Home > Digitalizacija > Nigel Vaz: Digital business transformation

Digital moat

A “digital moat” is the sum of the capabilities you put in place to create value and be competitive in a digital world. It is your company’s ability to evolve hard‐to‐duplicate, digitally supported products, services and experiences that continually align with changing customer behaviors and technology. A company that has one of the largest digital moats today is Amazon.

Often “digital transformation” was and for some still is associated solely with technological change. Digital business transformation is nothing but business transformation for the digital age.

Digital business transformation is a holistic approach to changing the way an organization thinks, organizes, operates and behaves.

Four forces of connected change are causing companies to rethink everything about how their businesses operate:

  • Customer behaviors
  • Technological change
  • Business models
  • Societal change

The Death of Business as Usual

The reason that digital is so significant for our age is that it signifies the coming together of rapid change in consumer behavior, technology, business models and a growing awareness of the impact that business and technology has on societies and our environment. Together, these four forces are driving disruptive change.

You may be familiar with Ray Kurzweil’s “Law of Accelerating Returns”, often cited because few have better made the case that technological evolution is exponential and not linear.

Truth, Knowledge, Vision. Those three words above the entrance to the American Museum of Natural History – they’re important here, too.

Perhaps the most foundational component of building a digital moat is creating the ability for your organization to learn, unlearn and relearn.

Traditionally, product companies think linearly with a clear beginning and end to product development. Software development and management, on the other hand, is continuous and ever evolving, adding new functionality and changes as a reaction to customer, business and market demands.

Many established businesses have structures and processes in place that wrongly put the emphasis on the scope and outputs of projects rather than on the outcomes for the business. This creates what’s known as “technical debt” where those companies take what appears to be the easier, shorter path instead of the path that will produce the right outcomes.

The questions facing many businesses are similar: what to do about legacy technology investment, how to connect disparate datasets to create a single view of the customer and (one of the most challenging shifts), how to break down functional silos that were originally designed to support your legacy organization? How will you change your orientation now that the primary focus of your technology investment is not just cost and risk, but value and differentiation? How will you pivot away from what made your business successful in the past to what will make it successful going forward?

The competitive advantage of digital companies comes from their integrated set of capabilities, what they are able to create with those capabilities and the cultural principles that underpin the systems that create their outputs. Digitally native companies consistently challenge established brands in platform business models, network effects, convenience, agility and customer experience.

Today, convenience, personalization and experience are key measures of customer value and can be what distinguishes established companies from leading digital businesses. The balance of power has moved from companies to customers, whose expectations of how, where and when their needs are met have all risen dramatically.

Efficiency is still a primary focus for CEOs, but mass production is no longer pursued at the expense of customer choice.

The rapid rate of technological progress sits at the heart of the transformation imperative. Technology is the enabler that allows businesses to identify and unlock customer value and to connect with them. However, it is also what bends the competitive context out of shape. The most important technological change of our time is not any individual technology but the central role technology plays in the lives of consumers.

The Four Forces of Connected Change

While hardware, software and connectivity are all driving technology’s impact on consumers, one of the biggest technology challenges and opportunities for companies is around data.

When company leaders step back and, instead of obsessing over how they operate their business, orient from the perspective of how customers interact with them, then having all these pieces of data that often relate to the same customer, but housing them in a completely disconnected environment, makes no sense at all.

The three ideas that underpin the cloud are significant because they have allowed cloud ‐ based systems to evolve to mean a great deal more to businesses today. These are: cheap storage because it’s easier to store information centrally; computation so you have real computing power behind the storage; and finally, and most importantly, the ability to access the information and to be connected from wherever you were.

Many organizations make decisions on which technologies to invest in more slowly than new technologies that could give them (or others) a competitive advantage become available. If the lag between leadership decision making and technological advances were to remain the same, that could be manageable but it isn’t. As technology evolves exponentially, the gap between organizational change and technological change becomes ever wider.

The platform business model – and the technology giants predicated on this model – is one of the greatest business phenomena of the digital age. Platform business models and the network effect matter because they disrupt industries and, for established businesses, what they do can be difficult to replicate.

Older, established businesses – even those in the technology sector – seem to have a more comfortable relationship with the idea of interconnectedness among purpose, value, corporate governance, ethics and impact on society.

Not coincidentally, those three measures – financial, social, and environmental – are the legs of triple bottom line (TBL) accounting used by so many leading businesses today. Interestingly, John Elkington, the writer who coined the term “triple bottom line” back in 1994, is today working with industry experts to improve upon the TBL system through a new 3Rs framework. Responsibility, Resilience and Regeneration are the considerations for a digital era, where self‐disruption and innovation by businesses and across value chains become an essential part of the new system.

The digital world is hugely action oriented, and people within it draw connections between what a company exists to do, what it says and the actions it takes: the “be, say and do” of a business.

What Is Slowing Down Established Businesses?

Across a range of different industries and organization types, the things that are holding them back are remarkably common:

  • Top‐down decision making
  • Organizational silos
  • Legacy technology
  • Short ‐ termism
  • Talent shortages
  • Values and culture
  • “Not invented here”

In a traditional business set‐up, you might form a hypothesis, do the research, present a business case for funding and make a recommendation, have someone execute that recommendation and if necessary, course correct. This is far removed from the idea of operating in constant beta where not only are you making decisions constantly, but you are constantly updating live products. The need today is to make data‐driven decisions constantly.

“Legacy” in the context of technology, is a polite way of saying “out of date”. It’s because these systems are so business‐critical that they don’t get replaced: They are big, complex and the cost as well as the risk of replacing them leads to a crucial investment decision being deferred.

Typically, the front end is imagined to be digital. In a world that is entirely about a business being digital, there is no such thing as a front end or middleware as distinct from your back end, which is often where your mainframe and real legacy technologies live. All that matters is getting the service to the customer.

The risk and cost approach is a “house of cards” approach to technology. Where the entire business is digital, these technology silos tend not to exist.

An established business is likely to take a present‐state approach to investment, and choose not to invest if the numbers suggest that the return will not have a significant impact on revenue and profitability. This approach falls into the trap of considering the present cost of investing, while ignoring the future, stored‐up costs of not investing, the effect of which can compound over time.

The ability to attract and retain the best digital and engineering talent is a twofold challenge. First, they are in competition with leading digital businesses which may already have strong cultures, capabilities and ways of working and are therefore attractive employers for talent entering the workforce. Second, the technology skills that we need in our organizations are changing rapidly and the risk is investing in the wrong kind of talent or that even if you invest in the right talent, you are unable to retain them. Turnover costs for highly skilled positions can be 213 % of salary.

A company’s culture and values are often a reflection of its origins, provenance and founders. The risk to established companies comes where its culture and values become blockers to change.

A successful organization today needs to embody a clear reason to exist, in line with customer needs.

Characteristics of a Digital Business

The inconvenient truth is that most companies are great at their core business, but not great at reimagining the future of their business. They need help to balance the pressure to perform in their current context with the need to transform in the context of a digital world.

There’s much more that Tinder got right: being clear that its purpose is to solve a universal problem about meeting people, the emphasis on slick and speedy experience and the central idea that the extraordinary amount of data input via the app is the fuel to evolve and improve the product and its value in customers’ lives.

Six things that leading digital businesses consistently do very well.

  • The first quality that they share is to have a very clear idea of what need they are serving or what problem they are solving and for whom.
  • Digital businesses are also very quick to understand the value to the customer of what they do. They are very clear on what the benefit of their product or service is to the user. They also understand the value to their business.
  • A digital business will quickly go from “we are creating this much value for the customer” to “here is the value to us in our business and here is how we can be valued”.
  • Leading digital businesses focus on designing the experience. They understand that there is a direct link among value to the customer, value to the business and quality of the experience
  • They are applying data, AI and machine learning to keep pace with changes in customer expectations and needs.
  • They are powered by engineering. Even more important than that, their engineering capability and mindset provide them with the final quality of a leading digital business: the ability to continually refine themselves using their data and inputs.

You are building a company that can drive business outcomes through its ability to evolve products, services, and experiences in sync with changing customer behavior and technology.

It’s right that we want to transform the user experience and that we recognize that the user experience is connected to that broader experience, but how, then, do we think about product and policy, people, operations and technology?

By widening our lens of transformation to include multiple facets of the business, it becomes easier to identify a point of untapped expectation within the customer journey and use that to illuminate a path of transformation across the whole enterprise.

Gone are the days when transformation efforts could be molded into a project mindset, with a clear beginning and end, justified solely by typical measurements of cost, time and scope. The true potential of transformation today lies in value, differentiation and productivity: three metrics representing a strategic shift in mindset from project to product. A product improves constantly in an effort to serve consumers’ wants and needs. Amazon is a good example of a company that does this well. The organization sees both its platforms and services as products, continuously improving and deploying new versions and business lines by using data in ways other companies have yet to consider.

Ultimately, digital business transformation is aimed at driving two outcomes:

  • Creating an organization that can continually change at pace with the changes around it
  • Constructing the capability to identify and realize value through digital for your customers and business

The Big Hairy Audacious Goals (BHAGs) of Digital Business Transformation

In their book Competing Against Time, authors George Stalk and Thomas Hout introduced the idea of time as the most powerful source of competitive advantage. In a world that is rapidly evolving, the idea of managing time as a strategic asset and creating the systems and ways of working to accelerate responsiveness, adaptability and speed to market is incredibly relevant.

One of the common pitfalls we see with clients is they map out a compelling vision, set of outcomes and road map for their transformation, but then go about the governance and execution of it using the same waterfall approach to project‐based work and change management processes of the past.

The Publicis Sapient How lays out how value is identified and realized continuously in a digital business. It has five activities that can happen concurrently:

  • Ignite
  • Hunt
  • Shape  
  • Incubate
  • Build & Scale

The first set of activities centers on Ignite. This is where you are making the case for digital business transformation and looking to gain stakeholder support.

The next activity is Hunt. The Hunt activities are where you identify the potential customer and business value pools you could pursue.

The biggest change we’ve seen in recent years is clients saying “don’t tell me what I can do”, show me. As a result, prototypes are playing an increasing role in both visualizing what’s possible and helping stakeholders come along on the journey.

Hunt will not just produce one set of activities. It will create a portfolio of moves that will need to be prioritized and coordinated.

The Shape activities are where that prioritization happens. This is done by creating testable hypotheses for each value pool and then using data, research, feedback, modeling and analysis techniques to refine your hypothesis and probe the consequences of your investment choices.

Incubate is exactly that: where you can create Minimum Viable Products (MVPs) and test their viability in the market.

Last is Build & Scale. The MVPs that were piloted are now scaled to the desired audience(s).

For decades, cars were all about their hardware: the literal nuts and bolts of their physical design. Today’s cars are as much about software as they are hardware. Is there an auto manufacturer in the world who doesn’t think mobility and the rise of Uber and Lyft will have an impact on its business? None that we’ve seen. Tesla is still in the cool device phase and hasn’t yet become an ecosystem, meaning there is still space for established automotive companies to lead in the ecosystem space.

After years of work with clients across multiple industries, what follows are the five capability areas that, in concert, will enable you to evolve in sync with changing customer behavior and technology.

These are your SPEED capabilities:

  • Strategy: developing and testing your hypothesis on priority value-pools
  • Product: evolving at pace and scale
  • Experience: how you can enable value for customers
  • Engineering: delivering on your promise, at pace and at scale
  • Data: validating your hypotheses and uncovering insights for constant iteration

While your Strategy capability may certainly be able to Ignite and Hunt for opportunity areas and potential markets, when combined with Product, Experience, Engineering and Data, you can suddenly go from identifying a potential area of opportunity to rapidly prototyping, testing and bringing it to market.

The two BHAGs that I stress through this book serve as the parallel rails to keep you on track: one is continuous change and the other is value creation.

Strategy

In nature, you can witness a behavior known as swarm intelligence, where decentralized, self‐organizing players operate as a collective. Think of bees and ants. Within a swarm of bees or a colony of ants, you have independent insects that act in concert with the whole. In the 1950s, a scientist named Pierre‐Paul Grasse introduced a new concept within social insect societies called “stigmergy”. What he observed was that when one of the insects veered from the rest of the group, it left behind traces in the environment that actually changed the future actions of the rest of the group.

Swarm intelligence and stigmergy are most commonly applied in a digital context to the fields of artificial intelligence (AI), machine learning and robotics.

Today, the review functionality is a critical component of the trustworthiness not just of Amazon and Yelp, but of most companies. Managing it (including managing the manipulation and legitimacy of the reviews themselves) has become critical. This is swarm intelligence and stigmergy playing out across digital companies.

Your biggest competition is no longer defined by scale but by who is meeting the needs of your customers most effectively and by their ability to operationalize that into an effective business model.

Strategy has arguably always played a critical role in setting the North Star for the direction of the company. In the context of transformation, this has never been more important given the balance between supporting the current model and moving to a new one.

Have you noticed how large enterprises today ground their purpose in a customer orientation? Customer‐oriented vision statements are the most powerful because they anchor to customer needs, which in turn can be used to shape your digital vision.

In traditional business sequence, the next step would be to identify “where to play”: the markets, product categories or consumer groups that you will choose to focus on.

Established companies have been “doing digital transformation” for a long time. There are three well‐defined patterns in what we refer to as the D‐3 model: defend, differentiate or disrupt.

Three models of transformation, which weighed the immediate threat with the longer‐term transformation needs: evolve, attack or jump.

The evolve approach focused on the long‐term, taking a more gradual approach to both growth and cost‐reduction transformation. The second option was attack. This involved launching a proposition to go after a new segment, provide a new service or enter a new geography. The final model was jump where the company could create a highly optimized shell of the model that they wanted to migrate their current business into.

In the traditional model, most of the process from creation to realization would happen in‐house. That is no longer the case today. As the rate of change has increased around us, it is impossible for one company to hold all the capabilities that it needs to innovate solutions. This is where partner ecosystems play an important role on creating adaptability, innovation and scale.

Intellectual property and accelerator assets are another key consideration in the design of a partnership ecosystem.

Where strategy was once a capability that ran fairly independently of the rest of the business, today it is an inextricable piece of an integrated set of capabilities.

One of the first shifts your strategy capability must make is to move your organization’s primary strategic focus away from your competition and toward your customer.

Product

For most of our clients there is a strategy function; for a few there is an experience function; but for all there is some version of a product function. For many established businesses, product‐based P & Ls are where transformation efforts begin.

The holy grail of product management is creating the capability to repeatedly produce products and services that achieve product‐market fit, where you create products that customers want to buy, have identified the audience that wants to buy them and have designed a business model that compels that audience to buy your product.

At any given moment, your business has to be simultaneously identifying and realizing value. Identifying value is more than just surfacing ideas; it requires tight cross‐functional coordination across the five capability areas:

  • Identify
  • Shape
  • Prototype
  • Test the viability of the idea
  • Realizing value is how you scale these ideas through delivery and then bring them to market or to your internal organization

Today, 70 % of digital transformations fail and companies are left with little to show for considerable investments. There are a couple of dynamics that consistently show up in failed transformations. First is the “watermelon effect”, where the service‐level agreements (SLAs) all look green on the outside, but inside the program is red and the efforts are not producing the desired business results.

“Technical debt,” where companies take what appears to be the easier, shorter path instead of the path that will produce the right outcomes, resulting in additional cost to rework the solution.

As he reflected on the most successful product teams he’d seen, Cagan shared three principles they all had in common:

  • Risks are tackled up front, rather than at the end.
  • Products are defined and designed collaboratively, rather than sequentially.
  • It’s all about solving problems, not implementing features.

Think about the way we used to manage projects. Every project manager would manage three variables: time, scope and cost. But in this world in which change is continuous, that management system is not working well. When you think about time, any good project manager worth her salt is going to add buffer, which actually makes you slow because the project expands in size to fill all that available buffer. So, what if instead of focusing on time, scope and cost, we focus on speed, quality and value.

  • How fast can we go from an idea all the way to putting it into the world?
  • How can we do that with quality so that whenever we do it, we are not breaking things?
  • In addition, how do we make sure we’re not just completing the scope but delivering the value to the customers and to the business?

When you make this shift to speed, quality and value, you gain the ability to move at the speed of disruptive change in the face of uncertainty.

Agile is a set of frameworks, practices and principles designed to give teams the agility to respond to change. Agile is based on Lean

Key values:

  • Individuals and interactions over processes and tools
  • Working software over comprehensive documentation
  • Customer collaboration over contract negotiation
  • Responding to change over following a plan

Where Agile enables adaptability to change through cross‐functional teams, Lean methodologies are primarily focused on reducing waste so those teams can be more effective in driving outcomes.

What DevOps provides is a way for companies to produce software faster and with higher quality by directly addressing the organizational silos and blockers. It’s an approach that creates stronger collaboration between software development and IT operations teams, provides stronger connections to your lines of business and customers, and improves your organization’s ability to produce continuous software delivery.

Experience

Experience encompasses the entire customer journey and crosses organizational silos. Customers are increasingly expecting the interactions with brands to be frictionless.

Everything “above the glass” that customers see and interact with has to be connected to what’s “below the glass”, the internal functions that feed into those experiences. Whether you’re selling financial products or groceries, creating compelling experiences that meet the needs of customers will stretch well into your organization. This end‐to‐end experience design is where digital natives compete incredibly effectively.

Instance, the multiple implications from data: Digital companies are designing every aspect of their customer journey with data capture in mind. This feeds their systems of value identification and realization, which nurtures their ability to change with the changing needs of their customers.

How we define what makes a great experience has also changed. It’s no longer about the worlds we create around a product, but is much more closely anchored to how digital is applied to increase the usability and effectiveness for the customer. There are four characteristics we’ve identified that shape this – Light, Ethical, Accessible and Dataful (LEAD) – that we’ll explore in more detail.

Information architecture (IA) is the science of organizing and structuring the content of websites, web and mobile applications, and social media software. Without it, the web (and, in turn, client touch points) would contain an unwieldy amount of unstructured information.

With product and service design the goal is to surface, design and build ideas that will unlock value.

As you look at service design overall, there are four key components: design thinking, front stage/back stage, change candidates and modeling for behavior.

There Are Three Types of Design:

  • Classical design – activities which pertain to the design of objects we use in the physical world
  • Design thinking – activities that enable companies to put the user at the center of every design decision and to create innovative products focused on human wants and needs
  • Computational design – activities involving processors, sensors, memories, actuators, data and networks

To incorporate design thinking into your business, data is a massive accelerant and important, but there have been many times where design thinking can be applied in companies with fragmented data infrastructure, although much less effectively. To operate at a level of computational design, however, a cohesive data infrastructure is required.

Another avenue for capturing data is instrumentation. Instrumentation allows you to collect information on not just your digital products, but physical as well.

What computation allows you to do is replace the intuitive aspect of design with the ability to test hypotheses using computation to produce hundreds or thousands of design permutations to find multiple solutions.

LEAD creates a barometer that can be used to determine whether the experiences you are building are of quality to the end consumer and it does so through the lens of computation.

As the world becomes increasingly digital, understanding how experience is evolving and adapting itself is critical.

“The real sources of advantage are to be found in management’s ability to consolidate corporatewide technologies and production skills into competencies that empower individual businesses to adapt quickly to changing opportunities.”

There is growing recognition among businesses today that technology can create value to the customer and real differentiation around a company’s product and service.

Organizations that have historically considered risk and cost and invest enough in technology to keep the risk at bay, have never really thought about it in the context of value, differentiation and revenue generation.

Shifting technology from being primarily functional to value‐producing in established businesses is challenging because part of the process involves navigating the spaghetti-like architecture that has been built over decades.

Where established companies are classified by industry, digital natives are classified by competency. Digital companies aren’t judged by the industries they disrupt but by their ability to use digital to create new products, services and markets. In order to do that, technology could not just be a matter of delivering on an idea. Instead, digital companies hired engineers who could apply the possibilities of technology to solve problems.

Engineering

From an engineering perspective, creating a core competency in digital requires lenses across three areas:

  • Architecture
  • Ways of working
  • Talent

One of the biggest challenges and opportunities that surfaced over the past decade is the rise of enterprise cloud. Cloud is different in that it’s not a specific type of software, but a key design component for how you create flexibility and agility within your systems architecture.

Digital business transformation cannot be done through technology alone. To create value requires an approach where all capabilities are working continuously in concert.

Main types of cloud service:

  • Infrastructure as a Service (IaaS)
  • Platform as a Service (PaaS)
  • Software as a Service (SaaS)

Cloud architecture and applications are part of the toolkit of a digitally native company. The way in which applications are built is fundamentally changing. Instead of this monolithic approach, today many development teams are turning to microservices as an alternative.

Microservices is an architectural approach to building applications that partitions apps into services that can be built, tested and updated independently of other services supporting the application. One side advantage of microservices is that in the context of DevOps it starts to create real code artistry. Developers not only write code, but manage that code in a model of continuous improvement and integration.

Shifting your technology function to a product and value orientation through the use of Agile, Lean and DevOps amounts to significant changes in the way this capability operates:

  • The level of ambiguity in the work increases.
  • Teams have to be much closer to the customer.
  • Teams get smaller and more autonomous.
  • Delivery will be continuous and delivery cycles will be shorter.
  • DevOps will be critical to creating end‐to‐end products and services.
  • Low Code and No Code application development.

Low code is a type of application that helps professional developers develop applications with little hand‐coding, essentially streamlining their work and helping accelerate the development process. No code, on the other hand, is geared toward “citizen developers”, business users who do not know how to code, and allowing them to build apps through interfaces that don’t require them to write any code at all.

One of the most common questions our clients ask is: “How do I achieve speed to market without taking unnecessary risk with resilience and stability?”

As the pace of development and releases accelerates, automation will play a key role in producing value with speed and quality.

A great engineer is hard to find. Plain and simple. While there are many strong technologists with deep expertise in specific software, being able to problem solve in an ambiguous context and lead Agile and Lean technology teams is a different skillset.

To develop the polyglot‐like skillset of an engineer requires closer to eight to ten years to allow them to experience multiple technology cycles and evolutions.

Data

Technologists working on AI and machine learning have to have a strong understanding of data.

The transformation of your IT and engineering capability is key to making digital a core competency and to unlocking what’s possible for you as a digital business.

Netflix saw its market cap of $ 205 billion surpass that of Disney. Netflix is a company that has been around since 1997 and has $ 20 billion in revenue; Disney is an iconic brand almost 100 years old and with over three times the revenue, at $ 70 billion. The market is valuing the assets of these companies differently.

For established companies, the journey to become data‐driven can be simplified into four lenses:

  • Utility: How do you get useful data and analytics on the right audience (data sets and data architecture)?
  • Data Science and Artificial Intelligence: How do you manage your data and create a closed loop system of automated learning and decision making?
  • Designing for Data: How do you design your products, services and experiences to collect data?
  • Ethics: How does becoming data ‐ led impact your ethical responsibility?

The components that shape any company’s data strategy are the data sets, data architecture and data science and AI that exist in its environment.

Today, most companies supplement their first‐party, proprietary data with second‐and third‐party data sets, creating a mix of deterministic and probabilistic data. Deterministic is data you know to be true, which means it is known, factual data about a user. Probabilistic, on the other hand, is inferred based on patterns across similar data sets. This enables companies to get a more holistic view of the customer even though they may not have the mechanisms in place to capture these data themselves.

In 2010, a software engineer named Dave McCrory introduced the idea of data gravity. Similar to the law of gravity where objects are attracted to one another through gravitational pull, data gravity asserts that as data sets become larger and larger, they become harder to move. As a result, the data is anchored in place and continues to grow. Meanwhile, things like applications and processing power are attracted to the data itself and move to where the data resides.

Today, customer data platforms (CDPs) are being introduced as a central connection point for customer data coming from different systems. The CDP creates a single identity for an individual.

The idea of creating a unified view of a customer and a unified customer experience. It simply wouldn’t be possible without unified data that’s accessible broadly.

80 % of the time consumed in most AI and machine learning projects goes to data preparation and engineering.

The primary drivers for digital business transformation are either significant opportunity or existential threat.

Gryphon

Where the Gryphon of legend was half lion, half eagle and consequently dominant among all creatures, the business Gryphon is equipped with powerful hybrid capabilities, an original approach, and the ability to move freely across the Gryphon Zone. Gryphons are born every day. They disrupt our understanding of the world as it exists today, and instinctively break previously assumed boundaries to combine the best of technologies, services and experiences. It would be incorrect to assume, however, that the speed, agility and technological power that digital natives display mean the Gryphon Zone can be accessed by them alone. To be a Gryphon organization is not about age or size, but about state of mind.

Customer obsession is building your business around the belief that consumers and their rapid uptake of technology are the drivers of change, that the number one priority is how to create value for the customer.

Creating this connected customer‐centric orientation means both your teams and systems are designed to identify and realize value for the customer, shifting away from the siloed approaches of data capture and execution of the past.

Outside‐in is a customer‐led perspective that allows an established business to break free of its constraints.

In 2016, the Amazon founder and CEO outlined his now legendary “Day 1” philosophy. At the core of “Day 1” is the principle of always focusing on outcomes rather than outputs: on results, not processes. The idea of his company ever reaching “Day 2” is unthinkable. For Bezos, the generally larger and established “Day 2” organizations represent stasis where decisions are made, but made slowly and with an emphasis on whether the process was followed correctly rather than whether the intended outcome was achieved.

For established organizations, disrupting yourself combines changing your orientation to the products and services you produce, alongside creating new systems and ways of working that can create that good disruption to help your organization move more nimbly.

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle.

For would‐be Gryphon organizations, putting this process in place is what matters. Failure is just an option, an occasional, necessary evil.

Digital business transformation

One person cannot drive transformation alone. Though a shared vision is important, shared outcomes are even more so.

Creating clarity on the business outcomes you are solving for is one of the most critical components of a successful transformation.

Change is hard. For a lot of people, it raises doubts and insecurities about their ability to traverse the unknown. Running large transformation programs is no different. Quick wins are an important way to signal progress. These wins can cross a number of categories from progress against outcomes, to advancing capabilities, to recognizing progress in the process itself.

It’s not just about what you communicate, but how. Authenticity is everything.

Rapid prototyping enables you to build out some of your most ambiguous (or ambitious) ideas to see how they translate in real life and what they actually enable.

Whatever your entry point into transformation, the most important thing is that you have a clear vision of the outcomes you’re trying to drive and that you start to chart the path to get there.

One thing about the idea of partner ecosystems is it’s no longer just about a partner to whom you can outsource capability. Today’s partner ecosystems are composed of partners who fill your capability gaps and also play a critical role in co‐creation.

One of the biggest challenges within any established organization is breaking through operational silos that limit innovation. Small, multidisciplinary teams provide a way to break through those silos and create progress faster.

One of the operational hurdles many of our clients’ face is that their businesses are not wired to fund an environment of continuous improvement.

The reality is that, as your company becomes more sophisticated in its digital capability, the faster it will need to move. Programs certainly can’t wait for annual budget cycles and likely will need to move more quickly than quarterly as well. Instead of funding the end outcome upfront, funding is based on meeting specific milestones.

Another approach is to look at your transformation as from a portfolio perspective.

Digital business transformation is not just about your capabilities; it’s about rewiring how you create value.

When leaders step foot on the path to digitally transforming their companies, they are not just providing the same value in different channels, but are changing how their company (and the people within it) creates value. This is a mental shift that has implications for the allocation of capital.

The level of uncertainty businesses faces in the context of digital is driven by two things: whether someone understands your customers’ needs better than you do and whether they can apply digital to disrupt how those needs are met.

With a destination in mind, you can check to see if your incremental efforts are moving you in the right direction. Without a destination in mind, you are almost guaranteed to create transformation debt you’ll have to reconcile later.

To digitally transform your business requires transforming not only what your customers see, buy and experience, but how your enterprise operates to enable that.

The “Value Exchange” thread highlights the key interaction points between the company and the customer. Companies must consider new data ‐ driven products and services, innovative experiences and ecosystems, and the overall communications points with consumers.

The “Structure” thread addresses how the organization is set up to perform daily operations. It includes how teams are organized, the talent and skillsets of the employees, and the overall culture of the workplace along with the incentive system driving behavior. The “Execution” thread addresses how companies operate to deliver their products and services. It includes the process and methodologies the organization leverages, the delivery model for bringing about both step change and daily tasks and the underlying technology to enable business operations.

Digital business transformation is a journey that trumps its destination: a journey that asks businesses to reimagine and rapidly realize new ways of working and satisfying consumer expectations. It is the process of helping your organization reinvent itself against the backdrop of unprecedented data, technology and ultimately consumer‐driven change which is fueling unexpected competitive dynamics and diminishing traditional business models as industries shift and merge.

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