Digital Transformation is Hurting your Bottom Line

Digital Transformation is all the rage again. How can this be? It even has a “cool” new acronym (DX) in case you don’t want to waste time pronouncing two words. As you may have noticed, digital transformation has been “all the rage” for a decade or so.

Perhaps this isn’t necessarily the case, but it occurs to me that this term — “digital transformation” — is both entirely overused and under-defined. I clearly remember when I was a director at the American Cancer Society and digital transformation meant going paperless–a Palm Pilot PDA/Pocket PC in every pocket.

When I was doing consulting work at Dell, digital transformation meant embracing the profound impact of social media technology. Dell thought, “If we enable 50,000 employees to tweet and post to LinkedIn we can spread brand preference and drive sales.”

Just this week, when you search for Digital Transformation you get 12 million+ technology based results (IoT, Cloud Based Computing, Software Architecture, etc) in Google.

When a phrase can mean anything, does it mean anything at all?

If we consider how digital transformation is being described in the market today in comparison to a decade ago, things do not appear to be changing. It is often still thought of as largely technology focused infrastructure investments or ad hoc innovation projects — from AR in designing shoes, digital banking on mobile apps, omnichannel technology to manage supply chain, machine learning for personalization, AI to help you shop, conversational commerce (Alexa), and so on.

Technology remains the focus when people discuss digital transformation. And we don’t totally disagree: preparing for and adapting to changing technology is important.

But here’s the thing: If the people and the business and the culture don’t transform to continuously adapt to the technological imperative, then these “transformation” projects seem destined to primarily drive short term cost and distraction more than long term value and change.

But here’s the thing: If the people and the business and the culture don’t transform to continuously adapt to the technological imperative, then these “transformation” projects seem destined to primarily drive short term cost and distraction more than long term value and change.

The examples I referenced are the point solutions – the means to a greater, more revelatory change. At Clearhead we think total reliance on these technology point solutions lulls you into a false sense of security. As you likely have experienced, the whole process–researching, issuing an RFP, vendor demos, sales cycles, procurement processes, and…finally…purchasing these point solutions–takes months and months of time, and sometimes years to fully implement.

And by the time they are implemented the organization is often onto the next tech that will change everything, driven by new leadership that is unaware of the old initiative. As you can imagine this vicious cycle takes place over long periods of time, so it’s often hard to spot from an organizational standpoint.

Falling into the “Solution Trap”

So we have to ask ourselves, “Why do we fall into the same “solution trap” over and over?” Because it’s easy. You face a constant barrage of digital transformation messages and vendors selling those point solutions that will solve everything. You have hippos that see technology as always the solution. And as human beings we have been trained our whole lives to think in solutions. That’s when we think digital transformation is hurting your bottom line–when it becomes a solution trap that’s easy to spend money on and worry about later.

That’s when we think digital transformation is hurting your bottom line–when it becomes a solution trap that’s easy to spend money on and worry about later.

We believe that transformation is more about the readiness of your people and process to continuously create value amidst constant market change and technology disruption. So, how do we do that?

First, let’s pause for a second. Take these in.

“There is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Everything else you create, somebody will replicate.” – Amazon Founder, Jeff Bezos

“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” – Harvard Business School marketing professor, Theodore Levitt

We love those quotes. What are we really solving for with all this all this technology? Do we need to base true digital transformation on technology? What’s the actual big problem we are trying to solve?

As we work across our 50+ clients, Clearhead is thinking about digital transformation as cultural and strategic transformation that’s informed by data. What we call Data-Driven Transformation (DDT).

So how can digital transformation help your bottom line rather than hinder it?

So how can digital transformation help your bottom line rather than hinder it? What does digital transformation mean to our clients? Real digital transformation means:

  • Changing the way your employees think and approach value creation in their day to day.
  • Moving from a project based organization to a problem solving organization.
  • Establishing SMART goals for all your projects and employees.
  • A process that contemplates all efforts as experiments that need to be measured, rather than merely a solution that is bought.
  • An ultimate acceptance that we cannot solve every problem and that value is created by solving the biggest problems.

And as you might have experienced, this cultural shift can be difficult. It requires more than switching out technology every two years. How your employees do their jobs with technology changes over time, and it will radically change even more as tech advances in the next five years. We believe you can switch out technology vendors all you want BUT you need to look deeper than technology solutions to fundamentally change how you think about your business culture, design culture and product culture.

We believe you need a continuous, iterative, strategic roadmap for your organization as much as you need any technology or product roadmap. And you can’t succeed in one without the other. That’s our definition of Data-Driven Transformation.

We believe you need a continuous, iterative, strategic roadmap for your organization as much as you need any technology or product roadmap. And you can’t succeed in one without the other. That’s our definition of Data-Driven Transformation.

So how do you start to change that overall culture and strategic thinking? We believe you need to embed the following tenants:

Evidence Based Operating

Are too many people in your organization making gut driven decisions? Are your objectives and goals fuzzy? Do you value projects and solutions over everything else? We hear you. We used to be the same way. We were solutions based. But we changed our culture to focus on problems. We decided that loving our problems–rather than our solutions–greatly increases the likelihood of seeing ROI.

So what are these problems? They are the same problems that are getting in the way of you achieving your objectives and SMART goals. And those problems often manifest themselves across your organization when it comes to people, process, technology and culture. The faster you can tackle these strategic problems the easier it is to build world-class products and UX at speed.

Every Solution is an Experiment

So if we have strategic problems across people, process, technology and even culture (yikes!) how do we find them and run experiments to find solutions for them? That’s the essence of our Business Problems Solution Mapping consulting projects (bPSM). We help you find the biggest problems preventing you from achieving your objectives and SMART goals. Then we develop and prioritize hypotheses to test solutions to those problems. Just like any other test.

Have a problem with a particular process? We will plan, develop and test a new process with you. We dedicate hours to then running the new process, and measuring employee and stakeholder satisfaction before and after the new test, time to complete the process, etc, giving you qualitative and quantitative data about its effectiveness.

This same bPSM framework can be used for designing your next org, how you hire, the technology you use, how your train your employees and how you change your culture. And then instead of leaving, we teach you how to run PSM for your yourself on a continuous basis throughout your year.

This is what will truly start to change your culture, creating a continuous, iterative, strategic roadmap for your organization. And this evolution enables real Data Driven Transformation.

So what does this look like in the world of our clients?

So what does this look like in the world of our clients? Here’s an example.

Client Objective:
Build an accurate P&L around the online business.

SMART Goal that ladders up to that:
Create accurate project based costs for online business by Q2 2018.

What Problems are getting in the way:

  • The executive team sees digital moving the organization forward but doesn’t prioritize it.
  • The merchandise teams don’t understand online prioritization or see the real P/L value it brings.
  • The digital team is not required to measure and forecast their contributions.
  • The product team often makes spend decisions that are not coordinated with merchandising teams.
  • The online marketing team often makes spend decisions that are not coordinated with merchandising teams.

Sample Hypothesis:
We believe that establishing specific criteria (activity based costing) for the online business will show real value. If we are right, this sets a foundation for everything in the business to be measured in a similar way and supports future investment in digital vs. other investments.

The Experiment:
Develop an activity based model for one segment of the online business. Test and learn based on those calculations, educate leadership on these changes and then measure the culture change that happens through an employee pulse survey and interviews.

As I mentioned above unlike most consulting firms we don’t stop here. We actually run the business “experiments” with you. And measure them using qualitative (interviews) and quantitative data (financial results, Clearhead’s employee pulse survey, CSAT, NPS, etc.).

Solving Your Most Critical Problems Creates Real Business Value

As our CEO likes to say “If you solve critical problems for your customers, value is created and metrics go up. Conversely, if you dabble or don’t solve problems and the problem stack starts getting higher and higher, you’re going to see the metrics go down.”

So when it comes to what we now hope you call Data Driven Transformation, how can we help you tackle the strategic problems in your business? And help you build that strategic, iterative roadmap driven by your biggest problems? I’m here to help.

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