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As a term, ‘digital transformation’ is a lot like AI, big data, and IoT. Most people have an idea of what it means, but there’s no widely accepted standard definition of it and most importantly no roadmap for how organizations can actually implement it. Articulating a definition and a roadmap is essential if digital transformation is to actually transform organizations in any meaningful and sustainable way.
“Without properly defining digital and its impact on a specific market segment, digital transformation will remain 4IR lip service.” ~T-bird Joab Meyer and colleagues Click to Tweet
T-bird Joab Meyer, MBA ’07, and colleagues Karl Johnson and Sunny Ray were seeking to “demystify digital transformation” when they embarked on their current research project to assess the state of digital transformation, which has included seven different global organizations to date.
“To demystify digital transformation, it must be broken into specific company activities that support a unique set of 4th Industrial Revolution (4IR) strategies,” the researchers explained in an overview of their work. “Such 4IR strategies must be built upon employee capabilities, which enable firms to ‘take advantage of emerging digital possibilities’ or what the MIT Center for Digital Business calls ‘Digital Dexterity.’”
To better understand practical steps organizations can take to develop such digital dexterity, Meyer, Johnson and Ray interviewed 14 senior leaders from seven different firms. In the course of their interviews, the researchers identified three digital mindsets that seem particularly essential to successful digital transformation: 1) understanding the needs of customers; 2) taking an agile approach to development; and 3) having a strong partnership with IT in which the business looks to their IT colleagues as innovation partners.
Since graduating from Thunderbird, Meyer has led global change initiatives within companies in both China (HSBC Bank, Cisco Systems and Preferred Popcorn) and the US (Ecolab, Cargill and Medtronic). He is currently Change Activation Partner at General Mills, a leading global food company with brands such as Cheerios, Haagen-Dazs and Wanchai Ferry. Karl Johnson leads global transformation initiatives within Cargill, a $130 billion global business that provides products as well as trading, risk management, and agricultural supply chain services for food ingredients, bio industrial, protein, salt, and animal nutrition and health. Sunny Ray is a Program Director for the Enterprise Excellence Project Management Office (PMO) at Ecolab, a global leader in water, hygiene and infection prevention solutions, where she directs the change management program and consults across multiple strategic initiatives.
“The lens we bring to this research is change management,” Meyer explained. “So, it's the people side of digital transformation. It’s helping people understand what business value the technology is going to have. And then, most importantly, how to actually use it and adopt it so there is sustained business value.”
To illustrate the importance of the people side, Johnson gave the example of a manufacturing plant manager who is used to leveraging a tool like Excel to gather historical data and create a descriptive picture of how well the plant is performing. “The plant manager leverages their intuition, their experience and the data to come up with a compelling story and a view of what changes they need to make to, for instance, optimize the plant's production, reduce cost or achieve some other key performance indicator.”
“This plant manager’s entire career – in some ways their identity – has been built on their ability to take historical data, use their intuition, create a descriptive picture and make decisions going forward,” Johnson explained. With digital transformation, “the plant manager loses some of the handholds they've had in the past that have made them successful. They have to make a shift over to trusting the predictive insights coming out of a digital tool. And that's a pretty major mind shift from descriptive to predictive.”
“They have to make a shift over to trusting the predictive insights coming out of a digital tool. And that's a pretty major mind shift from descriptive to predictive.” ~Karl Johnson Click to Tweet
The stakes for successful and sustainable digital transformation are high. Failed digital transformations “waste millions of dollars and millions of hours of people's time,” Meyer said.
Furthermore, when organizations don’t succeed at digital transformation, they miss the vast opportunities which can be realized through 4IR technologies like AI, big data, and IoT. And that’s a significant competitive disadvantage. “There’s really not an opportunity to sit back and stay with the traditional approach without fear of major disruption in a number of these industries,” explained Johnson.
The researchers have found a wide variety of benefits from digital transformation. In one example, Meyer cited how General Mills digitized their popular Box Tops for Education program. “The core process of donating to local schools based on the number of box tops submitted hasn’t changed. However, the original paper-based box tops have been replaced by software application customers use to record their purchases digitally.” A different example identified by Meyer is a global health insurance company which has leveraged 4IR technology to move into a completely new business model. “This insurance company has created a digital healthcare platform where they can even see patients remotely. They’ve taken their core business and extended it into completely new business models.”
Taking digital transformation beyond “4IR lip service” requires the three digital mindsets Meyer and his colleagues discovered in the course of their interviews. “These are three very important skills employees have to develop if they're going to be successful,” Meyer said.
The first mindset essential for successful and sustainable digital transformation is understanding the needs of customers. “Often organizations put the cart before the horse, implementing the latest technology because it’s exciting rather than focusing on the fundamental question of ‘What's the problem we're trying to solve here?’” Meyer explained. “Ideally, you start with a consultative approach where you ask the customer, ‘What are you trying to solve?’ and then you consider what technology exists to help address the problem.”
Changing how the organization thinks about customer engagement can be one of the toughest digital transformation challenges. “One of the surprises in our research is the challenges with the organization’s own salesforce,” Johnson explained. “For really good salespeople, their success is predicated on delivering dependable products that meet the customer's needs. With digital, new opportunities for customer engagement arise. For example, harvesting data from customers to create insights – essentially selling the insights you derive from the data. But this is a whole different engagement than solely selling the benefits the customer receives from the physical product.”
“Ideally, you start by asking the customer, ‘What are you trying to solve?’ and then you consider what technology exists tohelp address that problem.” ~T-bird Joab Meyer Click to Tweet
“Technology tools probably aren’t going to work the first time. And so, the more you have an agile mindset of adjusting, adapting, learning through each iteration, while keeping the larger goal in mind, the better positioned you are for success,” Meyer explained.
“An agile approach is fast, iterative, and produces minimum viable products (MVPs),” Johnson added. That’s a very different approach than, say, perfecting production processes for physical products, which need to be 100% right every time. And this difference, Johnson said, challenges traditional engagement models. “If you're launching an MVP app to accompany a physical product, the app is not 100% foolproof like the physical product. Getting an MVP quickly into the market enables the organization to gather insights and use them to iterate improvements to the MVP. However, accepting a less than 100% viable app in exchange for the promise of better future value and insights it may deliver can be difficult for both the customer and the salesforce to really understand and accept. It requires a shift in mindset.”
“Within the organization, there has to be a different relationship between the business units and corporate IT. There has to be a shift from looking at IT as a cost center to looking at it as an innovation partner for new ways to generate revenue,” Johnson said.
IT needs to be part of the conversation with customers about the problem they’re trying to solve and the technologies which could help solve it. Meyer explained, “It's not enough to have just a salesperson understand the customer’s problems. You also need a business-oriented IT leader with credibility as a partner who can think innovatively. This IT partner is not a tool customization order-taker but someone who can ask the consultative questions and has the depth of technical knowledge to offer technology solutions.”
“There has to be a shift from looking at IT as a cost center to looking at it as an innovation partner for new ways to generate revenue.” ~Karl Johnson Click to Tweet
Having discovered these three mindsets common among organizations where they've had successful and sustainable digital transformation, Meyer, Johnson, and Ray are now working on developing a digital transformation adoption model. They’ve been collaborating with Thunderbird professors Mary Teagarden and Patrick Lynch and have presented highlights of their findings to Lynch’s big data class.
Meyer and his colleagues are currently looking for more leaders with digital transformation experience to share their stories. If you’re interested in participating, contact Meyer through LinkedIn.