Top Tips to avoid Digital Disruption
We talked with Tony Saldanha, Advisor vyn, Global IT and Shared Services Executive, Consultant, Founder & best-selling Author of ‘Why Digital Transformations Fail’ to learn from his expertise in delivering large scale successful transformations.
Here’s Part 2 of his key lessons.
What role do innovation labs play in jump-starting digital transformation programmes?
90% of all innovation labs fail according to Cap Gemini. Disney, Coke, Target and Microsoft amongst others, have all shut down or reduced the scale of their innovation labs.
Why? It’s because setting up an ‘Innovation Lab’ does not guarantee transformation of the mothership. As a result, most innovation labs are more likely to be Innovation theatre rather than innovation drivers.
Pressed by the stakeholders to be more innovative, most boards and CEOs make well intentioned efforts to jumpstart innovation by ideas such as innovation labs. However, these are more like buying gym memberships as part of a New Year's resolution to become fitter.
Buying a membership does not guarantee becoming fit. To be fair, innovation labs aren't the only form of theatre. Others include holding hackathons, Silicon Valley tourism / delegating to Corporate Ventures groups and relying too heavily on consultants. Each of these is an important tool, but in the absence of a strategy they are ineffective to jumpstart innovation.
So, what should you do instead? Firstly, start with a broader digital transformation strategy. Work on the supply side at how to generate and test ideas and on the demand side on how to adopt them. Only then, look at the tools such as innovation labs.
In other words, don't do transformation, be transformative!
Watch Tony’s 90 second vyn on this innovation lab topic here.
To be transformative, how important would you say is the role of the teams embracing the change, particularly the middle management?
In this context, let me share a compelling statistic: in a Harvard study of 56 companies, only 32% were successful in change management. The biggest reason for failure was middle management.
Is this an example where the blame for change leadership needs to be placed on middle management? Is this a frozen middle? No, I don't think so, because I think the term frozen middle is a bit pejorative. It places the responsibility for change leadership on middle management, whereas it needs to reside with us, the senior leaders.
I believe that change management fails at the middle management level for four reasons: One is that the reward structures are more driven towards operation than innovation.
Secondly, the time needed for coordination vertically and horizontally takes up most of the effort and energy of the middle managers.
Thirdly, I believe that the two worlds of innovation, disruptive innovation in particular as well as operations need some degrees of separation, because...
So, what can we do about it?
I believe middle managers need empowerment to drive dramatic change. This is because they are a critical, but neglected part of our organisational structure. In fact, a Wharton study has determined that there is a 22% variation in the results of companies depending on how well middle managers are empowered.
If managers can indeed drive dramatic change, is there a case for disrupting your own business model to be more successful?
Yes this is something I feel strongly about. Let me ask you this. Why is it that Netflix keeps disrupting itself constantly, whereas other innovative companies have gone bankrupt? How can you avoid eventual disruption?
Now, I'm sure there were some very innovative horse carriage makers that still got disrupted by the automobile. Netflix is different. They are the best example we have of a serial disruptor. They've disrupted themselves at least three times from mail and DVDs to streaming media, to creating original content creation.
You need a different innovation strategy for your current business model from that of disruptive business models. This is really important because we're in the midst of the Fourth Industrial Revolution where digital technologies are starting to blend with the physical, the biological and the social.
This calls for totally different capabilities and skill sets as well as for a very different strategic innovation plan for disruption. That's called digital transformation.
So, what should you do? Firstly, ensure that you have innovation programs that cover winning in both the third as well as the fourth industrial revolution. The plans necessarily are very different.
Secondly, make sure that you have plans to disrupt yourself not in a risky haphazard way but, in a way that ensures that you are winning both today as well as tomorrow.
Watch Tony’s 90 second vyn about the art of perpetual digital transformation here.
Thanks for taking us through the fine art of perpetual disruption. Given the different ways a business can be disrupted, what advice would you share with our readers?
Let’s start with an example; Sears is being beaten by online digital business models. Meanwhile, Tesla and Amazon are winning with smart digital products and incredibly efficient digital operations.
What are the ways in which you could be disrupted?
Sears and other retailers are a good example of digitally driven, new business models. However, e-business offers a much better ‘go-to market’ solution from a customer perspective. This is the same dynamic that happened between competitors, Netflix and Blockbuster.
The second is smarter technology embedded products. For example, Tesla took what used to be a mostly mechanical product and has turned that into a smarter electronic service offering. This is the same dynamic that's been happening between the cashless industry and the cash economy.
The third is efficient digital operations. The fashion retailer Zara goes from conceptual design to in-store product availability in only two weeks! That kind of efficiency is hard to beat.
So, how does this knowledge help your business?
Being aware of the three ways in which you could be digitally disrupted allows you to create counter measures. As part of your strategic plan, you need to have digital transformation products to cover all three eventualities.
Thank you so much Tony for sharing your experience and expertise in what it really takes to avoid digital disruption and thriving in the fourth industrial revolution!
Watch Tony’s engaging 90 second leadership perspectives here on the vyn playlist and subscribe to vyn.
Read Tony’s latest book ‘Why Digital Transformations Fail’, #1 on Amazon’s new releases list for organisational change.
Thank you for reading!
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