Lessons on digital transformation from Nike, Burberry and Starbucks.
There’s no simple recipe for becoming a digital leader. But a good, first step? Put someone in charge to lead the change, and you’ve added a key ingredient.
That’s the message of “Leading Digital: Turning Technology into Business Transformation” (Harvard Business Review Press), which explores how large companies in traditional industries leverage digital capabilities to get a leg up on the competition.
Nextgov Executive Editor Camille Tuutti sat down with one of the co-authors, George Westerman, an MIT Sloan management researcher, to get more insight into how organizations can master digital transformation.
Although the use cases in the book include private sector companies -- including Burberry, Nike and Starbucks -- government entities can learn a thing or two about how to lead the digital transformation.
Westerman’s hope for federal agencies? “An agency like the Social Security Administration should be as easy to deal with as the Apple Store,” he says.
Don’t we all wish that.
Q: The book starts by saying, 'technology is the biggest story in business today.' What are some recent technological breakthroughs that today are radically shaping business?
A: We think about it as an inflection point that technology has been going through, which started 50 years ago. The first time the government ever recorded something called ‘computing’ was 1958. The last 50 years or so, technology was one thing, which was a lot of automation. And the inflection point we’ve seen the last eight to 10 years where there’s a lot more mobile, it’s social and connected; it’s much more analytic than it’s ever been before. That’s what we’re talking about: the new story of technology. We’re not just automating processes anymore; we’re completely enabling whole new ways to work and to make decisions than we ever did before.
Some of the things we’re seeing is mobility -- that’s huge -- the idea that you don’t have to be connected to your desk anymore or office. Social media, that you can communicate with people in ways that you never imagined before and organizations can be more flat in their communications. And the last thing is analytics. People are starting to really mine the data and making smarter decisions -- you can get much more granular now.
Q: Looking at individuals driving those changes, what does their DNA look like?
A: For all this talk about 'let a thousand flowers bloom -- you’ve got to innovate from the bottom up,’ every single 'Digital Master' we've met, the transformation was led top-down, very strongly top-down. So the people driving this are either the CEOs or someone at the next level down making this happen. And you have to do that because what we’re talking about is how you’re changing how to engage with with customers, changing your operations, changing your business models. If you don’t have someone at the top driving that, [change] is just not going to happen.
Q: 'The reasons that companies fall short of digital mastery aren’t mysterious,' you write. What are those key challenges?
A: The first one is the idea that if you’re doing digital just to do more of the same, that’s not going to be enough. People doing mobile [in which] emails or social media just become another corporate communication mechanism -- that kind of incremental view is just not going to stand in a period where big changes occur. How can you be completely different when these technologies are there? What impossibilities are possible? The second challenge is leading. The senior teams really need to get on board and drive things, and you’ve got to create a vision and you’ve got to engage your people. And that’s really hard to do from the middle. The last one is, if your IT is a mess, it’s hard to do digital. You’ve got to fix that relationship between IT and business people and you’ve got to fix the spaghetti in the platforms.
Q: A company like Burberry, you write, went from 'Beginner' to 'Digital Master.' What can other organizations learn from that story?
A: At Burberry, the issue that they had was that they were making 2 percent growth per year while competitors were making 12-13 percent. [Then-CEO) Angela Ahrendts made the choice she wasn’t going to compete with the Italian and the French firms because [Burberry] is a stodgy British firm. Those firms go after one group of people: 'Ladies who Lunch' -- wealthy, older ladies who can spend a lot of money. Ahrendts instead decided to go after millennials especially in Asia who had a lot of money, who care a lot about brands and weren’t reached by the other brands. That was a major change, for 100-year-old Burberry. It started with that vision of approaching a whole different customer segment and saying, ‘these people’s language is digital, so we’ve got to be digital.’ What we see in companies over and over again is, someone has got to say, ‘how are we going to be radically different?’ and then start to figure how to get there.
Q: How does a leader promote a digital governance culture?
A: You start by putting somebody in charge of digital and then supporting them. In one media company we studied, the CEO brought in an outsider to be a chief digital officer. He was going to try to build some common processes across all the media properties. And the next thing that happened is every property owner went to the CEO and said, ‘I don’t like that guy, get rid of him.’ And the CEO said, ‘No, he’s our guy.’ That’s how you build that culture. You start it and you reinforce it with your messages. Gary Loveman at Caesars [Entertainment Corporation] said: 'We’re going to be learning through everything we do with our customers; we’re going to be experimenting constantly. And if you do experiments without control groups, don’t come back to work tomorrow.'
Q: The book concludes with an optimistic 'You ain’t seen nothin’ yet' about the impact of digital technologies on the business world. You mention robotics, wearables, 3-D printing. Which emerging tech trends do you see being truly transformational?
A: 3-D printing is one of those ones we don’t hear enough about that’s starting to change the supply chain in huge ways. If you can imagine running a supply chain where you don’t actually keep any inventory anymore. It’s already happening. Or designing things for family cars where you print the products every time -- it’s already happening. I think 3-D printing is already out there further than we think it is. I also think there’s a whole lot more we can do with big data still, and the Internet of Everything. Oh man, if we think it’s hard now with the amount of data we have, just wait until you’ve got trillions of data points and you try to make sense of those.