Partner & Managing Director, New York
Every company that has legacy infrastructure, processes or technology is navigating the transition to digital. Some are moving faster than others, either by strategy or necessity.
At one level, this is reminiscent of some of the other technology-driven transformations of the past, such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Sales Force Automation (SFA). However, this shift we are experiencing today is certainly more powerful and dramatic than any of these, and the stakes are much higher, as entire sectors are being transformed at a pace we have never seen before. In his 1970 classic, Future Shock, author Alvin Toffler described the massive implications of an acceleration in the rate of change. He predicted that its rapid and unrelenting pace would cause people to feel overwhelmed. His perspective was prescient, as the rate of change in 1970 feels glacial compared with today, and many, even most people are indeed feeling overwhelmed.
Many articles and books have been written about digital transformation, yet few include practical information on what the C-Suite can and should do tomorrow, next week, next month …you know, at ground level where our noses are against the grindstone. So, here are a few concrete thoughts, hardened by having participated in the tech transformations of the past, and informed by the pattern recognition gained by helping our analogue clients untangle the Gordian knot of digital transformation:
Michelangelo supposedly described the creation of the sculpture of David as chipping away the stone that didn’t look like him. My feeling about analogue companies undergoing digital transformation is similar. For them, deciding the 80 percent of what they could do, but will not do right now, is much of the battle. We have been called into several situations where a core problem is trying to do too much, too fast, with too little. All companies have constraints: human, capital, change tolerance -- and that recognition is vital to making productive progress in digital. It is tempting to dabble, to try a number of things, to experiment. In fact, some advisors push their clients this way. However, in our experience, this is a mistake. Especially since many analogue clients are faced with margin and cash contraction as they navigate this shift, the reasonable and appropriate ordering of initiatives is crucial. Nothing succeeds like success, and all of the conversation about building a digital culture is important. But our experience is that success builds momentum and confidence. On the other hand, doing too many things at once virtually ensures a high percentage of failure, which is demoralizing, and sows doubt and fear. That is both financially and culturally costly.
It is so tempting for analogue companies to focus on the sexier and more visible areas of digital, such as social media and mobile commerce as they transform their companies. These are important for sure, but they must be paid for. The reality is that this transition is expensive, and for most analogue companies there is significant margin and cash flow pressure. Instead, focus on areas that are margin and cash flow accretive now, such as procurement, manufacturing, customer service, employee self-service, and supply chain management. When companies do this, we regularly see cost reductions of not 5-10 percent, but 50-80 percent along with productivity gains measured in the range of 5-10 times. These are real, measurable, tangible contributions to the balance sheet and P&L. And, these productivity gains can fund the sexier stuff.
While the tools are different, the experience gained from having gone though and made the mistakes associated with previous technology transformations is very useful in navigating today’s digital transformation. New skills and capabilities are needed, but it turns out that wisdom is, too. Managers who have made the mistakes, who have over-taxed organizations and had to course correct, and who have managed large and complex programs are a great complement to the cutting edge technical skills present in developers and engineers. Both are made better by the other. Finding the right balance can be hard, the generational and cultural differences are real, but it turns out that a little grey hair can be handy in this rapidly changing world.
In the intro to his famous book, Toffler wrote that, “…future shock is no longer a distantly potential danger, but a real sickness from which increasingly large numbers already suffer.” It seems that many established and historically healthy analogue businesses are suffering today, as they struggle to adapt. Discernment, pacing, and a focus on generating ROI are some keys to success.
This article originally appeared on ChiefExecutive.net.