By Tony Saldanha, Special for USDR
A chat with Tony Saldanha, president of the consulting firm Transformant, on his new book, Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead. AsSaldanha says, this era is like no other we’ve experienced before — and companies had best learn how to adapt. Fasten your seatbelt and read on.
1. What inspired you to write this book?
Like most operational leaders, the challenge of how to make digital transformations more successful has been a constant for years. 27 years in IT and Shared Services with Procter & Gamble spanning all continents have given me the opportunity to work on small automation efforts in Africa and large corporate acquisition integrations, as with P&G’s acquisition of Gillette. It became evident to me that there was a method to the madness of digital transformations, and that the 70% failure rate could be significantly improved.
The other thing that bugged me as I ran P&G’s multi-billion shared services in every region was the constant hype and overselling of technology. Artificial Intelligence, Blockchain or Cloud computing were positioned as solutions as opposed to tools. With the exponential growth of capabilities in recent years, this hype has reached a fever pitch. The average smart phone user now has more computing capabilities at hand than when Bill Clinton was president! The hype machine leaves business leaders with the frustrating dilemma of knowing that digital is not an option while being entirely unsure of what exactly to do. I realized the notes and checklists I had created for myself would be helpful to others too.
2. Can you explain the concept of digital transformation?
Technology suppliers label everything from a new email system to artificial intelligence tools as digital transformation. While that’s understandable from a technology sellers’ perspective, since digital transformation is the number one challenge for boards of directors and is a trillion dollar industry, it muddies up the water for executive decision makers.
I recommend that business leaders and owners think of digital transformation in the context of the Fourth Industrial Revolution. We happen to be in the midst of it. The first three industrial revolutions were driven by mechanical, electrical and electronics/internet technologies. The fourth melds the physical, biological, and social worlds with digital. With digital capabilities disrupting every industry from media to medicine, the business models that made organizations successful in the Third Industrial Revolution are inadequate now. Physical selling and distribution models have to now incorporate personalized e-business models, for instance. While digital transformation requires the use of digital technologies, its ultimate success can only be defined by whether or not the enterprise sufficiently modifies itself to thrive in the new digital era.
3.Why do digital transformations fail? Is there one factor that brings down businesses?
One word: discipline — in defining the exact goals of digital transformation for a given situation, and in using newer sets of execution methods necessary for success. In Alice in Wonderland, Alice asks the Cheshire Cat which way she should go. The Cheshire Cat replies that it depends on where Alice’s destination is. When Alice says that she doesn’t really care about her destination, the cat wisely retorts that in this case, it doesn’t really matter which way she goes. This is not dissimilar to what happens with digital transformation.
Most leaders aren’t really clear about what the goal of digital transformation is for their specific organizations. Is it just to upgrade to new technology, or to change their business model? The discipline of setting the right goals is missing. The second issue is the discipline in execution. Most leaders follow the practices of implementing technology upgrades to run digital transformation. In reality, the processes required to execute digital transformation are closer to those needed for organization change management and venture capital portfolio management.
4. Is the retail apocalypse an exaggeration?
The retail apocalypse is unfortunately all too real. The real estate firm Cushman & Wakefield estimated that twelve thousand retail stores closed in 2018 in the U.S., up from nine thousand in 2017. That includes several iconic chains filing for bankruptcy: Sears, Mattress Factory, Brookstone, Rockport, Southeastern Grocers, Nine West, and Bon-Ton. And that’s on top of names such as Toys “R” Us, Payless ShoeSource, H.H. Gregg, the Limited, Aéropostale, Sports Authority, and Radio Shack in the previous two years. The retail sector continues to be among the top of the list of bankruptcies in the U.S., along with the energy sector
5. We’ve all seen businesses where some functions are completely digital and others aren’t, or aren’t yet. Why is that problematic in the long run?
The problems arise when the siloed digitization of processes detract from holistic efficient or agile operations. If Amazon had its amazing online ordering website, but sub-par warehousing and accounting operations, would they be as effective? Successful companies in the digital era go after end-to-end improvement of specific work processes.
In Amazon’s case this is the entire process of “demand-to-cash.” That includes the whole cycle from generating demand for products with AI algorithms that suggest you might like item A based on your liking item B, all the way to collecting payments and/or sending refunds. Focusing on digitizing customer noticeable processes from end to end provides companies with a sustainable and distinctive competitive advantage.
6. What’s the best advice you can give to a smaller, new business right now?
Get going on digital capability building now! You have a key advantage over your bigger competitors — you’re not weighed down by legacy processes, systems and people. Your best bet to overtake larger competitors is to create digital business models and digital operations that are designed for the Fourth Industrial Revolution; not for the legacy operations of the third.
Here’s a small example. Mundane operations like travel and expense management in large enterprises are very different from those in more modern digital companies. Legacy operations often use pre-ordained travel agencies to book flights and hotels; and collect receipts, submit expense reports, validate those reports vs. receipts submitted, pay the corporate credit card agency and the employees, and so forth.
But many digitally native companies use data and technology to completely replace these complex activities. So, if you want to make a trip from point A to point B, there is great data available on appropriate trip cost, which is then available as a budget number. At that point the employee is given a budget figure and completely set free to book or stay wherever they want. There are no travel expense reports to be submitted, and no back-office operations to validate receipts with claims.
7. Do you think there will be a Fifth Industrial Revolution?
My focus in writing the book was to help executives, public sector leaders and business owners turn an existential threat into an opportunity of a lifetime by making their digital transformations successful. Large-scale industry failures define industrial revolutions, and the Fourth Industrial Revolution is inexorable: it will happen regardless of whether we embrace it or fear it. And there will inevitably be a fifth and so on. The existence of these cycles isn’t a choice; whether we embrace them and win via them is.
To learn more about Tony Saldanha, visit transformant.io.