Digital transformation is big business today, so much so that more than 90% of the C-Suite now ranks digital transformation as their #1 or #2 most important area of strategic investment. That’s great news. Or is it?
The first wave of successful digital companies (Google, Netflix, and others) have gained unprecedented growth and profits by placing customers at the center of everything they do. Many traditional firms today applaud the brilliance of these firms’ unrelentingly focus on the customer and try to emulate it. But this approach only works because these firms focus on something else that isn’t so easy for traditional firms to embrace: the unknown.
Culturally, traditional firms pride themselves on well-honed, rational processes designed to produce precise answers to well-defined questions. Those processes seek to confine and define the unknown and then eliminate it. For traditional firms, the unknown is to be avoided. And yet, it’s the embrace of the unknown that fuels the innovation and growth that characterize digital-native firms and that traditional firms so eagerly seek to acquire.
The biggest unknown—the one traditional firms too often fail to recognize—is actually the customer, and what he or she wants. Steve Jobs famously said “Our job is to figure out what customers want before they do. . . . People don’t know what they want until you show it to them.” The research techniques traditional firms use—heavy on focus groups, voice of the customer surveys, and other forms of consumer feedback—can only reveal what customers think they want. They can’t discover what customers are actually going to want but can’t yet imagine.
How do digital-native firms get there? With a completely different discovery process built on rich, ongoing experiments. Dictionary.com defines an experiment as “a test, trial, or tentative procedure; an act or operation for the purpose of discovering something unknown.” There is no roadmap for an experiment, no prior assumption about the outcome.
If traditional firms are to achieve the outcomes they want from digital transformation, they must embrace this discovery-focused approach. Roadmaps and playbooks worked when the roads were well mapped and understood. Where there are no roads, there can be no roadmaps.
So What Can You Borrow from the Digital Elite?
When you spend time with leaders at firms like Google and Amazon, you hear a different narrative from the one most common inside traditional firms. Instead of roadmaps and risk avoidance, you hear words like ecosystem, experiments, and risk taking. You also see leaders ruthlessly focused on making sure that corporate politics and bloated policies and processes are never allowed to flourish. These leadership behaviors and cultural values are what make these companies so well equipped to navigate the digital terrain with ease.
So if we can’t purchase a roadmap, or cut and paste the techniques of the digital elites, how can we fuel digital transformation in more traditional firms? How can we shift from minimizing risk to embracing it? The process begins with abandoning the legacy metaphor of “company as machine” and embracing a new metaphor of “company as ecosystem.” In the same way that the earth’s ecosystems thrive when there is a healthy interconnectedness between species, so does a corporate ecosystem thrive when there is a depth of interconnectedness between the different business, technology, and operations groups of a large firm. A recent CEB leadership study bears out the value of this kind of thinking—those leaders who are succeeding at digital transformation, the study found, are those whose efforts are focused on amplifying low-friction intergroup interactions. That same study found that business outcomes like profitability and growth are far more correlated to intergroup and team performance than departmental or individual performance.
In our book, The Age of Surge, we focus a great deal on introducing leaders and middle managers to the mindsets, behaviors, and skills essential to nurturing a company ecosystem that powers digital business success. Because your employees, culture, and history are uniquely your own, attempts to copy the cultural or structural practices of firms like Amazon and Netflix rarely lead to authentic transformation. For this reason, your most pressing digital transformation challenge is to nurture and transform your own ecosystem. Doing this means starting where you are, not where you or your IT department might wish you were.
While the building blocks of corporate ecosystems and digital transformation include many important elements, one of the most strategic—and easily adopted—is intentional networks. The work of leadership is now more than ever about enabling the flow of trust, ideas, and cooperation. Without a rich, interconnected tapestry of human networks, the ability to experiment and profit from undiscovered customer and marketplace opportunities will remain unrealized. Transformational leaders guide the shape of intentional networks, weaving a tapestry that amplifies trust and powers continuous innovation.
Google is Google. You are you. While ideas and inspiration for digital transformation can be mined from digital-native companies, authentic digital transformation must start with you, the company’s leadership. In any era, but especially today, the fundamental aspect of leadership is self-awareness—awareness both of your own strengths and challenges and of your organization’s strengths and challenges. Self-awareness is what keeps you from getting caught up in the past or trying to be someone else, even someone you admire. Recognizing who you are today, discovering where you need to change, and being willing to start where you are and “follow yes,” is far more important than looking over your shoulder at whatever shiny new digital strategy worked for someone else.
Have you read?
Brad Murphy is CEO of Gear Stream and co-author, with Carol Mase, of THE AGE OF SURGE: A Human Centered Framework For Scaling Company Wide Agility And Navigating The Tsunami Of Digital. He is a serial software entrepreneur who has pioneered digital enterprise innovations in product, service, and agile software development. Since 2000, Murphy has helped more than 50 Global 2000 companies transform themselves, abandoning rigid, top-down operating models to become modern, adaptive digital innovators with radical improvements in customer engagement, top-line growth, innovation, and organizational agility. For more information please visit www.GearStream.com.