BRITE ’23: The Digital Transformation Roadmap (David Rogers)

foreign [Music] Ed in the last couple years that change we're all told that organizations can't change hate change change is actually quite easy in a true moment of crisis so many organizations were able to dramatically change their operating models everything they did in a matter of days and weeks [Music] my last book was the digital transformation Playbook this was the first book written on the topic of digital transformation uh and defined the field the subject by arguing that digital transformation is actually not about technology Edie is much more about strategy leadership and new ways of

thinking inside our organizations so what have I learned uh in those years since well the biggest thing I learned is the digital transformation is quite hard even if you do manage to rethink your strategy to drive change in large established complex organizations is extraordinarily hard uh and I'm not the only one who's learned this uh in the intervening years every major uh International consulting firm has done some kind of study on the subject of digital transformation and they've all pretty much come up with the same finding which is that roughly 70 percent of companies who

are even attempting and investing in and really pursuing a digital transformation are failing by their own measure by their own estimates um and that's a sobering fact that we have to deal with frankly this is not sustainable and it's not sustainable because the world is not slowing down right the Need For Change is not going to go away uh the digital Revolution is not stabilizing and hitting a plateau so we have to get better at driving change in organizations now there are a million things that can go wrong and that do go wrong in the

course of trying to drive digital change in established businesses my own research has focused on trying to understand out of all the many symptoms we can see in organizations what are the underlying root causes what are the root causes of failure and what I found in my research is there's really five essential barriers to digital transformation the first is a lack of a shared vision a shared vision of why that particular organization much must change I see so many organizations where they talk about a digital transformation and all their language is generic right we need

to be digital we want to be digital first we want to Future proof our organization and they are inevitably using very generic metrics and goals to Define their progress things like maturity metrics that are pulled off a shelf from a consultant and used for every business they they meet with on the second barrier is I see a lack of growth priorities guiding digital transformation efforts so we either see companies where there's really no Focus strategy and so you just have a lot of scattered digital projects going in different directions or I also see companies where

digital is seen purely as an effort towards cost cutting right no view of how do we actually drive growth and new opportunities in our business the third barrier is a lack of experimentation companies are still sticking with their old habits of dealing with change through planning more planning more planning give me benchmarks show me the case study the business case bring in third party data tell us what we can do because it's been proven many many times before that does not work in this context the fourth barrier is a lack of flexibility in the governance

of these organizations they're applying the same BAU business as usual processes and management to new opportunities that they have applied for years to their established business and lastly I see companies struggling with they want to change and yet they still have the same technology stack they still have the same talent and skill set they still have the same culture inside the organization that they had before the digital era so to make digital transformation really work it's not enough to rethink your strategy we also have to transform the organization that is the subject of my new

book the digital transformation roadmap and in it I lay out five steps that any organization can can take to drive real meaningful change and to become a much more adaptive organization that can respond to change moving forward in the world right this is a blueprint if you will for any organization and let me just spend the time we have today together to give you a brief introduction to each of these five steps and what they mean for your organizations the first step is to define a shared vision and this is critical the fact is we

all learned in the last couple years that change we're all told that organizations can't change hate change change is actually quite easy in a true moment of crisis right so many organizations were able to dramatically change their operating models everything they did in a matter of days and weeks in March of 2020. but most of the time thankfully we are not at that level of true uh existential crisis and when you are not in that circumstance transformation is quite hard how do you motivate how do you align how do you get people out of their

habits and out of their sort of foxholes to actually be ready to step forward and do something different and this starts with the imperative to have a shared Vision right and this has to be a vision everyone understands and that is also unique to your particular organization this is an answer to the questions where is our world going as a business what role will we play in that future landscape and why why must it be us my work I found four critical components of an effective shared Vision you need this future landscape Vision you need

to understand your unique right to win and you need to be able to define the case for change both in terms of the impact you're going to have on the world and in terms of the business results that you are expecting to receive back today Disney is guided in the digital era by a different business Theory it's one based on Disney taking its unique intellectual property characters storytelling and becoming much more of a direct to Consumer company a business that actually has an individual relationship and a connection to each person who it serves of course

streaming at streaming services are at the heart of it but this vision is also about how those connect to all the other parts of the business the second step of the road map is we have to pick our strategic priorities the defining diet or digital transformation I call this picking the problems that matter most now here we get into trouble and the era of so much digital change the problem is the technology can become an incredible destruction right it is constantly drawing our attention away from questions of strategy I keep having to talk to companies

and tell them you do not have an AI strategy let alone a chat GPT strategy right you do not have a metaverse strategy or a blockchain strategy these are technologies that you may use in order to pursue certain opportunities to create value in the market but these are not the starting point of strategy so we have to constantly force ourselves to keep shifting our view shifting our minds from focusing on the latest new products and shiny objects and instead focusing back on customer needs right as digital native businesses and entrepreneurs in Silicon Valley are uh

uh love to say you have to fall in love with a problem not the solution so MasterCard for example long known as a credit card network is Reinventing itself as the world's biggest fintech company and they are doing that by focusing on strategic opportunities in the digital era such as how can MasterCard solve these cyber security needs of businesses and institutions today using things like digital identity Authentication how can they harness these vast amounts of retail transactional data which flow through their Network every day how can you harness that data for new analytics and insights

to solve a wide range of business and social problems how can they provide Financial inclusion to underserved and unbanked communities around the world using the latest Technologies and business models of the digital era uh one of the tools are actually eight tools in the book one of them is the problem opportunity Matrix this is designed to help any organization find and pick what are the most important problems and opportunities that truly matter to your customers and to your business the third step of the road map is experimentation now this is where we have to really

learn and adopt the lessons of agile and Lean Startup design thinking and product management so that we become comfortable constantly experimenting rapidly testing and validating new Ventures to find out which ones will work in the real world this starts with a mindset and that is a leadership mindset from the top all the way to the bottom of humility right I love this quote from Dean Beck hey he was at the New York Times talking about their digital transformation he was brutally honest he said we have no idea what is going to work what the future

of Journalism is going to look like right when we started podcasts we had no idea we take risks we screw up we try stuff we don't know what's going to stick this mindset is critical now once you adopt that mindset of course you start to realize all the things you don't know the incredible amount of uncertainty around any new digital business model or Venture which you're planning or thinking about launching in the world so how do you go about actually answering all these questions testing all these many hypotheses and business assumptions that you're making well

I developed a model called the four stages of validation which simply helps to organize and guide any business in any Venture through this process of validation right so you have to validate first what is the problem that you think you are solving second what's the solution that you believe will address it third what is the product that you think the customer will actually use and fourth what is the business that you think you can build off of that now what does this look like in practice it really comes down to do you adopt this kind

of approach to testing and validating and learning challenging all your assumptions about your business or do you sort of take the old Playbook which is a lot of planning and a big decision by a leader at the top right so let me give you two contrasting examples first CNN not long ago the leadership of CNN and it's parent Warner Brothers had a very exciting idea for new digital business model they saw the whole world is going to streaming they saw the great success of Disney plus and others and they said this could be an opportunity

for news for our brand for our kind of content and to reach audiences in the digital era in a different way very exciting idea right so what did they do the day the experiment they validate that they test and learn what the customers really wanted no it created a long very detailed plan right hired McKinsey got a lot of third-party data convince themselves there was no question this was a huge opportunity just waiting for them to walk through the door it was all just a matter of execution and so they put 300 million dollars into

preparing for the launch of CNN plus that was all before day one spent and so they launched the service exactly as they envisioned and were quite certain that the customers would want and love it to be and it was not what they expected uh less than ten thousand daily users a tremendous failure by their own expectations and their own standards and the whole thing CNN plus was shut down uh in about a month now it was a really interesting idea I do not uh just discredit that at all uh but the fact is 300 million

dollars was a lot of money a huge waste of money to learn whether or not the market demand was exactly what they had predicted beforehand by contrast let's look at Walmart now one of the big strategic priorities of Walmart in recent years has been can they be the ones who really helped to define the future of online grocery purchase right a really critical important category in Commerce which had not yet been really sort of captured in the shift to e-commerce and omnichannel purchasing and delivery and so as they focused on this they didn't create a

giant master plan and roll it out they said there are many different ways we might approach this we don't know what's going to work right I was at Walmart Labs talking with their Chief Operating Officer Jeff Schatz when they were running constant experiments checking pricing checking customer demand different types of basket sizes operational questions and what they found iteratively through testing different approaches was there were many opportunities that might work most important uh they discovered uh there were some customers who would pay per delivery but there was a lot of value in creating what they

launched Walmart plus a membership program annual membership a little bit like uh Amazon Prime that would give you free grocery delivery for the entire year uh as well as some additional benefits at the physical stores of Walmart um at the same time they also tested a Bops buy online pickup at store a model and they had that in play When the pandemic hit and suddenly there was a huge surge in demand for that now this was free you didn't have to sign up for the membership anyone could order online you just had to drive to

the store and they would come out and put the food the groceries in the back of your car in the trunk and this became extremely popular but of course customer demands needs or expectations are shifting more recently as quarantines have lifted and lives have changed Walmart discovered a new emerging customer need some of the customers don't just want to have you bring the groceries and leave them at your doorstep where the ice cream and the sorbet and other things can start to melt they actually want to have a known trusted Walmart employee who they know

by name to actually come into their home and put it all away for them and thus they've launched Walmart in-home a new variation a premium version of the same service always testing always learning what does the customer need what will actually work in the real world the fourth step of the road map is about governance and governance encompasses many things it is oversight of new Ventures like we've been talking about it's funding it's people where did people get assigned uh to uh New Opportunities it's metrics it's compliance right all of these things are critical for

any established business and yet if we don't get out of our own way if we simply use the old governance we've run for years as the company is trying to change it will continually put barriers to innovation in front of us and so we have to learn to rethink governance to really Empower us to manage New Growth at scale and this is critical if you look at the success of the New York Times and transforming its business model it's not just about how they've changed the whole process around news Gathering and creating stories and distributing

them and the subscription model around news it's also been supported critically by new revenue streams from things like New York Times cooking uh the New York Times gaming app these are separate subscriptions uh Acquisitions like uh not just you know Wordle but the wire cutter the athletic and how each of these are actually managed with difference governance models based on what they need to succeed right at Amazon you may not know but the most profitable part of that entire business by far is not the e-commerce service and Prime that we're also personally familiar with it's

actually Amazon web services this was a huge step outside the core of the business back in the day when they were purely a retail company it was actually a junior engineer named Benjamin black who first sketched out in a white paper this idea that hey if we are rebuilding our entire technology stack to have a more scalable e-commerce operation maybe that's something that we could also sell as a service Enterprise Cloud Computing Services right a huge step for Amazon and this story points to something that digital native businesses truly understand which is the importance of

pushing decision making down the organizational chart to the lowest level this is part of the whole idea of two Pizza teams at Amazon which have been adopted in other businesses as well and the key here is to design your governance to empower your teams to drive change right these are teams that are going to look very different than the kinds of sort of siled functional teams you have in most traditional organizations these teams are small they are multifunctional they are critically single threaded that means everyone is 100 focused on the single project or Venture that

they are focusing on and working on right now they are autonomous they have clear decision rights so they can work without constantly needing to get signed off outside approval on the decisions they make and they are accountable which starts with a clear definition of success for that team and its work to which they can be held accountable and transparent metrics that everyone can see what is happening while they are working independently a very different model of governance for teams the last step of the roadmap is capabilities how do we grow the technology talent and culture

that we need to truly be a digital business now Volkswagen like many of its peers established automobile companies are all grappling with a question right now am I a car company or am I a tech company that makes cars because guess what that's what Tesla is right right it is a very different kind of company and this is a question that each of us has to be grappling with are you a tech company in your own field and that really comes down to three things first of all do you have the right kind of digital

technology architecture data assets I.T governance which are all designed for flexibility for scale for agility for independence of action throughout the organization do you have the right digital Talent this has to be managed not just at a point of hiring people but really throughout the entire Talent life cycle if you're going to have and grow the talent that you need and third you have to have a digital ready culture you need a culture that is data driven that is collaborative risk taking experimenting that is much more bottom up than just top-down command and control one

that is not focused not on the products but obsessed with your customers now if you spend time with great digital native businesses you'll actually find they talk much more about culture than about their technology at Amazon they are constantly looking to their clearly defined leadership principles and asking what are the processes that we can use every day to support in and still make those principles really come to life my friend uh David Glick was at Amazon for almost 20 years from the IPO days to the current ERA and he saw more and more of these

develop over time as Amazon thought about how do we instill culture at scale one of the many things that he saw uh added was the no PowerPoint rule right right so if you're in a meeting at Amazon you are not allowed to present your proposal and your ideas in a PowerPoint right right instead you have to use a six page memo which carefully lays out in narrative fashion following a very rough template of the topics what you're proposing and why presenting data both in favor of your argument and against your argument taking that critical point

of view and then at the start of every meeting everyone sits in total silence while they read the memo as they learn from experience if you send the memo in advance some people are going to read it a lot won't because they're busy and they'll just kind of bluff their way through the meeting and pretend they have so everyone sits at the first start of the meeting reads the whole memo takes notes once everyone's done and ready and has the questions then the discussion begins why do they do this because it changes how decisions are

made and that is critical to how Amazon operates it's critical to their culture so these are the five steps of the road map and in the book they're actually a number of uh specific Concepts and strategic planning tools within each of these steps to help you to define a shared Vision in your organization to pick the problems that matter most to validate new Ventures that you are focused on to manage growth at scale with your governance and to grow the technology talent and culture that you need I want to leave you with three last truths

about digital transformation first digital transformation is not about technology it is about business and it's about the customer second digital transformation cannot just happen top down command and control from the CEO or the chief digital officer telling everyone else what they're supposed to do it must be a bottom-up change that engages people at every level of the organization and lastly digital transformation is not a project it does not have a start date and an end date it is a continuous Journey this is because the world is not slowing down the change is not over it

is going to keep coming and digital transformation is an ongoing process of becoming an organization that is more and more able to adapt to that change every single day into the future digital transformation is hard I want to be clear this is not easy for any established business but it absolutely is possible and any organization if you are able to define a shared vision pick the Strategic priorities that matter most to you to really practice experimentation every day in your teams to reshape your governance to empower change in the organization and grow the capabilities and

the culture that you need for the future than any organization can transform and thrive in the digital age thank you thank you