Making the leap to digital business

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Jim Sinur came up with Gartner’s famous hype cycle, and his book “Digital Transformation: Innovate or… Die Slowly” is expected to hit shelves this spring.

Companies wanting to become digital businesses must make a leap of faith and start a transformation that may take years.

It’s the kind of transformation where everyone has to be on board. Executives will have to accept that there are no lines of attribution tying employee performance to digital success—at least not yet. Managers will have the odd task of incentivizing employees to run so fast that they might stumble. And employees must stop trying to be perfect, because they will no longer be rewarded for it.

Sounds like a nightmarish transformation, right? It gets worse.

For companies deciding to sit this one out, it would be a potentially devastating mistake, says Jim Sinur, who just joined Palo-Alto, CA.-based Aragon Research as its first Aragon Fellow, leading the coverage of digital business transformation, business process management, cognitive process and Internet of Things.

No stranger to major transformations, Sinur has worked at Northwestern Mutual Life, American Express and Gartner. Sinur came up with Gartner’s famous hype cycle, and his book “Digital Transformation: Innovate or… Die Slowly” is expected to hit shelves this spring.

Five2ndWindow sat down with Sinur to get his take on digital business transformation.

The “digital transformation” journey of a thousand miles begins with a single step, right?

Sinur: For most organizations, digital business transformation comprises three major areas: The first phase is customer delight—a different customer interaction. We’re not talking about CRM where you’re keeping more data about your customer so you know what to sell them. It’s about creating a better interaction with the customer, because the customer now has control.

Jim SinurWith mobile, [Five2ndWindow] is in this first phase. You’re all about the first step of the digital transformation, because that’s where it’s happening, at the interface.

The second phase is internal operation optimization. The way companies operate internally is the most challenging part of digital business transformation. Part of digital is being agile and able to change. Building a culture for change is the biggest challenge.

The third phase is creating products and services. If all goes well, you get to invent products and services, and then realize you may have to change your business model to take advantage of these new products and services. That’s ideally how that evolution should go.

A fourth phase that might be needed at any time is a change in the business model. So if you have an outlier like an Uber coming in, you’ll be forced into a business model change earlier than the [ideal] progression.

How do you start changing the culture?

Sinur: It depends on what kind of pressure is on you. You either take it incrementally or do it in bigger pieces. Most companies are conservative, and so they’ll change the culture incrementally.

If you have a visionary at the highest level in the company, they might bring in a chief digital officer. Gartner recommends you get the most bang for the buck if you bring someone in high, like a CDO. I’ve lived through a number of transformations, and it doesn’t always come from on high. Rather, it comes from a visionary in the middle.

What I find as the most successful is incremental transformation that accelerates as you get experience. It’s a journey, but you take steps that give you benefits along the way. You can use the benefits from the early steps to fund the rest of the digital journey.

You might not be fully digital for a long time. That’s because you can’t buy digital off the shelf today. No one is going to combine the best of big data, predictive, rules, agility, user interface, virtual reality, and 3D printing in one package. You’re going to have to put it together yourself.

Some people cheat and go ahead to the operational improvement area. They glean benefits and use them to drive each of the steps. In operations, you’ll find inefficiencies everywhere. Companies that are successful find low-hanging fruit and use part of those benefits to fund further projects—really smart ones do this.

What mistakes do not-so-smart companies make?

Sinur: There are a couple of ways of being not smart here. One is to be a fashionista who tries the latest shiny object. They’ll probably increase revenue but won’t control costs. They’re doing multiple things and not seeing how they’re hooked together. You can do that for a short period of time, but it’s a mistake if not managed over the long haul.

The other mistake is to stay in the wait-and-see mode. You don’t get any revenue gain, nor do you help your costs. Another mistake, although not as bad: You’re well managed and use digital technology where it makes sense, and so you’ll certainly cut your costs—but you’re not raising revenue.

The best is to have a balance of raising revenue and reducing costs by using digital wisely. You have to be somewhat aggressive, but not foolish. MIT did a study and found that, if you did it right, you’ll raise your revenue by 26 percent and reduce your cost by 9 percent.

How does this journey lead to hot products and services?

Sinur: Generally, people are innovating through experimentation with digital. There are several ways to start. For example, with the mobile interface, one way is to model things: precise customer journey maps, customer interaction studies and focus groups. That’s a very structured way of doing it. If you’re not under pressure, then you can do that.

If you are under pressure, you might innovate through experimentation where you actually try approaches in a sandbox environment with customers (or employees) to see how that interface works.

Whether you do some heavy mapping and analysis upfront or use the sandbox approach, either way you’re going to be experimenting. That’s the nice thing about digital. Tools allow you to innovate and have agility.

How do you know you’re on the right path?

Sinur: Essentially, there’s going to be a change in your culture and belief systems. It’s going to be: Speed first, fix later; agility over accuracy; and incenting people to change so that they’re not perfect. In all your jobs, you’ve been incented to be perfect and deliver high quality. We’re going to have to back off this a notch and go fast. One of my old bosses used to say, “Make dust, or eat it.”

There’s a leap of faith here. Good companies have a pod of money that rewards people for change. It’s hard to attribute change and success to any one individual. Eventually, you’ll learn how to draw those lines.


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Tom Kaneshige is editor of Five2ndWindow, Penton’s independent news site helping marketers and line-of-business executives get ahead of the mobile disruption happening to the customer experience. You can reach him at tom.kaneshige@penton.com.

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