In Fast Times, a team of McKinsey consultants share the recipe they apply to help their customers be first movers and win the digital race.
“[Fast Times] is for senior executives who are frustrated by the slow pace and limited return on investment (ROI) of their digital transformations, and are unsure what’s holding them back” in the word of the authors.
While not a detailed blueprint to design a Digital Transformation initiative, they cover critical imperatives to develop a Strategy, Capabilities, Adopt and Scale, and they cleverly do it answering provocative questions like “Are you clear about the which transformation model is best for your company?” or “Have you hired digital stars?”
They provide insightful tips on Speed, Scale, Talent and Culture. A must read for leaders already embarked in a digital journey or in need of a reset.
Fast Times: How Digital Winners Set Direction, Learn, and Adapt by Arun Arora, Peter Dahlstrom, Klemens Hjartar, and Florian Wunderlich
Most business executives think – often reflected by who they bring to the room when you discuss the topic with a CEO – that Digital Transformation is about technology. It is not.
Certainly, top notch technology capabilities are a critical ingredient in all Digital Transformation success stories, but there is a lot more to it. This is the purpose and central theme of this blog: debunking the notion that technology is the most important factor in making a start-up or centuries old companies more competitive with digitally driven innovation, and expanding the field of view of executives to include the broader set ingredients that they will have to mix and match to lead their companies into the digital future.
Digital Before Transformation
Software is eating the world. In a now famous 2011 Wall Street Journal piece, technology entrepreneur and venture capitalist Marc Andreessen brilliantly made the case of why most companies were in the way of becoming software companies – across industries, from entertainment and banking to cars, retail and logistics.
“Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale” he wrote.
While banks still own branches, airlines fly planes and Amazon last year ordered 100,000 electric delivery trucks, technology is now in charge of engaging with customers, managing risk and fares, or deploying assets – and make companies winners or losers depending on how good their algorithms are.
Most of the underlying technology has been around for some time. But now its maturity, ubiquity, and affordability – and the ingenuity of the engineers, entrepreneurs and innovators deploying it – are giving it a dramatically more significant role in shaping business models and strategies. A Transformative role.
Time to Transform
Some industries and companies can be wholly reconfigured by technology – remember Blockbuster or Tower Records? – but not all. McKinsey puts is very well: “the number of companies that can operate as pure-play disrupters at global scale are few in number, and rarer still are ecosystem shapers that set de facto standards and gain command of the leverage created by hyperscaling digital platforms.”
But even in asset or activity-intense sectors that can’t be entirely switched to digital-only experiences, modern technology is driving major change, and visionary executives the world over have taken note and quietly started reshaping strategies, business models and organizations to exploit these new opportunities. They updated their leadership styles, cultures and platforms to design and deploy entirely new ways of doing things. They embarked in a Digital Transformation.
The Impact
Academics and consulting outfits have very carefully analyzed the advances in digitization and linked them with financial performance, and the relationship is undeniable.
A seminal two-year study by the MIT Sloan School of Management analyzed more than 400 large firms and found that digitally transformed businesses are 26% more profitable than their industry competitors, drive 9% more revenue through their employees and physical assets and are 12% more valuable than their peers.
The researchers developed a digital maturity model to show how different companies are reacting to technological opportunity, and cleverly analyzed how businesses invest in technology, but more importantly, how the true leaders create the leadership and change management capabilities necessary to drive innovation, which they called transformation management intensity.
They proved that the ability to modernize strategies, organizations and processes is as – or more – important than the technology itself in the quest to be a digital leader.
Another by McKinsey found that focusing on the right digital practices, B2B companies –currently trailing B2C companies in digital maturity – can create long-term value, with the most advanced in their transformation programs driving five times more revenue growth than their peers.
Digital Leadership
Digital transformation is about Strategy, People, Innovation and Execution. Photo by standret.
So, what is Digital Leadership about then?
It is about reinventing strategies, operating models, and processes. It is about putting the customer in the center of attention of the entire organization and designing their experience from the outside in. It is about fact driven decision making and agile change management.
It is about fostering a culture of nonstop innovation and fearless renewal, of mercilessly abandoning established ways of doing things and adopting digitally enabled models.
Technology allows all of this, from the advanced analytics platforms that support decision making and action to the omnichannel platforms that support seamless customer experiences. From process automation to remote collaboration. But despite the broad availability and growing affordability, technologies alone are useless without the leadership to drive change.
Transformation is more important than Digital. And Transformation is about Strategy, People, Innovation and disciplined Execution, the components of the framework proposed in this blog.
Originally written late 2017, updated December 2020.
A new approach to leadership for the team at the top.
If a company wants to be very fast, thoroughly transform customer experiences, and systematically outperform competitors, it needs more than many agile teams. A truly agile company requires that the company’s top officials, most, if not all, of the top executives, also adopt agile principles.
Writing for Harvard Business Review, a team of Bain & Company consultants describe how such an agile leadership team works, how it differs from the conventional corporate-style executive committee and other agile teams, and what agile means for the day-to-day work lives of senior executives.
While the job of a conventional agile team is to create innovative solutions to a problem, an agile leadership team aims to strike the right balance between standardizing operations and pursuing innovation.
The Agile C-Suite by Darrell Rigby, Sarah Elk, and Steve Berez Harvard Business Review, May–June 2020
Interviewing executives and employees at more than two dozen digital and in-transition companies and then surveying employees in over 500 digital and traditional companies, the researchers identified the values and practices from digital culture that make sense to transplant to traditional companies as they embark in their digital transformation journey.
They identify impact, speed, openness and autonomy as the four key values of digital culture, and then extrapolate them with eight digital and traditional practices to promote innovation without sacrificing the integrity and stability that enable a healthy workplace.
They support the empiric research with real-life examples.
Having originally learned Agile – and its family members Scrum and Kanban – leading a software development organization, applying it to change management and digital innovation required taking a step back and reflecting how the concepts, methods, and artifacts work in this new mission and environment. It took a lot of work!
In Doing Agile Right, Bain & Company’s Darrell Rigby and his colleagues Sarah Elk and Steve Berez provide an excellent overview of Agile concepts, how to implement and scale them to enable nimble innovation, and, in their own words, how to achieve balance between the fast-paced change facilitated by Agile and the financial and operational discipline provided by traditional management practices.
“Every organization must optimize and tightly control some of its operations, and at the same time innovate. Agile, done well, enables vigorous innovation without sacrificing the efficiency and reliability essential to traditional operations. The authors break down how agile really works, show what not to do, and explain the crucial importance of scaling agile properly in order to reap its full benefit. They then lay out a road map for leading the transition to a truly agile enterprise”
Doing Agile Right: Transformation Without Chaos by Darrell Rigby, Sarah Elk, Steve Berez
Digital Maturity indicates the relative development of a company and organization’s competency in key areas to establish present-day standing and help identify opportunities for improvement and priorities for investment.
This is usually accomplished running a Digital Maturity Diagnostic to determine whether an organization is lagging, competitive or leading based on a set of factors: e.g. Digital Strategy, Leadership and Culture, Digital Skills, Customer Centricity, Technical Competencies, Data & Data Analytics, Project Delivery, etc.
Academic researchers and consulting outfits have developed the models, and then applied them to large pools of organizations to determine relative maturity by company, sector, geography, etc. Many provide a set of results by category and a combined score.
Digital Maturity Reports are enormously useful tools to help business executives map where they stand in the innovation race relative to their peers, identify gaps and opportunities, throttle investment, and track progress along the digital journeys.
Generative AI arrived quickly, with bold promises dominating headlines. But anyone who has lived through past technology shifts knows the real story: the hard job of driving value is not proving it can work –…
Digital intensity and transformation management intensity influence revenue growth and profitability in different ways. This toolbox equips leaders to integrate superb transformational execution with their digital strategy, enabling them to achieve up to 26% greater…
The team behind The Digital Advantage: How Digital Leaders Outperform their Peers in Every Industry and The Nine Elements of Digital Transformation reflected on their influential research after surveying 1300 executives in more than 750…
Most business executives think – often reflected by who they bring to the room when you discuss the topic with a CEO – that Digital Transformation is about technology. It is not. Certainly, top notch…
Digital Maturity indicates the relative development of a company and organization’s competency in key areas to establish present-day standing and help identify opportunities for improvement and priorities for investment. This is usually accomplished running a…
One of the hottest topics CEOs face when tuning their leadership teams to embark in a Digital Transformation is deciding if they need a Chief Digital Officer. They do.
These are the four reasons why.
One: responsibilities
The Digital leader is concerned with strategy and models, change management, digital business outcome and supporting the rest of the business leaders develop their digital skills and agendas. She or he is the “sherpa” facilitating the development of the roadmap and nudging the transformation, understands technology profoundly but does not have to be a technical expert.
The IT lead executive on the other side delivers on technical stuff, itself a gargantuan effort – more on this later. The two must form a strong and fluid partnership since their success is mutually dependent, their agendas are complementary but different.
Two: priorities and bandwidth
Seasoned executives know that mixing workloads that have aggressive real-time demands with forward-looking pioneering work on the same individual(s) usually leads to the present mortgaging the future. In Sales it is one of the guiding principles in organization design and priority management: once a leader, team or individual executive has enough “existing” customers, growth will suffer, it is crucial to either reshuffle responsibilities or add people.
The same happens here. The CIO will usually be tasked with managing delivery and operational workloads, inevitably sacrificing time needed to research and strategize if also asked to lead innovation. The CDO has a lighter operational burden and demand-driven disruptions, and can focus on imagining, planning and building the future.
Note that the CDO must be responsible for outcomes and show results but is a lot less concerned with the day to day operational demands of the IT infraestructure.
Three: profile and dynamics
The CDO is a networker, both internally and externally. Innovation and change require a huge investment of time during the envisioning, planning or implementation phases of new initiatives. It can be selling ideas, coordinating or troubleshooting, and while structure and focus are essential to get results over time, a lot of the actual hands-on time is unscripted and unstructured.
The CIO on the other side lives in a significantly more systematized and process-driven environment required by project delivery, operations, support and security.
This requires each executive to have a specific profile – or at least wearing the right “hat” for the demands of the job since smart, experienced individuals could conceivable adjust their style as needed – but will be challenged to do both simultaneously.
Four: an additional voice
Another advantage is bringing other technically competent individual to the leadership team. Although the role is not as technical as the CIO, the CDO will have enough technical know-how to present alternative ideas and views, challenge assumptions and enrich the debate along the way.
This of course requires good planning and decision-making habits, idea curation, and a bit of conflict management. But openness to consider a wide spectrum of possibilities, have heated debates and experiment with different approaches is a desirable attribute in a digital leadership team.
Size Matters
The size of the business has a counterintuitive impact in the need to create the CDO role. Instinctively, the larger the business the more important it should be. Not so fast.
Here is other side of this story: larger businesses have larger IT organizations, giving the CIO more flexibility to delegate day-to-day operational duties, redeploy a % of the staff to innovation initiatives, and therefore reinventing the position as a hybrid CIO/CDO role. This is particularly true if the company is advanced migrating systems to the cloud – freeing resources and budget from legacy on-premises jobs.
Smaller IT organization however will have a smaller or more junior team reporting to the CIO, making it more challenging to redefine and expand the position, or redeploy resources further down the IT organization.
One solution does not fit all
In the end, this is a case-by-case discussion that must consider several factors – but most of the time separating the roles will be the preferred approach, with far more upsides than downsides.
The Digital Innovation team is the source of vision, knowledge and experience in how technologies will transform the way a company does business. It is the hearth of the Transformation program and will cement the ability of the organization to innovate identifying and adopting future technologies beyond the initial change initiative.
Name and purpose
While the name may change depending on company size and convention (e.g. Digital Innovation Center in larger corporations, Digital Innovation Team in smaller ones, Digital Excellence Center after becoming a Digital leader) the purpose is similar: a compact but assertive group of specialists to lead the design and implementation of the initiatives that bring to life the Digital Transformation.
Responsibilities and influence
Members of the Digital Innovation Team collaborate with business teams to identify, assess and eventually develop innovation opportunities enabled by technology, and then guide the IT teams to implement and manage the relevant systems. Some organizations call them Product Owners, although this may be more or less applicable depending on industry and scenario.
They are also influencers and a support function, the go-to experts when line of business leaders or teams come across ideas, opportunities o problems that could be addressed with technology. They partner with and empower the less technically-savvy to help them be Digital innovators.
Digital Innovation Hub
Contribute to the Digital Strategy
Monitor industry and competition
Research trends and innovations
Imagine novel applications of technology
Assess feasibility and potential impact
Develop and lead initiatives
Drive business outcome
Ensure alignment between business and technology
Organization
The team is usually structured to match the mayor “themes” or initiatives that form the basis of the Digital Strategy: Data Analytics, Customer Engagement, Digital Marketing, Process Automation, and so on. They are part of the same team (formally or virtually) to ensure that the plans they manage are aligned and connected.
In smaller organizations, this may be one of only two functions that report to the Chief Digital Officer, and in most cases will rely on a sister function, the Transformation Office, to orchestrate the Digital Strategy, the rollout of projects and drive change.
The Digital Innovation team is one -if not the- most impactful and cost-effective investment of the Digital Transformation program. Independent from line of business organizations and IT, they will focus on innovation regardless of short-term pressures or complacency.
“The best companies — those we call Digirati — combine digital activity with strong leadership to turn technology into transformation. This is what we call Digital Maturity. Companies vary in their digital maturity, and those that are more mature outperform those that are not.”
Consistent with other research, leaders are digitally transforming three key areas of their business: customer experience, operational processes and business models, and each of the three pillars has three elements that are changing.
Digital Transformation: A Framework 