The NOISE of Digital Transformation

The fear of digital transformation, the obsession with efficiency as the only path, and the challenge of people as agents of differentiation.

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[See original POST on blog @b_crespo QUANTUM MARKETHINK]

A Master of the Advaita Vedanta lineage says that what we experience daily is not noise. It is sound, and its intensity can be measured in decibels. What turns sound into noise is our observer, our perception. I could perhaps have called this post "the sound of digital transformation," and I have serious doubts you would have opened it.

After 5 cohorts of Digital Transformation professionals -the last three with the help of Susana as co-director of the program in Digital Transformation at IE Business School- I have had the gift of meeting hundreds of professionals who face daily the challenge of digitally transforming their company, whether leading it first-hand or from a management role in parallel.

My learning over these years is that most organizations experience digital transformation through the interpretation of digital noise. I cannot deny the complexity of digitally transforming a company that is over 100 years old. Even transforming a company that is 10 years old has its complexity. In fact, it all depends on the degree of collaboration among everyone who executes within the company: from the top executive -the CEO- down to the last manager, when those who lead the company have no interest whatsoever in collaborating with the rest of the company's teams, the challenge of transforming the organization turns into a nightmare. I'm not surprised by the rise of agile methodologies as an antidote to the lack of collaboration. We have turned a work methodology into a trend and forgotten that all it took was neutralizing the lack of collaboration.

most organizations experience digital transformation through the interpretation of digital noise.

1.Fear as a catalyst for change (noise)

Companies are full of profiles who fear losing their job, their position of privilege, or perhaps profiles who resent never having led. When we interpret leading as a function derived from the number of reports, we confuse the challenge of leading with the task of managing.

And the fear of losing (from your job to any benefit tied to your role) is the worst enemy in any strategic change. Whether we like it or not, digital transformation is the reaction to a new scenario. And in this new scenario, one possible outcome is efficiency, which comes hand in hand with a reduction in headcount.

The propensity of a company in any sector undergoing transformation -needless to say, most of them- to reduce its workforce, its teams, is the biggest catalyst of fear toward the challenge of digital transformation. And it is fear of transformation that inoculates the virus of noise. We start interpreting sound as noise.

Organizations don't transform through wishful thinking. Necessity and urgency are what set the pace. A media outlet where print sales no longer grow has the noise virus inoculated. A financial institution that foresees cutting 25% of its branches over the next 2 years also has the noise virus inoculated. The same happens with a Telco that knows the telecommunications spectrum will alter its offering in the coming decades. Much the same happens with an insurer that has failed to understand its business beyond calculating a customer's risk based on a policy, rather than on the overall risk of the customer's entire relationship with the company. I suspect that when users change their purchasing criteria for any product or service, some noise ends up affecting any organization, whichever vertical it belongs to.

Something similar happens with any company that no longer grows at the pace of past decades. And perhaps the problem isn't in its ability to grow, but in the intuition to observe that its industry no longer works under the same criteria. Growth for growth's sake no longer works in this new context.

"The propensity of a company in any sector undergoing transformation (..) to reduce its workforce, its teams, is the biggest catalyst of fear toward the challenge of digital transformation."

2.The noise of efficiency

All business models have, for one reason or another, the noise virus inoculated. That is the only reason companies decide to digitally transform themselves. They have interpreted that technology, data, or new processes must change the way things are done if they want to keep telling shareholders what they want to hear. And a shareholder, by definition, only seeks to grow.

It's possible that a sector's proximity to or distance from the end customer (a retail view versus an industrial view) generates different models for interpreting the transformation challenge. The retail or consumer-facing model interprets digital transformation as a change in the revenue-generation model derived from an alteration in its distribution model. A shift from physical stores to digital assets, with the resulting efficiency gain derived from a reduction in jobs. The industrial or B2B model usually interprets digital transformation by translating technology into savings across the value chain, with the resulting impact on the meatiest part of the P&L (wages and salaries).

For one reason or another, most companies end up interpreting one path or the other as the only possibilities for a digital transformation process. Someone confused digital transformation with efficiency, and sadly it isn't the only option, though it is the one most valued by shareholders.

The real challenge for companies lies in interpreting the transformation challenge as sound and not as noise. And that means seeing the possibilities of making the value chain more efficient; reflecting on a new distribution model where users have already decided how to interact with digital assets; And at the same time, starting to sketch out the next business model that will change the rules of the game in your vertical.

Interpreting the opportunity of digital transformation as sound and not as noise means knowing how to read that the impact of transformation affects the business model, affects the organizational model, requires serious reflection on the distribution model, and requires a certain amount of creative skill in designing the strategy. Strategic redesign has to do with reflecting on how data affects the generation of new products and the creation of new business models. Nor will I be the one to deny the role of technology as a catalyst for savings in the P&L and its resulting impact on strategy. And all these paths are only part of the work to be done. The most important challenge still lies ahead.

Fortunately all the paths above converge on the reflection that it isn't possible to define a digital transformation roadmap without including people. And these are possibly the hardest to transform.

"Someone confused digital transformation with efficiency, and sadly it isn't the only option, though it is the one most valued by shareholders."

3.Transforming People or the sound of Transformation

It isn't possible to face a challenge when it's interpreted as a problem. The same mind that creates a problem is not capable of solving it, though the same person is. Is it possible that we need to propose a "mindset" shift among change managers?

Transforming people means inviting them to change. And this is the challenge of transforming companies' culture. To stop interpreting sound as noise, we need to add new capabilities and new skills to the professional development of teams. Relearn the concept of leadership. Otherwise we'll fall into the mistake of thinking the old executive team is of no use to us in this context. And there are already plenty of organizations in today's competitive context full of Digital and non-Digital Professionals. Sad dichotomy. Organizations' damned habit of understanding internal success in terms of winners and losers. I love my friend Craig's reflection on differentiating a work group (people with the same boss) versus a team (people who share a single vision).

Sharing the new vision means starting the search for the professionals needed to tackle the opportunity of digital transformation. And this requires understanding the challenge on its technology side, its data side, and its collaborative processes side:

• Do we have the technological and analytical capabilities?,
• Do we have executives willing to collaborate and share a single purpose within the organization?,
• Are our teams prepared to hold their ground in a context full of uncertainty, where historical data no longer works?,
• Have we developed a culture that embraces experimentation as part of learning?, does risk minimization dominate over a learning culture?,
• Have we taught our teams to manage change on a permanent basis?,
• Are we, as an organization, prepared to compete with players with a lighter cost structure than ours?

If we keep producing executives geared toward mechanizing processes that minimize risk, we will be fostering human beings who are tremendously vulnerable to the risk of being replaced by algorithms and robotics. And that risk is already very close.

Thinking about valuable professionals in the age of artificial intelligence and automation means recovering old humanistic paradigms, strengthening emotional skills, and developing creative skills to solve the challenge of continuous innovation in our business models. Don't let anyone tell you everything is harder, accept that it's different. And allow me to add "exciting".

It's up to all of us to start by improving our creative skills to rethink our business model. To develop our emotional quotient because the old intelligence can already be automated. To understand change management as a daily part of how we manage teams and projects. Accepting uncertainty as the only possible path at a historic moment when cycles are shortening. To internalize that innovation is no longer the monopoly of a department.

This change of era we are living through has already happened in the past, and perhaps the only difference lies in the fact that the metronome now moves faster. Perhaps much faster at times.

A new melody is playing, a new concept of harmony with different rhythms, and we run the risk of interpreting it as noise. Once again, it all depends on our observer, our perception. The challenge still lies with people.

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[See original POST on blog @b_crespo QUANTUM MARKETHINK]

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