Author Archives: Greg Satell

About Greg Satell

Greg Satell is a popular speaker and consultant. His latest book, Cascades: How to Create a Movement That Drives Transformational Change, is available now. Follow his blog at Digital Tonto or on Twitter @Digital Tonto.

Big Companies Should Not Try to Act Like Startups

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Big Companies Should Not Try to Act Like Startups

GUEST POST from Greg Satell

In 2009, Jeffrey Immelt set out on a journey to transform his company, General Electric, into a 124 year old startup. Although it was one of the largest private organizations in the world, with 300,000 employees, he sought to become agile and nimble enough to compete with high-flying Silicon Valley firms.

It didn’t end well. In 2017, problems in the firm’s power division led to massive layoffs. Immelt was forced to step down as CEO and GE was kicked off the Dow after 110 years. The company, which was once famous for its sound management, saw its stock tank. Much like most startups, the effort had failed.

Somewhere along the line we got it into our heads that large firms can’t innovate and should strive to act like startups. The truth is that they are very different types of organizations and need to innovate differently. While large firms can’t move as fast as startups, they have other advantages. Rather than try to act like startups, they need to leverage what they have.

Driving Innovation At Scale

The aviation industry is dominated by big companies. With a typical airliner costing tens of millions of dollars, there’s not much room for rapid prototyping. It takes years to develop a new product and the industry, perhaps not surprisingly, moves slowly. Planes today look pretty much the same as ones made decades ago.

Looks, however, can be deceiving. To understand how the aviation industry innovates, consider the case of Boeing’s 787 Dreamliner. Although it may look like any other airplane, Boeing redesigned the materials within it. So a 787 is 20 percent lighter and 20 percent more efficient than similar models. That’s a significant achievement.

Developing advanced materials is not for the faint of heart. You can’t do it in a garage. You need deep scientific expertise, state-of-the-art facilities and the resources to work for years—and sometimes decades— to discover something useful. Only large enterprises can do that,

None of this means that startups don’t have a role to play. In fact one small company, Citrine Informatics, is applying artificial intelligence to materials discovery and revolutionizing the field. Still, to take on big projects that have the potential to make huge global impacts, you usually need a large enterprise.

Powering Startups

All too often, we see large enterprises and startups as opposite sides of the coin, with big companies representing the old guard and entrepreneurs representing the new wave, but that’s largely a myth. The truth is that innovation often works best when large firms and small firms are able to collaborate.

Scott Lenet, President of Touchdown Ventures, sees this first-hand every day. His company is somewhat unique in that, unlike most venture capital firms, it manages internal funds for large corporations. He’s found that large corporations are often seen as value added investors because of everything they bring to the table.

“For example,” he told me, “one of our corporate partners is Kellogg’s and they have enormous resources in technical expertise, distribution relationships and marketing acumen. The company has been in business for over 100 years and it’s learned quite a bit about the food business in that time. So that’s an enormous asset for a startup to draw on.”

He also points out that, while large firms tend to know how to do things well, they can’t match the entrepreneurial energy of someone striving to build their own business. “Startups thrive on new ideas,” Lenet says “and big firms know how to scale and improve those ideas. We’ve seen some of our investments really blossom based on that kind of partnership.”

Creating New Markets

Another role that large firms play is creating and scaling new markets. While small firms are often more agile, large companies have the clout and resources to scale and drive impact. That often also creates opportunities for entrepreneurs as well.

Consider the case of personal computers. By 1980, startups like Apple and Commodore had already been marketing personal computers for years, but it was mostly a cottage industry. When IBM launched the PC in 1981, however, the market exploded. Businesses could now buy a computer from a supplier that they knew and trusted.

It also created fantastic opportunities for companies like Microsoft, Intel and a whole range of entrepreneurs who flocked to create software and auxiliary devices for PCs. Later startups like Compaq and Dell created PC clones that were compatible with IBM products. The world was never the same after that.

Today, large enterprises like IBM, Google and Amazon dominate the market for artificial intelligence, but once again they are also creating fantastic opportunities for entrepreneurs. By accessing the tools that the tech giants have created through APIs, small firms can create amazing applications for their customers.

Innovation Needs Exploration

Clearly, large firms have significant advantages when it comes to innovation. They have resources, customer relationships and deep expertise to not only invent new things, but to scale businesses and bring products to market. Still, many fail to innovate effectively, which is why the average lifespan of companies on the S&P 500 continues to decline.

There’s no reason why that has to be true. The problem is that most large organizations spend so much time and effort fine-tuning their operations to meet earnings targets that they fail to look beyond their present business model. That’s not due to any inherent lack of capability, it’s due to a lack of imagination.

Make no mistake, if you don’t explore, you won’t discover. If you don’t discover you won’t invent and if you don’t invent you will be disrupted. So while you need to focus on the business at hand, you also need to leave some resources un-optimized so that you can identify and develop the next great opportunity.

A good rule of thumb to follow is 70-20-10. Focus 70% of your resources on developing your present business, 20% of your resources on opportunities adjacent to your current business, such as new markets and technologies and 10% on developing things that are completely new. That’s how you innovate for the long term.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Pixabay

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Driving Change is Not Enough

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You Also Have To Survive Victory

Driving Change is Not Enough

GUEST POST from Greg Satell

In early 2004, Viacom announced it would spin off Blockbuster Video, leaving CEO John Antioco master of his own fate. He moved quickly to meet the threat posed by Netflix head on, launching Blockbuster Online in 2004 and, after successfully testing the concept in a few markets, ending late fees in early 2005.

Still, not satisfied with playing catch-up, Antioco searched for model that would return his company to dominance. He found it in 2006 with the Total Access program. Within a few weeks of announcing the promotion, Blockbuster was winning the majority of new subscribers, outstripping Netflix for the first time.

It was a textbook case of sound strategy and execution meeting a disruptive threat, but it would not end well. In 2010 Blockbuster would declare bankruptcy and become a cautionary tale. We tend to think that driving change is merely a matter of coming up with a clever plan and executing well. Yet that isn’t enough. You also need learn how to survive victory.

Defying Critics And Beating The Odds

John Antioco was the quintessential American success story. Starting from humble origins as a management trainee at 7-Eleven, he rose to become a senior vice president at the company. He then moved on to run the struggling Circle K convenience store chain, which he turned around in just three years before moving on to Taco Bell and working the same magic there.

So when he joined Blockbuster as CEO in 1997, he was ideally suited to the job. Early in his tenure, he came up with a program to share rental revenues with the movie studios rather than buying the videos directly.The strategy improved the firm’s cash position and its access of high demand movies, while also allowing it to increase its marketing budget. It was a stroke of genius.

“The experienced video executives were skeptical,” Antioco would later tell me. “In fact, they thought that the revenue-sharing agreement would kill the company. But throughout my career, I had learned that whenever you set out to do anything big, some people aren’t going to like it. I’d been successful by defying the status quo at important junctures and that’s what I thought had to be done in this case.”

So Antioco approached the Netflix problem in the same way. He assembled a team of talented executives, came up with a strategy and worked to execute it flawlessly. Yet although his efforts were initially successful, there was a flaw in his plan that he didn’t see at the time and it would lead to Blockbuster’s downfall.

Failing To Align Stakeholders

Not everybody was thrilled with the moves Antioco made. Franchisees, many of whom had their life savings invested in their business, were suspicious of Blockbuster Online. They only owned 20% of the stores, but could make their displeasure known. The moves were also expensive, costing roughly $400 million to implement, and investors balked.

So while Blockbuster was making progress against the Netflix threat, as earnings turned to losses, its stock took a beating. The low price attracted corporate raider Carl Icahn, whose heavy-handed style made managing the company difficult. Things came to a head in late 2006 when Icahn demanded that Antioco accept only half of the bonus he was owed.

“I was at a point, both personally and financially, that I had little desire to fight it out anymore,” Antioco told me. He negotiated his exit early the next year and left the company in July of 2007. His successor, Jim Keyes, was determined to reverse Antioco’s strategy, cut investment in the subscription model, reinstated late fees and shifted the focus back to the retail stores.

When Blockbuster declared bankruptcy in 2010, the event was portrayed as corporate America’s inability to navigate digital disruption. Yet, as we have seen, nothing could be further from the truth. The management team came up with a viable strategy, executed it well and proved they could compete, yet still were unable to survive that victory.

Building Shared Purpose And Shared Consciousness

When General Stanley McChrystal took over command of special forces in Iraq, the situation he encountered was surprisingly similar to that of Antioco and Blockbuster. A well-led, well-resourced and highly efficient organization was faced with a disruptive challenge by a smaller, less powerful, but incredibly disruptive adversary.

Yet while Antico saw the problem as one of strategy and tactics, McChrystal saw it as one of one of organizational coherence. So he embarked on a program to improve the links both within his command and also to outside stakeholders, such as partner agencies, law enforcement and embassy personnel, to build “shared purpose and shared consciousness.”

“We began to make progress when we started looking at these relationships as just that: relationships — parts of a network, not cogs in a machine or outputs and inputs,” McChrystal would later write in his book, Team of Teams. Within a few years, the terrorists were on the run.

The difference in outcomes is striking. Antioco, who had built his career on defying the critics, largely ignored their concerns and pressed on with his strategy. McChrystal, on the other hand, understood that if he couldn’t get key stakeholders on board, the strategy wouldn’t matter. He worked on building relationships not to overpower, but to attract others to his cause. There were still critics, but they were vastly outnumbered.

You Need A Plan To Survive Victory From The Start

In my book, Cascades, I cover a wide range of transformational efforts, from revolutionary political movements to corporate turnarounds. In every case, the movement for change inspired others to move against it. As Saul Alinsky pointed out decades ago, every revolution provokes a counterrevolution.

I saw this first hand in Ukraine’s Orange Revolution, which I personally took part in. Five years after we protested in the bitter cold to overturn a falsified election, we saw the target of our ire, Viktor Yanukovych, win the presidency in an election that outside observers judged to be legitimate. Later, similar events played out in the aftermath of Egypt’s Arab Spring.

What makes the difference is not a particular strategy or persona, but whether an organization can align based on shared values and purpose. It wasn’t that Blockbuster franchisees were worried that Antioco’s plan wouldn’t succeed, they were terrified that it would and they would be left behind. Investors, for their part, were more focused on earnings than Antioco’s vision.

Yet shared values are what enables a transformation to succeed beyond a few initial victories. As Irving Wladawsky-Berger, a key player in IBM’s historic turnaround in the 90s told me, “Because the transformation was about values first and technology second, we were able to continue to embrace those values as the technology and marketplace continued to evolve.”

And that’s what so often makes the difference between ultimate success and failure. Those that see driving change as merely a series of benchmarks often find their efforts thwarted. Those that build a plan to survive victory based on the forging of shared values, are much more likely to prevail. Transformation is always a journey, never a destination.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Wikimedia Commons

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Build Trust Before Beginning a Transformation

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Build Trust Before Beginning a Transformation

GUEST POST from Greg Satell

A few years ago I was invited by Accenture Strategy, along with other thought leaders such as Bruce Weinstein and Andrew Winston, to discuss its research on trust and competitive agility. In a study of 7,000 companies the firm found that trust among a diverse ecosystem of stakeholders is increasingly becoming a competitive advantage.

One of the most interesting aspects of the discussion was how crucial trust is for driving transformation and change. We tend to think of trust as static, but Accenture’s research, as well as that of the participants, made it clear that trust is especially important when you need to drive an organization to do something different.

All too often, transformation is seen as a simple matter of strategy and tactics, but it’s far more than that. Nobody can really drive change alone. You need buy-in from a variety of stakeholders, such as customers, employees, suppliers, analysts and investors to make it work. So before you set out to transform your organization, you first need to build trust.

Purpose, Values And Constraints

Every change effort starts out with a grievance. Sales are down, customers are unhappy, regulation restricts a once profitable activity or something else. That’s what drives the need to change, but it does little to provide the will to change. In researching my book Cascades, I found that every successful change effort starts by transforming an initial grievance into an affirmative “vision of tomorrow.” To drive a true transformation, people need to believe in it.

For example, when Paul O’Neill took over as CEO at Alcoa in 1987, the company was in dire straits. So analysts were more than surprised when he declared that his first priority at the company would be safety. It was an odd vision for a struggling company, but O’Neill understood that improving safety would also improve operational excellence. The company hit record profits a year later.

Or consider Lou Gerstner’s tenure at IBM. When he arrived, the once high-flying firm was near bankruptcy and many thought it should be broken up. Yet Gerstner saw that by shifting its focus from its own “stack of proprietary products” to its customers’ “stack of business processes,” the company could have a bright future. The result was one of the greatest turnarounds in history.

Notice how each of these visions also included important constraints. When safety is the first priority, managers can’t cut corners. When customers’ “stack of business processes” is the company’s focus, salespeople can’t wring every last dollar out of each deal. Yet those constraints are crucial in building credibility with key stakeholders, such as unions and customers.

Small Groups, Loosely Connected

Anybody who has ever been married or had kids knows how hard it can be to convince even one person about a significant decision. So it is somewhat puzzling that business leaders so often think they can convince thousands through mass communication campaigns. The truth is that change happens when people convince each other.

That’s why every change efforts depends on small groups, loosely connected, but united by a shared purpose. Small groups engender trust, loose connections provide reach and a shared purpose gives a change effort a raison d’être. You need all three to successfully drive a transformation.

Consider the case of Wyeth Pharmaceuticals, which in 2007 saw sales for one of its top drugs fall by 70% due to the launch of a generic version. In order to compete more effectively, the company’s leadership embarked on an ambitious effort to instill lean manufacturing practices across 25 sites employing 17,000 people.

Yet rather than try to transform the whole company all at once, it chose one keystone change, involving factory changeovers, at one facility. It had limited impact, but with the success of that one initiative at one facility, it then moved on to others, implementing the transformation in phases, speeding up as the process gained momentum.

The result was a 25% reduction in costs, an improvement in quality and a more motivated workforce. It’s tough to imagine how that could have been achieved if the management had simply decided to cut salaries instead.

Training To Empower Transformation

When Barry Libenson first arrived at Experian as Global CIO in 2015, he spent the first few months talking to customers and everywhere he went they were asking for the same thing: access to real-time data. That was much easier said than done, because it meant that he would have to shift from a traditional data infrastructure to the cloud, which would entail far more than just implementing new technologies.

“The organizational changes were pretty enormous,” Libenson told me. “For example, agile development requires far more collaboration than traditional waterfall development, so we needed to physically reconfigure how people were organized. We also needed different skill sets in different places so that required more changes and so on.”

To spur these changes, the company identified high potential employees that it thought could help drive change. It also brought in outside partners to train them in agile development, so that they could train and coach others. Those employees then became centers of excellence and helped drive change even further throughout the organization.

“Building trust was crucial to making it all work,” Vijay Mehta, Chief Innovation Officer at the credit bureau stressed to me. “When you are trying to build an innovative, fail-fast culture, people need to trust that they won’t be penalized for being ambitious and failing. So that had to come from the top and be constantly pushed all the way down to make it all work.”

Transformation Is Always A Journey, Never A Destination

All too often, we see change through the lens of a specific objective. Paul O’Neill needed to return his company to operational excellence. Wyeth needed to cut costs to compete with generics. To provide its customers with the access to real-time data, Experian needed to shift its decades-old infrastructure to the cloud.

Yet change is never as easy as it first would seem, because the status quo has inertia on its side, which can be a powerful force in any enterprise. In fact, research by McKinsey has found that only 26% of transformational efforts succeed. The reason is that change is often narrowly construed as a series of procedures, a cost cutting target or a technology implementation project.

Yet Alcoa, IBM, Wyeth and Experian succeeded where most fail because they saw driving change as more than just a series of objectives, but as a shift in values, skills and capabilities. That’s why they started not with a detailed plan, but with building trust, because leaders can’t implement change, they can only inspire and empower it.

The truth is that transformation is always a journey, never a destination. O’Neil’s focus on safety unlocked a passion for operational excellence. Gerstner’s focus on IBM’s customers led it to a highly profitable service business based on deep partnerships. Wyeth’s lean manufacturing program empowered its employees to create value for the company and its customers. Experian’s shift to the cloud was just a prelude to an ambitious foray into artificial intelligence.

None of this would be possible without trust, because trust is open ended. It is, in its essence, a social contract that demands that employees, customers and other stakeholders are not treated as merely means to an end, but ends in themselves.

— Article courtesy of the Digital Tonto blog and previously appeared on Inc.com
— Image credit: Unsplash

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Four Ways To Empower Change In Your Organization

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Four Ways To Empower Change In Your Organization

GUEST POST from Greg Satell

In 1957, Ken Olsen founded Digital Equipment Corporation (DEC) with his MIT classmate, Harlan Anderson, and by the 1960s, the company had pioneered the minicomputer revolution. Much cheaper than IBM mainframes, but still powerful enough to be useful, these machines helped make DEC one of the world’s leading technology companies.

Hailed as a visionary, Olson was named “America’s most successful entrepreneur” by Fortune magazine in 1986. Yet as AnnaLee Saxenian explained in Regional Advantage, by that time the minicomputer industry was already being disrupted by PC’s and DEC would never recover. It was acquired by Compaq in 1998.

The truth is that everybody gets disrupted eventually, even a visionary entrepreneur like Olsen. What makes the difference is whether you are able to chart a new path. That takes more than merely being smart and ambitious, you need to empower change from within. It’s never easy, but there are some basic principles that can help you reinvent your organization.

1.Identify A Keystone Change

Much like DEC in the 80s, by the 1990s IBM had hit hard times. Squeezed between low cost PC’s made by firms like Compaq, Intel based servers and a software industry dominated by Microsoft, IBM was near bankruptcy. Many observers, both inside and outside the company, thought that it should be broken up.

Yet its incoming CEO, Lou Gerstner, saw things differently. As a former customer, he knew how important IBM was to running critical business processes of large organizations. As he talked to other customers, he found they felt the same way. In fact, they were terrified of IBM being broken up. If he could refocus the company on fulfilling that need, he could save it.

That was easier said than done though. IBM had a hardwired culture of “if it was a good idea, we would have already done it” that had been ingrained over decades. So he needed to identify a keystone change — one that would be clear and tangible, involve multiple stakeholders and pave the way for future change — to make a transformation possible.

So Gerstner built a new business model aimed at the customers’ “stack of business processes” rather than its own “stack of proprietary technologies.” That led to a successful new service business, an e-business initiative and a new line of Linux based servers. Within a few years, he had achieved one of the greatest turnarounds in corporate history.

2. Empower Change Agents

Probably the greatest misconception about change is that a leader can force it through. Even as skilled an executive like Lou Gerstner needed others to actually implement the changes at IBM, his role was mostly to inspire belief that it could be done. The truth is that you can’t force change. You need need to attract rather than try to overpower.

As Zeynep Ton explains in The Good Jobs Strategy, when the recession hit in 2008, Mercadona, Spain’s leading discount retailer, needed to cut costs. But rather than cutting wages or reducing staff, they asked their employees to contribute ideas. The result was that the company managed to reduce prices by 10% and increased their market share from 15% to 20% between 2008 and 2012

Or consider England’s National Health Service, a truly mammoth organization of with 1.3 million employees serving 54 million citizens. In 2013 it introduced Change Day, on which employees pledge to do one thing to improve the life of patients. In that first year there were 189,000 pledges for action and that figure rose to 800,000 in the second year.

Many of the initiatives were small, but multiplied by hundreds of thousands, it has created a significant impact. As Helen Bevan, Chief Transformation Officer for the NHS Horizons team put it to me, “Programmatic methods have their place, but if you want to create change on a truly massive scale, a top-down approach on its own doesn’t work so well. You need to get people invested in change. They have to own it.”

3. Network Your Movement

When Rick Warren first arrived in Orange County, California in 1979, he saw the opportunity to build a new kind of church. He had spent three months going door-to-door and found that while many residents identified themselves as christians, they found church services boring and irrelevant. So he began to cater his services and programs to meet their needs.

Today, his Saddleback Church is one of the largest congregations in the world, with 20,000 people attending sermons every week. Yet looks can be deceiving. What makes Warren such a powerful force isn’t those massive weekend services, but the thousands of small prayer groups that that meet during the week.

We tend to think of effective leaders as solitary figures, able to compel action through sheer force of will, but actually they are shrewd managers of complex ecosystems and that’s key to how they are able to empower transformational change. Martin Luther King Jr., for example, didn’t lead the charge for civil rights alone, but as one of the Big Six. In much the same way, Nelson Mandela had to build consensus among many competing interests within the African National Congress.

Today IBM, having had its core business disrupted by the cloud, is taking a network approach to quantum computing. Rather than having its scientists work alone in secret labs, it has set up a Q Network of leading companies, startups, academic institutions, and national research labs to advance the technology.

4. Survive Victory

The most important thing to remember is that the battle against disruption never ends. All too often, an initial victory soon reverses itself. Many turnaround efforts see some initial improvement as excitement about a new direction motivates people to perform better, then dissipates as harsh realities take hold.

The case of Ken Olsen and DEC provides some insight into why this happens. While he was hailed as a visionary leader, the minicomputer revolution he spawned was rooted in a particular technology. When that technology ceased to be compelling, as always happens eventually, his company could no longer compete effectively.

Now consider what Irving Wladawsky-Berger, one of Gerster’s key lieutenants, told me about IBM’s historic turnaround. “The Gerstner revolution wasn’t about technology or strategy, it was about transforming our values and our culture to be in greater harmony with the market… Because the transformation was about values first and technology second, we were able to continue to embrace those values as the technology and marketplace continued to evolve.”

That’s why, as I explain in my book Cascades, it’s critical that you make a plan to survive victory and that plan must be rooted in fundamental values rather than in a particular strategy or set of tactics. To overcome disruption for the long-term, you need to not just transform the organization but, more importantly, the fundamental beliefs that drive it.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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Hire for Diversity and Empathy to Drive Innovation

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Hire for Diversity and Empathy to Drive Innovation

GUEST POST from Greg Satell

One of the questions I get asked quite often, both at conferences and when coaching executives, is what type of personality is best suited for innovation so that they can optimize their hiring. Are technical people better than non-technical people? Introverts better than extroverts? Is it better to hire foxes or hedgehogs?

The first thing I tell them is that there has been no definitive research that has found that any specific personality type contributes to innovation. In fact, in my research I have found that there is not even a particular kind of company. If you look at IBM, Google and Amazon, for example, you’ll find that they innovate very differently.

The second thing I point out is that every business needs something different. For example, Steve Jobs once noted that since Apple had always built integrated products, it never learned how to partner as effectively as Microsoft and he wished it would have. So the best approach to hiring for innovation is to seek out those who can best add to the culture you already have.

Foxes vs. Hedgehogs

In Good to Great, author Jim Collins invokes Isaiah Berlin’s famous essay about foxes and hedgehogs to make a point about management. “The fox,” Berlin wrote, “knows many things, but the hedgehog knows one big thing.” Collins then devotes an entire chapter to explaining why hedgehogs perform better than foxes.

Yet as Phil Rosenzweig points out in The Halo Effect, this is a highly questionable conclusion. Even if it were true that the most successful companies focus on one core skill or one core business, that doesn’t mean that focusing on “one big thing” will make you more successful. What it probably means is that by betting on just one thing you increase your chances of both success and failure.

Think about what would have happened it Apple had said, “we’re going to focus just on computers” or if Amazon had focused on just books. There is also evidence, most notably from Philip Tetlock, that foxes outperform hedgehogs on certain tasks, like making judgments about future events.

So the best strategy would probably be to hire a fox if you’re a hedgehog and to hire a hedgehog if you’re a fox. In other words, If you like to drill down and focus on just one thing, make sure you have people around that can help you integrate with other skills and perspectives. If you like to dabble around, make sure you have people who can drill down.

Introverts vs Extroverts

We tend to see leaders as brash and outgoing, but my colleague at Inc, Jessica Stillman points out that introverts can also make great leaders. They tend to be better listeners, are often more focused and are better prepared than social butterflies are. Those are great qualities to look for when adding someone to add to your team.

Still, you wouldn’t want to have an entire company made up of introverts and, in Social Physics, MIT’s Sandy Pentland explains why. Perhaps more than anything else, innovation needs combination. So it’s important to have people who can help you connect to other teams, both internally and externally, bring in new ideas and help take you in new directions.

Consider Amazon, a company that is not only incredibly successful but also highly technically sophisticated. You might expect that it hires a lot of introverted engineers and I’m sure that’s true. Yet the skill it is most focused on is writing, because it understands that to create a successful product, you need to get a lot of diverse people to work together effectively.

So much like with foxes and hedgehogs, if you’re an introvert you should make sure that you have extroverts that can help you connect and if you are an extrovert, make sure you have people who can focus and listen.

Technical vs. Non-Technical People

By all accounts, Steve Jobs was never more than a mediocre engineer, but was clearly a legendary marketer. Nevertheless, he felt strongly that technical people should be in charge. As he once told his biographer, Walter Isaacson, in an interview:

“I have my own theory about why the decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The product starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company.”

Yet the story is not nearly as clear cut as Jobs makes it out to be. When IBM hit hard times it was Lou Gerstner, who spent his formative professional years as a management consultant, that turned it around. Steve Ballmer clearly made missteps as CEO of Microsoft, particularly in mobile, but also made the early investments in cloud technology led to Microsoft’s comeback.

So much like with foxes vs. hedgehogs and introverts vs. extroverts, the choice between technical and non-technical people is a false one. Far more important is how you build a culture in which people of varied skills and perspective can work closely together with a shared sense of purpose.

Today, as we enter a new era of innovation, organizations will need a far more diverse set of skills than ever before and building a collaborative culture will be key to success.

Collaboration Is The New Competitive Advantage

Over the past few decades, the digital revolution has shaped much of our thinking about how we advance a business. Digital technology required a relatively narrow set of skills, so hiring people adept at those skills was a high priority. Yet now, the digital era is ending and we need to rethink old assumptions.

Over the next decade, new computing architectures like quantum and neuromorphic computing will rise to the fore. Other fields, such as genomics and materials science are entering transformative phases. Rather than living in a virtual world, we’ll be using bits to drive atoms in the physical world.

That will change how we need to innovate. As Angel Diaz of IBM told me a few years back, “…we need more than just clever code. We need computer scientists working with cancer scientists, with climate scientists and with experts in many other fields to tackle grand challenges and make large impacts on the world.”

That’s why today collaboration is becoming a real competitive advantage and we need to focus far less on specific skills and “types” and far more on getting people with diverse skills, backgrounds and perspectives to work together effectively.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Unsplash

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We Change the World with Ecosystems Not Inventions

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We Change the World with Ecosystems Not Inventions

GUEST POST from Greg Satell

Imagine yourself as the CEO of a Dow component company in 1919. You are fully aware of the technological forces that would shape much of the 20th century, electricity and internal combustion. You may have even be an early adopter of these technologies. Still, everything seems like business as usual.

What you don’t see, however, is that these inventions are merely the start. Secondary technologies, such as home appliances, radio, highways and shopping malls, would reshape the economy in ways that no one could have predicted. Your company has a roughly 50% chance of remaining on the Dow a decade later.

We are at a similar point today. New inventions, such as quantum computing, neuromorphic chips, synthetic biology and advancements in materials science already exist. It is not those inventions, however, but the ecosystems they spawn that will shape the decades to come. We’re all going to have to learn how to compete in a new era of innovation.

A 50-Year Boom In Productivity

By 1919, electricity was already a 40-year old technology. In 1882, just three years after he had almost literally shocked the world with his revolutionary electric light bulb, Thomas Edison opened his Pearl Street Station, the first commercial electrical distribution plant in the United States. By 1884 it was already servicing over 500 homes.

Yet although electricity and electric lighting were already widespread in 1919, they didn’t have a measurable effect on productivity and a paper by the economist Paul David helps explain why. It took time for manufacturers to adapt their factories to electricity and learn to design workflow to leverage the flexibility that the new technology offered. It was the improved workflow, more than the technology itself, that drove productivity forward.

Automobiles saw a similar evolution. It took time for infrastructure, such as roads and gas stations, to be built. Improved logistics reshaped supply chains and factories moved from cities in the north — close to customers — to small towns in the south, where labor and land were cheaper. That improved the economics of manufacturing further.

Yet all of that was just prelude to the massive changes that would come. Electricity spawned secondary innovations, such as household appliances and radios. Improved logistics reshaped the retail industry, shifting it from corner stores to supermarkets and shopping malls. As Robert Gordon explains in The Rise and Fall of American Growth, these changes resulted in a 50-year boom in productivity between 1920 and 1970.

The Digital Revolution

In 1984, Steve Jobs and Apple launched the Macintosh, which heralded a new era of computing. Based on technology developed for the Xerox Alto in the early 1970s, with a bitmapped screen, a graphical user interface and a mouse, it made computing far more accessible to regular consumers.

Before long, personal computers were everywhere. Kids would use them to write term papers and play video games. Lotus 1-2-3 spreadsheet software became a staple for small businesses and entrepreneurs. Desktop publishing helped democratize the flow of information. The computer age had begun in earnest.

Yet much like electricity and internal combustion earlier in the century, the effect on productivity was negligible, causing the Nobel Prize winning economist Robert Solow to quip, “You can see the computer age everywhere but in the productivity statistics.” In fact, it wouldn’t be till the late 90s that we saw a measurable impact from computers.

Once again, it wasn’t any particular invention that made the difference, but an ecosystem that built up over years. The Internet paved the way for open-source software. Hordes of application developers created industry specific tools to automate almost every imaginable business process. Computers converged with phones to create the mobile era.

The 30 Years Rule

Look back at the two major eras of technology in the 20th century and a consistent theme begins to emerge. An initial discovery of a new phenomenon, such as electricity and internal combustion, is eventually used to create a new invention, like the light bulb or the automobile. This creates some excitement, and builds the fortunes of a few entrepreneurs, but has little impact on society as a whole.

Yet slowly, an ecosystem begins to emerge. Roads and gas stations are built. Household appliances and personal computers are invented. Secondary inventions, such as shopping malls, home appliances, the Internet and application software help create new business models. Those business models create new value and drive productivity.

The truth is that innovation is never a single event, but a process of discovery, engineering and transformation. As a general rule of thumb, it takes about 30 years for all of this to take place, because thousands, if not millions of people need to change their behavior, coordinate their activity and start new businesses.

That’s why the future will always surprise us. It is not any one great event that tips the scales, but some hardly noticeable connection that completes the network. Network scientists call this type of thing an ‘instantaneous phase transition’ and there’s really no way to predict exactly when it will happen, but if you learn to look for telltale signs, you can see one coming.

A New Era Of Innovation

Today, we appear to be in a very similar situation to what those executives faced in 1919. We have decoded the human genome. Artificial intelligence has become a reality that everyone, for the most part, accepts. New computing architectures, such as quantum computers and neuromorphic chips, are in late stages of development by a variety of companies.

Yet once again, the impact has been negligible and it’s not hard to see why. While these inventions, in some cases at least, are relatively mature, they have yet to create the ecosystems that can drive a true transformation. Today, however, we can clearly see those ecosystems being created.

In fact, in artificial intelligence we can already see a fairly well developed ecosystem emerging already. In synthetic biology and genomics we can begin to see one as well, although it is still nascent. IBM has created a Q Network of major companies, research labs and startups to support quantum computing.

Here’s what’s important to know: We can’t predict exactly when the system will tip, but it’s a good bet it will happen in the next decade. It is also likely that the impact will be equal to or greater than the 50 year boom that began in the 1920s. Finally, it won’t be driven by any particular invention, but by ecosystems. You need to start figuring out how you will connect.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Pixabay

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Four Change Empowerment Myths

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Four Change Empowerment Myths

GUEST POST from Greg Satell

We live in a transformational age. Powerful technologies like the cloud and artificial intelligence are quickly shifting what it means to compete. Social movements like #MeToo and #BlackLivesMatter are exposing decades of misdeeds and rewriting norms. The stresses of modern life are creating new expectations about the relationship between work and home.

Every senior manager and entrepreneur I talk to understands the need to transform their enterprise, yet most are unsure of how to go about it. They ordinarily don’t teach transformation in business school and most management books minimize the challenge by reducing it to silly platitudes like “adapt or die.”

The truth is that change is hard because the status quo always has inertia on its side. Before we can drive a true transformation, we need to unlearn much of what we thought we knew. Change will not happen just because we want it to, nor can it be willed into existence. To make change happen, we first need to overcome the myths that tend to undermine it.

Myth #1: You Have To Start With A Bang

Traditionally, managers launching a new initiative have aimed to start big. They work to gain approval for a sizable budget as a sign of institutional commitment. They recruit high-profile executives, arrange a big “kick-off” meeting and look to move fast, gain scale and generate some quick wins. All of this is designed to create a sense of urgency and inevitability.

That works well for a conventional initiative, but for something that’s truly transformational, it’s a sure path to failure. Starting with a big bang will often provoke fear and resistance among those who don’t see the need for change. As I explain in my book, Cascades, real change always starts with small groups, loosely connected, united by a shared purpose.

That’s why it’s best to start off with a keystone change that represents a concrete and tangible goal, involves multiple stakeholders and paves the way for future change. That’s how you build credibility and momentum. While the impact of that early keystone change might be limited, a small, but successful, initiative can show what’s possible.

For example, when the global data giant Experian sought to transform itself into a cloud-based enterprise, it started with internal API’s that had limited effect on its business. Yet those early achievements spurred on a full digital transformation. In much the same way, when Wyeth Pharmaceuticals began its shift to lean manufacturing, it started with a single process at a single plant. That helped give birth to a 25% reduction of costs across the board.

Myth #2: You Need A Charismatic Leader And A Catchy Slogan

When people think about truly transformational change, a charismatic leader usually comes to mind. In the political sphere, we think of people like Mahatma Gandhi, Martin Luther King Jr. and Nelson Mandela. On the corporate side, legendary CEOs like Lou Gerstner at IBM and Steve Jobs at Apple pulled off dramatic turnarounds and propelled their companies back to prosperity.

Yet many successful transformations don’t have a charismatic leader. Political movements like Pora in Ukraine and Otpor and Serbia didn’t have clear leadership out front. The notably dry Paul O’Neill pulled of a turnaround at Alcoa that was every bit as impressive as the ones at IBM and Apple. And let’s face it, it wasn’t Bill Gates’s Hollywood smile that made Microsoft the most powerful company of its time.

The truth, as General Stanley McChrystal makes clear in his new book, Leaders: Myth and Reality, is that leadership is not so much about great speeches or snappy slogans or even how gracefully someone takes the stage, but how effectively a leader manages a complex ecosystem of relationships and builds a connection with followers.

And even when we look at charismatic leaders a little more closely, we see that it is what they did off stage that made the difference. Gandhi forged alliances between Hindus and Muslims, upper castes and untouchables as well as other facets of Indian society. Mandela did something similar in South Africa. Martin Luther King Jr. was not a solitary figure, but just one of the Big Six of civil rights.

That’s why McChrystal, whom former Defense Secretary Bob Gates called, “perhaps the finest warrior and leader of men in combat I had ever met,” advises that leaders need to be “empathetic crafters of culture.” A leader’s role is not merely to plan and direct action, but to inspire and empower belief.

Myth #3: You Need To Piece Together A Coalition

While managing stakeholders is critical, all too often it devolves into a game theory exercise in which a strategically minded leader horse trades among competing interests until he or she achieves a 51% consensus. That may be enough to push a particular program through, but any success is bound to be short-lived.

The truth is that you can’t transform fundamental behaviors without transforming fundamental beliefs and to do that you need to forge shared values and a shared consciousness. It’s very hard to get people to do what you want if they don’t already want what you want. On the other hand, if everybody shares basic values and overall objectives, it’s much easier to get everybody moving in the same direction.

For example, the LGBT movement foundered for decades by trying to get society to accept their differences. However, when it changed tack and started focusing on common values, such as the right to live in committed, loving relationships and to raise happy, stable families, public opinion changed in record time. The differences just didn’t seem that important any more.

In a similar vein, when Paul O’Neill took over Alcoa in 1987, the company was struggling. So analysts were puzzled that when asked about his strategy he said that “I intend to make Alcoa the safest company in America.” Yet what O’Neill understood was that safety goes part and parcel with operational excellence. By focusing on safety, it was much easier to get the rank and file on board and, when results improved, other stakeholders got on board too.

Myth #4: You Will End With The Vision You Started With

When Nelson Mandela first joined the struggle to end Apartheid, he was a staunch African nationalist. “I was angry at the white man, not at racism,” he would later write. “While I was not prepared to hurl the white man into the sea, I would have been perfectly happy if he climbed aboard his steamships and left the continent of his own volition.”

Yet Mandela would change those views over time and today is remembered and revered as a global citizen. In fact, it was the constraints imposed by the broad-based coalition he forged that helped him to develop empathy, even for his oppressors, and led him to govern wisely once he was in power.

In much the same way, Lou Gerstner could not have predicted that his tenure as CEO at IBM would be remembered for its embrace of the Internet and open software. Yet it was his commitment to his customers that led him there and brought his company back from the brink of bankruptcy to a new era of of prosperity.

And that is probably the most important thing we need to understand change. In order to make a true impact on the world, we first need to change ourselves. Every successful journey begins not with answers, but with questions. You have to learn how to walk the earth and learn things along the way. You know you’ve failed only when you end up where you started.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Pixabay

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We Need To Stop Glorifying Failure

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Here’s What To Do Instead

We Need To Stop Glorifying Failure

GUEST POST from Greg Satell

Over 50% of startups fail (and that number goes up to 75% for venture backed startups). The same is true of about three quarters of corporate transformations, which is probably why the average lifespan on the S&P 500 continues to shrink. These statistics tell a humbling story: few significant endeavors ever actually succeed.

So it’s probably not surprising that we’ve come to glorify failure. We are urged to “fail fast” and are cheered on when we do. Failure, after all, is hard evidence that you’ve tried something difficult and paid the price. Yet failure, as anyone who actually experienced it knows well, is a horrible, painful thing.

As I explain in Cascades, great transformations are achieved not by glorifying failure, but when we learn from mistakes and begin to do things differently. That’s how great enterprises are transformed, industries are disrupted and then remade a new and seemingly all powerful tyrants are overthrown. Failure is something we should never accept, but rather overcome.

Ask The Hard Questions

Go to just about any innovation conference and you will find some pundit on the stage telling the story of some corporate giant, usually Blockbuster, Kodak or Xerox, that stumbled and failed. It is then explained that these firms were run by silly, foolish people who simply didn’t want to see the signs of disruption around them.

These stories are almost never true and, in fact, should be seen as ridiculous on their face. It takes no small amount of intelligence, drive and ambition to run a significant enterprise so to suggest that executives managing highly successful businesses were utter dopes beggars belief. The truth is that smart, hard working people fail all the time.

Once you realize that it forces you to ask some hard questions. Why did these smart, successful people fail? Why weren’t the dangers lurking more obvious? What hidden forces were working against them? Why did they think that they actions they undertook, after no small amount of deliberation, were the best of the available options?

Consider the case of Mahatma Gandhi and his Himalayan miscalculation. In 1919, he organized a series of demonstrations to protest against unjust laws passed by the British Raj. These were successful at first, but soon got out of hand and eventually led to the massacre at Amritsar, in which British soldiers left hundreds dead and more than a thousand wounded.

Most people would have simply concluded that the British were far too cruel and brutal to be dealt with peacefully. Gandhi, however, looked for the error in his own actions and learned from his mistakes. A decade later, rather than embark on a wholesale revolt, he identified a keystone change that would break the logjam. Today, both the salt march that resulted, and Gandhi himself, have become icons.

Test Your Hypotheses (Cheaply)

If you want to get a project going in a typical organization, the first thing you do is try to procure a big budget. So you write up an impressive business plan, examine the political tea leaves and work your contacts. If you’re successful, you can build out a great staff, line up tier-one partners and really hit the ground running.

You also can’t make any mistakes. Unless your plan was truly bulletproof from conception (and it never is) or you just get really lucky, you’re going to make some big, well-funded, well-staffed blunder that you’ll have to scramble to recover from. Unless you catch it early or have the political clout within your organization to get more money, you are likely to fail.

Now consider how Nick Swinmurn started his business. As Eric Ries explained in The Lean Startup, instead of spending money on some expensive marketing study to see if people would buy shoes online, he simply built a cheap site. When he got an order, he would go to the store, buy the pair at retail, and ship it out. He lost money on every sale.

That’s a terrible way to run a business, but a great way to test a business hypothesis. Once he knew that people were willing to buy shoes online, he started Zappos, which quickly grew to dominate the market for selling shoes online. It was sold to Amazon in 2009, ten years after Swinmurn started, for $940 million.

Build A Network

We tend to think that success is the result of hard work and talent. Yet look at any category and one brand tends to dominate. There are many search engines, but only one Google, just like there are many smartphone manufacturers, but only one Apple. Both are great products, but they end up taking the vast majority of profits in their industry. Are they really that much better than their competitors?

The truth is, as Albert-László Barabási explains in The Formula, is that performance is bounded, but success isn’t. You can be better than your competitors, but not that much better. On the other hand, there are no limits to success because networks tend to be dominated by a central node.

To understand why, consider the case of Albert Einstein. Until April 3rd, 1921, he was a prominent scientist, but by no means an icon. In fact, much of his press coverage was negative. But on that date, he arrived in America with the Zionist leader Chaim Weizmann. Reporters covering the event mistook the enormous crowds there to meet Weizmann as fans of Einstein and the story made the first page of all major newspapers.

That, along with his brilliance and endearing personality, is what catapulted Einstein to iconic status. In a similar vein, Google launched its product on the techie-dense Stanford computer network and Apple introduced the iPhone to its already expansive fan base. It’s networks, not nodes, that drive success.

Stop Disrupting And Start Solving Problems

Walk down any grocery store aisle and it becomes clear that there is no shortage of ideas. At any given time there are countless opportunities for line extensions, expansions into new categories, partnerships and other things. Executives spend countless hours discussing the merits and demerits of ideas like these.

Yet innovation isn’t about ideas, it’s about solving problems. That’s why most ideas fail, because they don’t address a meaningful problem that people really need solved. Nobody really needs a different flavor of cereal, but Zappos, Google and Apple all met needs that people cared about and that made all the difference.

That’s why companies that last not only look to solve problems for today’s customers, but also take on grand challenges. These are not “bet the company” type of propositions, but long, sustained efforts that seek to fundamentally change the realm of the possible, like Google’s more than decade long quest to create a self-driving car or IBM’s generational pursuit of quantum computing.

The truth is that you never really have to fail because, if you make your efforts sustainable, you can always learn from mistakes and try again. Failure rarely stems from a lack of effort, but is guaranteed by a myopic vision.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Unsplash

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Competing Successfully in an Ecosystem World

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Competing Successfully in an Ecosystem World

GUEST POST from Greg Satell

In 1980, a young Harvard Business School professor named Michael Porter published Competitive Strategy, which drove thinking on the subject for the next 30 years. In essence, he argued that you build sustainable competitive advantage by maximizing bargaining power throughout a value chain.

Yet more recently, that kind of single firm level analysis has been called into question and leaders have learned to look more broadly at ecosystems. In fact, a recent report by Accenture Strategy found that because business models are being constantly disrupted, ecosystems have become a “cornerstone” of future growth.”

While value chains are strictly defined by “primary activities” such as “inbound logistics” and “support activities” like technology, ecosystems have mostly been a nebulous term. Clearly that’s not good enough. If we are going to compete in an ecosystem-driven world, we need to understand how they function and how we can leverage them to drive a business forward.

What Is An Ecosystem?

Ecosystem is a term that gets thrown around quite a bit, but people never seem to define what one is. All too often, it alludes to some indescribable ether that surrounds an enterprise. When you can’t define how an action would impact a customer or partner, you simply invoke “the ecosystem” and that’s supposed to make it all make sense.

Yet it’s important that we define terms that have meaning, because if we don’t they just become a catchall for things that we can’t describe. That’s a problem. As Wittgenstein pointed out long ago, if we can’t define something we don’t really understand it and if we don’t understand something we can’t hope to manage it very well.

Ecosystems are best understood as networks of networks and that tells us a lot. In fact, there is a whole science of networks to guide us. What’s most important about networks is that they are driven by links not nodes, so the most important network activity is connection. Networks are dynamic, always evolving, not static.

That’s where focusing on value chains runs into problems. Maximizing bargaining power within a value chain almost compels us to see things as a static, “winner take all” type of challenge in which you play one partner off against another. When you see things as an ecosystem, however, there is clear value in investing in connections and building up the nodes around you to improve your position.

It Is Ecosystems, Not Inventions That Drive The Future

We tend to think of history as a series of “great men” driving events. So electricity conjures up visions of Edison and his light bulb and automobiles remind us of Henry Ford creating the Model T. Yet the truth is that the impact from those inventions didn’t come till decades after those men brought those inventions to life.

In both cases, it was secondary inventions that drove the impact. Electricity allowed businesses to redesign factories to optimize workflow and drive productivity. Home appliances replaced backbreaking work and freed up energy for other tasks. Roads and gas stations revolutionized product distribution and led to the modern retail industry.

Computers followed a similar path. Digital technology had been around for decades when IBM launched the PC in 1981, yet it wouldn’t be till the late 90s that we first started to see an impact on productivity. The truth is that computers don’t do much by themselves. Applications need to be designed and people need to figure out how to put them to good use.

Notice that it’s impossible to point to any one thing that tipped the scale, because what drove impact was an ecosystem of connections between partners, suppliers and customers who needed to learn how to collaborate effectively. That has far less to do with technology than it does with forging meaningful human relationships and it takes time.

Power Today Lies In The Center Of Ecosystems, Rather Than At The Top Of Hierarchies

Traditionally we’ve seen the world as driven by hierarchies. Kings and queens ruled the world through aristocracies that carried out their orders. Corporate CEO’s outlined strategies that underlings would have to execute. Discipline was enforced through a system of punishments and rewards.

In a hierarchy driven world, you progress by climbing your way to the top. So you do your best to drive the performance of those under you to impress those above you. Success is determined by how high you rise. You learn to put great emphasis on signals that you have made it, such as the title on your business card and the size and location of your office.

In an ecosystem driven world, however, power does not lie at the top of hierarchies, but emanates from the center of networks. So an office on the executive floor may, in fact, diminish your ability to shape events if it leads to disconnection. At the same time, being seen as approachable, rather than high status, may enhance your power.

Here’s where Porter’s ideas about value chains can get you into trouble. If you are constantly trying to maximize your bargaining power, you are likely to weaken connections and find yourself at the periphery, rather than at the center, of networks. In an ecosystem driven world, displaying your power can often serve to undermine it.

You Move To The Center By Connecting Out

As I explain in my book Cascades, the best way move to the center of networks is by connecting out. At first, that may seem counterintuitive because it seems simpler to identify a central hub and connect in. Yet those nodes, by definition, already have a lot of links and your connection is less likely to be meaningful.

Once you understand that networks are dynamic and evolving, it becomes clear that a better strategy is to identify emergent nodes and connect to them early on. As the network grows, the center shifts and you are more likely to improve your position. In an ecosystem world, the best strategy is to widen and deepen connections throughout the network.

AnnaLee Saxenian gives an apt description of how this works in Regional Advantage, where she tells the story of how Boston’s “Technology Highway” lost relevance and Silicon Valley moved to the center of the technology universe. The Boston-based companies saw things in terms of value chains and focused on vertical integration to maximize their bargaining power. The Silicon Valley upstarts, on the other hand, saw an ecosystem and thrived on connection.

Today, of course, technology has exponentially increased our ability to make connections. However, what is crucial to understand is that relationships are essentially a very human activity. You don’t build them through gadgets or algorithms, but my investing your most valuable resource — yourself.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Pixabay

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Four Things All Leaders Must Know About Digital Transformation

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(But Most Don’t)

Four Things All Leaders Must Know About Digital Transformation

GUEST POST from Greg Satell

Today, technology has become central to how every business competes. Futuristic advancements like artificial intelligence, big data and cloud computing are no longer pie-in-the-sky propositions, but mission critical initiatives that leaders are racing to implement within their organizations.

Unfortunately, most of these initiatives fail. In fact, McKinsey found that fewer than a third of organizational transformations succeed. That’s incredibly sobering. Imagine any other initiative with that type of expected return not only getting consistently funded, but enthusiastically viewed as a smart bet on the future.

Yet digital transformation doesn’t have to be a sucker’s bet. The truth is that digital transformation is human transformation and that’s where you need to start. Initiatives fail because organizations habitually get blinded by the “gee-whiz” aspects of technology, don’t focus on clear business objectives, scale too fast and then declare victory way too early.

1. Focus on People First, Technology Second

At first, digital transformation seems fairly straightforward. There are many capable vendors that can competently implement cloud technology, automation, artificial intelligence applications or whatever else you’re looking for. So, theoretically at least, a standard procurement process should be effective in sourcing and executing a project.

Yet consider how the the nature of work has changed has changed over the last few decades, due to technological shifts. We spend far less time quietly working away at our desks and far more interacting with others. Much of the value has shifted from cognitive skills to social skills and collaboration has increasingly become a competitive advantage. New technologies such as the cloud and AI will only strengthen and accelerate these trends.

The truth is that value never disappears it just shifts to another place. Consider the case of bank tellers. There are more than twice the number of bank tellers today than there were before ATM machines, but the work they do is vastly different. They are no longer there to execute transactions, but to advise, solve problems and up-sell. That takes very different skills.

So the first step towards a successful digital transformation is not the technology itself, but thinking about how you can empower your people through it. Where do you expect value to shift to? What new skills will your people need to learn in order to succeed? How can technology help them get where they need to be to serve your customers well?

2. Establish Clear Business Outcomes

Another common mistake executives make when implementing new technology is to focus on the capabilities of the technology itself, rather than the business outcome you hope to achieve. Are you trying to drive transactions, improve service and customer experience or something else entirely? You need to determine that before you can even think about a technical approach.

That’s why every transformational effort should involve operational managers, partners and front-line workers from the start. You need also to talk to customers and see what they actually value, rather than what would simply help operations to run smoother. From there, you can begin to develop a vision for how your business can function differently.

For example, when Barry Libenson first arrived at the data giant Experian as Global CIO in 2015, he spent his first few months talking to customers and the business units that served them. Everywhere he went, he found the same thing: what customers valued most was access to real-time data, which his company’s existing infrastructure could not provide.

From there, the path forward was fairly simple, but not easy. He needed to shift his company from a traditional on-site server architecture to the cloud. That took him three years to accomplish, but it transformed Experian’s business, empowered new business models and led to new revenue streams.

3. Identify A Keystone Change

Once the vision is in place, the tendency, all too often, is to embark on what becomes a “five-year death march” to achieve it. In the end, everybody ends up frustrated, angry and, inevitably, it turns out that by the time the vision is achieved, the technology is out of date.

So instead of trying to swallow the entire vision whole, it’s best to start out with a keystone change. Think about a clear and tangible goal you can achieve in the near term that would require the involvement of multiple stakeholders and pave the way for future, more complex initiatives in the future.

One way to do this is to choose a solution that will help people with tedious, mundane tasks rather than create a new capability. It’s much easier to get people excited by reducing the time and effort they have to expend on something they hate then it is to push them to adopt something new. You always want to attract and empower, rather than bribe or coerce.

For example, in Experian’s case, Libenson started out by creating internal API’s rather than building customer facing features. These didn’t create an enormous impact, but they showed what was possible and built momentum for the larger vision.

4. Treat Transformation As A Journey, Not A Destination

Perhaps the most dangerous part of any transformation is when the initial objectives have been achieved. That’s when motivation begins to weaken and complacency sets in. In my book, Cascades, I call this problem surviving victory and it is a crucial element of every transformational effort.

The key to surviving victory is to plan for it from the start. In Experian’s case, the journey was never about the cloud. That was merely a destination. The vision was always to serve customers better and to develop new business models. That’s why Libenson focused not only on implementing technology, but indoctrinating new values and beliefs.

“Having gone through this transformational process over the past three years and seeing concrete business results, we are much better positioned to adopt those technologies,” he told me. “We’ve made the changes in culture, our organizational structure and skills to be able to adopt new technologies quickly, completely and with better collaboration with our customers.”

That emphasis on values is key, because to change fundamental behaviors you first have to change fundamental beliefs and digital transformation is always about empowering action. Keep your eye on that and you will be likely to succeed where most others fail.

— Article courtesy of the Digital Tonto blog and an earlier version appeared on Inc.com
— Image credit: Pixabay

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