Digital transformation lessons from the trenches... by Maarten Ectors

Here are some lessons for anybody wanting to do digital transformation based on positive experiences:

Differentiate between digital and innovation

Digital teams do sprints, have product owners & scrum masters, use Cloud Computing, AI, continuous deployment, etc. Innovation teams do the same. However very few companies have both and make sure they compete and collaborate at the same time.

A digital team is normally well resourced and staffed. Digital does the work that previously was done based on a waterfall approach. Sprints allow long-term plans to become flexible and business reality to drive changes. Faster, cheaper and more flexible digital solutions is what the digital team focuses on. Digital reduces the risk of big projects not delivering value by involving business teams in short sprints so when reality and priorities change, direction can change. The business drives the digital roadmaps via budget allocations. Summary: flexible and fast delivery of digital solutions to critical business problems.

The innovation team uses very similar tools but takes a different approach. The digital team can’t fail on major deliveries. The innovation team focuses on failing fast and cheaply. The focus is not on what (internal) customers want but what they haven’t been able to express they actually need. Success means experimenting with new ideas and customer needs. Using new technologies and approaches to do differently what we always have done in a particular way. Asking hard questions to experts about why business, processes and technology can’t be done different. Inspiring all via demos. The objective is to find market fit for new ideas, products, approaches and ventures. When market fit is found, everything focuses on fast delivery. Skunkworks. Get it to work first and get it to scale afterwards. Overtime the ideal solution can be build but for now creating a new business as if it was a startup is phase one. Under financing the innovation team until fast delivery of a market fit solution is best to stimulate creativity and make it impossible to do it “the old way”.

Create healthy competition and synergies

There are many ways to solve a problem. Neither Digital nor Innovation is always right. A healthy competition around certain grey areas will result in better solutions. At the same time there need to be strong bridges and a willingness for innovation to pass over success stories to digital to grow them big as well as digital to stop projects that have been made irrelevant by innovations and to refocus. Simon Wardley talks about pioneer, settler and city planner teams. Digital best practices should be able to flow into innovation because nobody wants to reinvent what is working great already.

Toxic IT will kill your industry

In the hightech world there is an oversupply of innovative solutions. For every million innovative solutions you have 5 paying customer problems. In most other industries however the opposite is true, your have a million paying customer problems but not enough time and ideas to all solve them. This imbalance allows for innovation to be at its best.

Ever wondered why startups are able to solve complex problems in easy ways where large companies cannot? The exponentially better technology is a key factor. In every context leaving a legacy behind is positive, except for IT where legacy systems hold hostage your data, products and customers. No wonder Simon Wardley thinks legacy is the wrong name and he prefers Toxic IT instead.

We live in a world where the top 1,000 companies in the world leave that ranking every year at an alarming faster and faster rate. Several stars of a decade ago do no longer exist. Many are just a bad reflection of the mighty empire they once were. Technology is a major factor. Commoditisation of previously expensive technologies allow new entrants to do what previously only large corporations could do. Add the nimbleness of these new entrants, some tweaks in the business model which incumbents can’t copy in order not to disrupt their existing cashcow and you have the perfect storm. Blue ocean thinking!

In order to avoid this destiny successful incumbents need to move away from their toxic legacy systems. However even if there is a successful business case to replatform the cobweb of toxit IT, this approach is too slow and too risky. The better approach is to start isolating toxic IT behind APIs [i.e. humans need languages to communicate, so do computers. If there is no common language there is no communication. If there is no API there are costly toxic IT island]. APIs into toxic IT will enable the customer to have a great digital experience. The other approach is to create read-only replicas of the data held into the toxic IT systems. Don’t go for one size fits all data warehouses. Some projects need reporting, others streams, other large datasets for machine learning. Data storage is not a hammer and every use case is a nail. Drain the toxic IT from their lifeblood, i.e. the data. Migrate API by API into future proof solutions. The equivalent would be a plate of spaghetti. You don’t want to have to sort out all the mess before you can start eating. Just pull out single spaghettis and straighten them before moving to the next. The order will be indicated by the usage of your APIs. The most used API will have most impact. Drain the legacy by focusing on highest priority first.

Digital organisations work smarter

Chances are you have large sets of programme managers, project managers, business analysts, business process designers, change teams, and more. If this is the case then you are not a digital company with empowered teams. You are very likely organised around functions and each function has a process to prioritise work in order to be as efficient as possible. Business as usual has found ways to pass work from team to team. However whenever somebody tries to innovate then none of these work prioritising processes fit the new approach and hence innovation tends to fail.

Organising by function is a relic of the days the market leader had most offices, sales people, call center agents,... and managed them most efficiently. In the digital age a mobile app can make ten thousands of bank offices irrelevant. Economies of scale can be easily had in digital IT. You don’t need to throw thousands of people at a problem if you can allow your millions of customers to self-service themselves from the super computer in their pocket.

Digital organisations are organised to deliver fast. Speed is everything. If a new technology has a network effect and whoever builds the biggest network ends up eating the market then you want to be incredibly fast. You can see this happening as we speak. Voice assistants have a network effect. The more one brand sells the more developers will make new voice apps, skills, or whatever you want to call them. The more voice apps, the more home appliances will choose this brand over another. The more different devices with the same voice technology the more likely customers will start to call their friends via these devices and friends that are not included will be left out and will get social pressure to buy. Winners will take most in the voice enabled world. Speed of customer acquisition will determine who gets hundreds of billions of profits tomorrow.

To organise for speed, you need to mix different profiles in a team and let them self-organise. The future way of working will be many very small teams, also called pizza teams, squads, tiger teams,... Look at them as a bee. Very productive and with a mighty sting if you annoy them. All these bees now need to be organised in large swarms. A large swarm of bees can kill an elephant. Just like in bee colonies we don’t have large amounts of queens, future organisations will need a lot smaller management layers. Amazon has been very vocal about how they are organised in pizza teams; focus almost exclusively on providing more, faster and cheaper products to obtain absolute customer happiness; and often have management disagreeing with empowered teams but committing equally. Why not read up on them?

Finally we invented a term to differentiate solveable from previously unsolvable critical business problems, we call them Harry Potter Problems. If the business and even the industry can’t find a solution to a critical business problem then it is time to go and find an innovator with a magic wand. Expect to see the outcomes of our magic wand later in the year. To be continued...

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Maarten Ectors is a strategic innovator who exchanged working with the who is who of high tech to apply disruptive technology and business innovation from the inside in the top UK insurance and investment management company. In less than a year they won the best claim technology solution of the year award and that is just the start...