized their own features before building on this ambitious platform.
Their digital transformation failed in a big way. GE tried to force disruption when they had no real reason too.
The narrative “disrupt or die” is slowly dying down, but at the same time, it doesn’t mean companies have to stop disrupting. They just have to go about it in a much different way than they used too.
Companies have survived disruption before, but they don’t have to completely upend what they are doing to thrive. Best Buy is a great example of surviving and thriving. You would think Best Buy would be 100% dead in the water by now, right?
Think about it:
They checked off almost every “our retail company is doomed” checkbox.
But, instead, this happened:
Best Buy hired Hubert Joly, at the time the CEO of a major hospitality chain, to take the reins and save the company. He did exactly that. Joly cut prices to make Best Buy more competitive, slashed unnecessary costs while investing in customer-facing labor, sold off struggling international units, and built up the e-commerce business. The company’s stores, once viewed as a liability in the age of online retail and “showrooming,” became an asset. Customer service became Best Buy’s competitive advantage.
Best Buy made changes, but they didn’t go all-in on disruption. They found their core advantage and maximized it.
Myth #2: Digital Transformation is all about the big bang approach
Truth: It’s about iteration, not an overhaul.
Let’s talk about Domino’s for a second.
Domino’s didn’t make the world’s greatest pizza or “re-invent” pizza. But, if you look at their stock price over the last 5 years, you’ll see that they’re doing something right.
As their CEO once said, “we are an e-commerce company that happens to sell pizza,” and adjusted all of their technology initiatives to focus on increasing eCommerce sales.
So, how did they get it to work?
They have a test kitchen.
Reinvention for Domino’s wasn’t just a one-step process. Since unveiling its new pizza recipe, the company has released new sandwiches, kinds of pasta, chicken dishes, and breads.
Doyle says the company is constantly whipping up new products and improving tried-and-true ones in its test kitchen and relies on consumers for final approval. There are 15 booths, each outfitted with a slot for sliding slices to customers and gauging their grins and gags. Domino’s calls it the “sensory panel.”
Myth #3: Disruptive products are decided by leadership
Truth: Experimentation and prototyping new ideas to build support within the organization is the best path forward.
We interviewed two leading technology leaders and got their feedback on how projects and products are chosen within their organization:
“Any time you’re talking about a change that so significant that it’s a paradigm shift, it will be difficult to get that buy-in through explanations alone. Building a prototype or a demo – give them something to experience, that’s what gets the emotional buy-in; that’s how you give them a glimpse into what could be and those are the moments of excitement. Don’t build a powerpoint, build a prototype.” – Neil Goodrich, Chief Innovation Officer, M. Holland Company
“Failing fast is important, but it doesn’t have to be public. A safe place to ‘fail fast’ is digitizing your operations, because your learning curve happens inside the four walls, not out in front of your customers. And if you are building something customer-facing, start slow and adapt. Use agile methods and test to see what they like. Adapt quickly and iterate.” – Jim MacLennan, SVP & Chief Information Officer at IDEX Corporation
Companies that act like Best Buy and Domino’s are proving they can survive and thrive in 2020 without having to overhaul their business. Companies are investing in “test kitchens” similar to Domino’s, except they are trying and experimenting with new tech.
GE Digital faced a big problem because they were a separate business unit than GE, and they were given metrics for success but had not proved that what they were building was actually needed. This resulted in a platform that didn’t make the progress they wanted.
The best digital transformation strategy in 2020 is to create an approach that includes feedback from your customers and employees within the organization. You can’t force a digital transformation to be successful.
So, the next time you find yourself defining your digital strategy, don’t forget the three digital transformation myths and feel free to reach out to us to help you define and execute your strategy.