The Digital Transformation – Advice to a CEO

DigitalTransformation

Tell a CEO about all the exciting trends and possibilities we are experiencing as part of the digital transformation and they are going to ask “What’s the bottom line?” We can’t give $$ based answers to that question outside of a specific proposition, but we can focus on results and ramifications.

LittleBlogAuthorGraphic  David Hodgson, February 24, 2016

Often commentators like myself will focus on the causes and drivers of change, and this can be useful. But this blog entry will focus on what I see as the three main overarching results of the ongoing digital transformation.

This analysis may make specific ramifications clearer to a CEO and help them see how to adapt a strategy to both survive and maybe gain a competitive edge. It is a generalized overview. As a CEO you must answer your own specific questions to see and create the results that will allow you to successfully compete.

#1 The digitization of all we use and touch

A convergence of technical breakthroughs and economic forces is now setting a course for the digitization of everything. This includes the mundane, like images, texts and music, to the incredible, like genomes, body parts and our very thoughts.

Digital forms are always more flexible, lower cost and ultimately more valuable than their physical equivalents, because of the ways they can be re-used in the digital world.

Any business that thinks it won’t be impacted is likely to be the next to go bankrupt. No industry or job will remain the same and many will cease to exist.

What digital assets do you have, or should you acquire to compete in this new age? Can you be the leader in transforming your area by transforming something important to a new digital form that could amplify its value? Could you leverage a new source of data, or an API from one of the new digital players?

#2 the democratization of playing fields

In his book “The World is Flat”, Thomas Friedman explains something he labels as “Globalization 3.0” which has had the effect of leveling the global playing field in terms of commerce. Underlying what he describes, are the same forces behind what we now call the digital transformation.

But commerce is just one playing field that is being leveled. We can now all have access to knowledge, tools and perhaps most importantly, communities, that enable us to be artists, scientists, musicians, developers or inventers. Whatever we want to do. Few domains of activity remain exclusive to an elite in the same way as they used to be.

This does not mean that there aren’t economic and power elites. In fact within many communities (like the USA) the last decade has seen an economic polarization and a concentration of money and power. However, globally we see a flattening and ultimately I think that the forces of the digital transformation will make massive polarization impossible within any community. But then I have always been a technological optimist.

CEOs must realize that the forces of digital transformation have empowered consumers and small business more than large companies. In many cases power is being fragmented and distributed and this has largely been through the app and the smartphone as tools of digital conveyance. For example, banks have to compete harder to retain fickle customers who can now switch easily. Teenagers don’t have to buy an album to hear the one song they like. Alternate offerings are easily compared and there is always a new competitor.

What do your customers really want? What is changing about how they want to consume or use what you have to sell? It is imperative that your strategy focuses on gaining a competitive edge via the experience and value you deliver to the “users” of your digital assets.

#3 the disruption of incumbents

Facets of the first two results I have described above, combine to create this third result. Generally speaking, because of the digitization of everything and the leveling of playing fields, the cost to entry in any business area is greatly reduced.

It costs so little to set up what would have been considered a sophisticated business just a few years ago that it becomes effective for small startups to offer products and services for “free”. Incumbents used to near monopolies, or established customer bases, might have been charging premium prices for what can now be offered massively cheaper.

The software industry is being turned upside down by open source software. Amazon offers cheap IT infrastructure. The hotel industry is being threatened by Airbnb turning a community of individuals into an unstoppable competitor. We know what happened to Blockbuster.

Sometimes, as with Uber, the incumbent is threatened mainly by what the user perceives as a more attractive experience. For Uber this would be easier access, better quality and a reasonable price as compared to taxi’s and regular car service.

Death or Glory

The CEO of an established firm must realize that it is death or glory for incumbents. Who are your new “Digital Transformation” competitors? If they aren’t here yet how could they appear? – what is it about your current business model that could be a weakness in this new world.

In summary my advice is that it is transform or be transformed and you must embrace all Clayton Christensen’s thinking on the “Innovators Dilemma” to engage the issues.

 

Image credit: McKinsey

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Space for Thinking in a Big Room

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To survive the Digital Transformation, companies will have to respond quickly to changing markets and customer needs. This is “business agility” and can only happen when cross functional units leave their silos and unite in joined up thinking to achieve shared business goals.

LittleBlogAuthorGraphic  David Hodgson, Feb 12 2016

One of the last things I did at CA before I left, was join in a “Big Room Planning” session to help prioritize goals and initiatives for the Mainframe Business Unit. As the name implies, the basic idea of Big Room Planning is getting a lot of key people together physically in the same room to do strategic planning for the business. It needs a big room to accommodate all the necessary participants! Our guides and facilitators were two expert consultants from the Rally Software group, now a part of CA Technologies through acquisition.

The Quest for an Agile Business

Agility is delivering customer value faster. The adoption of Agile development methodologies has been an intrinsic part of the Digital Transformation that we are experiencing in the IT industry. Big Room Planning is part of the next wave of Agile adoption; extending it from just transforming the development process, to using the same principles to transform the way a business is run. It is a natural next step for companies adopting Agile because it soon becomes apparent that delivering successful products involves the whole company, not just the engineering teams.

SAFe – the Scaled Agile Framework

Big Room Planning at the portfolio level is really an extrapolation of one part of Scaled Agile Framework, or SAFe. Championed by Dean Leffingwell, SAFe itself will have to be a subject for a future blog as it is too big a subject to cover here. Suffice it to say that it is the application of Lean principles to scale Agile for large enterprises that have multiple products and many development teams. An essential element of SAFe is Product Increment planning where cross functional teams agree the direction of a product roadmap.

The power of cross functional teams thinking together

Big Room Planning takes PI Planning up a level and expands the audience to include more business and operational functions. It allows a business to take two days out to set an annual strategy that everyone understands and is bought into, because they helped create it. Quarterly follow-up meetings allow the team to track progress and tweak the strategy responding to new information; the better understanding of obstacles, or changes in market conditions and customer requirements.

CA’s Mainframe BU was doing Big Room Planning for the first time. We were all learning together and there was a general sense that the team would do it better the next time! Some things you can only learn by doing however much preparation you do before hand, watching videos and reading primers. In fact it is central to Agile philosophy that the team learns together by doing and that the learning crucible is what forges the most valuable results.

What I saw in this first stumbling attempt was colleagues learning to work together in new ways. Functions like Sales and Marketing getting to understand and validate the roadmap before Dev start building anything. In fact those functions helped to prioritize the roadmap alongside Product Management with the advice of Architects to help size and weigh the impacts of alternatives. These deep interactions between multiple functions can help large companies behave like small companies i.e. help them truly be agile.

A Competitive Advantage for You Too?

Rally could be one of the best things that has happened to CA. The acquisition brought a great new product that will surely drive growth for CA where there will be synergies and operational multipliers. But the bigger impact could be in a company-wide evolution if the Rally culture can help fuel agile adoption at CA. If their new practices are adopted across CA’s business units we could see a unified company delivering successful organic products from ideation with prospects to successful implementation by customers.

But more importantly, what about you? Do you have a vision for your company as an agile business? Could the concept’s of Big Room Planning be a starting point for you to gain competitive advantage in the markets you serve? Check it out.

 

Image credit: CA Technologies