You are reading the second article in the Digital Transformation series. The first article was titled Digital Transformation Explained.

introduction

Digital Transformation should neither scare you nor fill you with doom and gloom. This article aims to get you thinking about your organisation, your leadership collective, the wider industry, and determine if you are asking the right questions to inform future stability and growth.

Digital innovation opportunities before us today are Australia is endless, yet the data suggests many organisations are slipping behind.

Technology advancements allow problems to be solved faster than ever before. While incremental steps forward help resolve issues, this has blurred our thinking and culture into no longer thinking big. We need to think big, look at the significant challenges, and take big steps forward in our approaches to innovation. Problems may, in turn, be broken down into meaningful incremental steps, but should always be linked to big visions..

With the rise of digital innovation, new ways of doing business are forming, changing traditional organisational foundations. Customary economic laws from microeconomics, such as supply-and-demand, are facing continued tension. Consumers are demanding more, and all industries are struggling to keep up with the evolving needs.

The net result is that the status quo is no longer enough. What got us to where we are today, will likely not get us to where we want to be in the future. A future where the status quo impedes our ability to remain competitive.

All the positive changes and advancements in technology have created a disequilibrium across all industries and markets.

History has taught us that when disequilibrium occurs, it is time for disruption.

Now is not the time to rest on our laurels; it is the time to challenge.

warning signs – questions & reflections

Constant self-evaluation of not only ourselves but also our organisations is always required.

The following list of warning signs and scenarios are prompts to help you start thinking more critically, being curious and asking more questions. Far from exhaustive, the list should help you realise that not asking the harder questions is doing a disservice:

• Customers are not coming to you at a steady pace like they used to
• Customers are finishing contracts and moving elsewhere, i.e. your subscription renewals are in decline
• You have trouble attracting the new generations of employees to come work for you
• Staff are frustrated continuously, in-fighting over cumbersome systems, achieving little through digital collaboration
• Marketing remains based around simple ads and age-old promotions, no longer delivering results of the past
• No one has ever talked about Customer Engagement, defined User Experiences, or considered the personas of your customers; there is no social selling strategy nor marketing funnels
• The website exists only to provide information, with no customer journey or clear calls to action
• Technology feels old, clunky and slow; nothing much is online, there is little integration, and it is a topic of constant jokes around the office
• Your IT team or current IT provider hops between initiatives without linking to a distinct digital strategy; there’s no portfolio approach with a clear customer engagement benefit defined
• Your organisation hasn’t changed in years and there is little data used to back up decisions
• There are no digital systems or reliable processes in place to measure the satisfaction of both employee and customer
• If an outsider asked one of your employees what the organisational strategy is, would they be able to articulate it? Would they be able to articulate their role, and how they are using digital to differentiate?

Digital transformation is clearly being used to justify the respective sale. This can trap an organisation into the unhelpful thinking that a purchase is their digital journey.

warning signs – food for thought

Digital transformation is about enabling the entire organisation to unlock new growth opportunities in their respective markets through a clear digital strategy. The strategy comes from the top with primary objectives of capturing new value and creating a competitive advantage.

What’s at the root of these issues being prevalent in the first place? Could it be complacency or failure to learn and re-invent ourselves? Perhaps we need to question ourselves more, checking our assumptions, asking if we consider ourselves at the point of knowing everything, no longer needing to continue the pursuit of excellence.

Leaders need to continually challenge not only our expertise but also the knowledge we possess, where we derived it and how current it is. Incumbent cultures need fresh challenges concerning traditional thinking. As a leader, never discount the value of getting out to see things for yourself.

Harvard Business Review (HBR), helpfully, lists seven warning signs that you have fallen into the expertise trap. Referenced from the article “Don’t Be Blinded by Your Own Expertise.”

• You’re unfamiliar with new technologies or approaches in your industry.
• When someone asks why you or the company does things in a certain way, you think, “Well, that’s how we’ve always done it.”
• When making decisions, you focus on how much risk your options pose rather than on the opportunities they represent.
• You discover that colleagues are working together in ways you haven’t—such as Slack, texts rather than email, and mobile rather than desktop.
• You keep proposing the same old strategies and tactics to address new challenges.
• You try to make old solutions ever more precise rather than pioneering entirely new ones.
• Millennials leave your team faster than they do other teams in your company.

We never like it, but a hard dose of reality in the form of a self-check is something we all can use from time-to-time.

One of the essential attributes a leader should possess is the ability and willingness to change. Change comes from extraordinary leaders who are relentlessly obsessed with learning, listening, and never being satisfied with where they are or what they have.

Perhaps you can take these questions away and reflect on them. Share them with your leadership teams and schedule some dedicated time at the next meeting to discuss.

“Extraordinary leaders are curious; they listen, learn, ask questions and are never satisfied with where they are, or what they have. They seek to define problems clearly and work with the collective knowledge of their teams to build a path forward.”

learning from others before us

The adage of “if it ain’t broke, why fix it?” is often cited as a reason to avoid change. Conversely, axioms such as; “change is the only constant in life” (Heraclitus) or “progress is impossible without change, and those who cannot change their minds cannot change anything” (George Bernard Shaw) encourage an understanding of ‘change’ as the natural state of things – it’s normal.

The business landscape has many salutary lessons of organisations that failed to recognise the change that disrupted their industry. Let’s take a quick walk through some examples:

• Nokia: in Stephen Elop’s, now famous speech, after Microsoft acquired Nokia; “We did not do anything wrong, but somehow we lost.”
• Kodak: Today, just as everyone says to “Google it,” we used to say it was a “Kodak moment.” How did their downfall happen? They didn’t lose to the digital camera (which they’d invented!); they lost to online photo-sharing platforms. Trying to expand their incumbent printing business into online printing, they failed to understand that online photo sharing was the new business. There was little recognition, study or participation in the emerging market of the time.
• Blockbuster: Went bankrupt in 2010, after then CEO, Jim Keyes, famously being quoted as saying “Neither RedBox nor Netflix are even on the radar screen in terms of competition.”
• Toys R Us: How can toys not sell? Perhaps a topic for another blog is around Economic Rent, and the failure to understand bloated, traditional supply chains. “Retailers today, especially in any kind of fashion or trend segment, have to progress. They have to morph, they have to modify. They have to represent the changes in the marketplace and their customers’ behaviour. Toys R Us has never been able to wrap their arms around the changes necessary, and this is the inevitable outcome.” Mark A. Cohen, director of retail studies at Columbia University’s Graduate School of Business, a former retail executive.

Digital transformation is an all-of-organisation mindset and not limited to new technology. Digital transformation extends beyond the technical arena and should never be limited to the latest shiny object. For this to be true, leadership needs drive innovation, recognising that traditional tenets of organisations, walls and geographic boundaries are being torn down.

80% of today’s CEOs believe digital disruption is imminent, and almost half think their business model will be obsolete by 2020

— Harvard Business Review Analytic Services Survey, Competing in 2020 Winners and Losers in the Digital Economy

Organisations must recognise the fact that no industry is immune, and revolutionary change is already at our feet. Massive opportunities lie before us, but before getting there, let’s dig a little deeper into the relationship between leadership and innovation.

“An organisation without innovation is well on its way to becoming a museum. As a leader, you are accountable for driving innovation. Period.”

leadership & innovation

The organisation will live or die by the decisions of leadership and their ability to learn, absorb new information and be advocates of change. The Australian Institute of Company Directors (AICD) has just released an insightful report in conjunction with the University of Sydney Business School.

You can read the report, which I recommend, but at a high level, their three key findings were:

• Finding 1: Australian directors recognise the importance of innovation, but more needs to be done to prioritise its delivery
• Finding 2: Australian boardrooms have low innovation and digital literacy levels
• Finding 3: Board-Executive collaboration leads to better performance

The AICD CEO and Managing Director, Angus Armour, sums up by stating “The study tells us that innovation is often missing from Australian boardroom agendas. It reveals that traditional risks are the focus rather than the risks – and opportunities – associated with innovation and disruption.”

Interestingly, in early October 2019, I attended a Data61 conference (D61+LIVE). The advertising promoted it as: Australia’s premier science, technology and innovation event. At the event, I sat in the audience listening to a panel that included:

Moderator:

• Elysse Morgan, ABC

Speakers:

• Andrew Stevens, Innovation and Science Australia
• Gail Williamson, WiseTech Global
• Kevin Bloch, Cisco
• Dr Stephanie Fahey, Austrade

There was a lot of healthy discussions, and one of the topics discussed concerned the role of innovation in organisations of Australia. Some frightening stats were presented regarding the shrinking R&D landscape and the belief within our Australian boardrooms that innovation is optional.

One alarming statistic was the R&D grant in Australia being reduced by $4bn over the past 2-years. While this potentially may be a government or political issue, it highlights the fact that Australia now has one of the lowest R&D levels in the OECD, below Slovenia and Greece.

Perhaps the importance of digital disruption and digital innovation is not taken seriously enough in our country, either by the government, or our organisations as a whole?

Maybe I’m wrong, but the evidence is suggesting that our country is beginning to lag in areas of innovation.

Perhaps I am wrong, but the evidence is suggesting that our country is beginning to lag in areas of innovation.

If innovation is not a regular topic of discussion in your organisation, you do not need to boil the ocean, so to speak, from day 1. The AICD report outlines five key recommendations to ensure innovation has the necessary priority it deserves:

• Lift directors’ technology and digital literacy.
• Set clear expectations of management regarding calculated risk-taking to drive innovation.
• Develop a shared language with management and clear narrative for investors/members on innovation.
• Ensure innovation features regularly on boardroom agendas.
• Establish a budget and executive incentives for long-term innovation.

While these stats were presented only to the audience of the AICD, the warnings they highlight apply to any organisational owner or organisational leadership team. They raise essential points around recognising that innovation must be at the forefront of conversations, why it must be on the regular agenda, and why there is an absolute need to educate the leadership team.

One of the core failures of innovation is using yesterday’s thinking to solve today’s problem. Instead, look at what is possible today, what is coming and think through applications which no one would ever have imagined is possible. Mindset changes like these are fundamental to the value of digital innovation.

“Innovation needs to play a central role in organisations, forming the foundation of disruption. Now is the time to lean into the opportunities, and not hold back. Focus on the big opportunities and what you can do uniquely.”

some closing thoughts

I opened with a series of questions about potential issues in your organisation. If any of the items speak truth into your situation, perhaps it is time to start thinking seriously about having a digital transformation strategy. Or, maybe some of the opening questions have challenged where your mindset is as a leader? If so, embrace the challenge and raise your own expectations.

The fact is that disruption is not new, nor is innovation. Disruption and innovation have been occurring for as long as humankind has been walking this earth. What is shifting is the rate of change. The reality is that digital is merely enabling disruption to occur at unprecedented levels and speeds than ever before.

Your operational models, no matter your organisation type, are being challenged. There is guaranteed to be a mismatch between what you believe to be accurate and the reality of the digital future of your industry. The ability of your leadership team to recognise these nuances and emerging trends, to have the strategic foresight to think through the megatrends, to review your industry and adjacent industries and to challenge the status quo is paramount for survival. If you are the leader of your organisation, all this starts with you!

On a positive note, the speed of innovation does not mean all existing organisations are dead. While new organisations are popping up at rates never seen before, their challenge is the lack of an established client base. Whereas, the strength of existing organisations is possessing an established client base.

It is time for big thinking and big moves, but everything doesn’t have to change overnight. The current organisational models can be supported so long as new models are being invested in and implemented. You will often hear me refer to this as the Mode 1 and Mode 2 operation of an organisation.

However, as always, the bottom line will be the risk appetite of your organisation, and the willingness to invest in new digital platforms.

The opening statement of my website states “are you having the right conversations?” In this light, I will leave the final closing thought for Mark Sanborn who is one of the top leadership speakers globally, with a list of over 2400 clients:

Your success in life isn’t based on your ability to simply change. It is based on your ability to change faster than your competition, customers and business.

— Mark Sanborn

“One of the core failures of innovation is using yesterday’s thinking to solve today’s problem.”