Reaching your tipping point
Nothing has been more disruptive to business in recent years than the new technologies that have been sweeping away decades of standard business practices. From retail and real estate to higher education, publishing, medicine and manufacturing, companies are no longer doing things “the way we’ve always done them”—and there’s more to come.
Amid this disruption, many well-established companies have launched change efforts, seeking to transform their business models, operations, supply chains, or other critical aspects of the business.
The idea, of course, is to master and control the new technologies rather than have them control you.
While some companies have done this to their great advantage, many such efforts haven’t gone well. “In a sign of how hard [such] change is,” Clint Boulton wrote earlier this year in CIO magazine,78% of nearly 4,000 chief information officers worldwide reported that their digital transformation efforts had been only “moderately effective or worse.”
What accounts for this? The answer, I think, can be found by looking at some of the success stories, as Boulton does in his article.
I’ve looked into this as well, and I’m also interested in the operational nitty-gritty behind the story (who did what and how?). And what I’ve found is that most successful transformation initiatives over the years have had certain things in common:
· They’ve had total buy-in from senior leaders [As I suggested above, If they’re not “all in” they shouldn’t be in at all.];
· the individuals working on the initiatives have been given all the resources, authority and support they need to see their efforts to fruition; and
· those spearheading the efforts have realized that devoting 50% of what’s needed for the initiative doesn’t yield half as much value as an “all in” effort.
Getting to the tipping point is always a challenge, involving, as the late heavyweight champion Muhammed Ali once put it, “different strokes for different folks.” For some companies it may involve no more than tweaking a process or product. For others, it may be a massive institutional undertaking involving a huge budget and armies of people.
What we mean by “all in,” of course, will vary. While everyone would like a simple, one-size-fits-all template for managing technological change, that’s not the way the world works. Delta Air Lines and Tesco, the UK-based supermarket chain, provide good examples, if you’ll allow me to revisit ancient (business) history, going all the way back to the year 2000 or so. But the good news is that these lessons still apply today.
Leaders of both companies were early to recognize that emerging digital technologies could play an important role in their long-term growth plans.
Tesco, the world’s third-largest retailer, didn’t have to make a lot of organizational changes when it decided to experiment with such innovations as online grocery shopping. The company already had the necessary talent. It had been an industry-leading innovator for many years; change was in its DNA. So a small internal team was able to ramp up the new digital initiative and push it to its tipping point with little fanfare. Such activities already were second nature to the company.
Delta was a different story. It didn’t have the internal talent and know-how to ramp up a major digital initiative. Moreover, senior managers were aware that institutionally such a “radical” change might be upsetting to some people and trigger resistance. So a decision was made to pull together a group of mostly outsiders to do the job, house them in a separate facility, and give them their own budget.
As a result, Delta was able to become an early mover in digital technology, enabling customers “to make reservations and purchase tickets” on its website, known then as Skylinks. Five years later the company even helped finance Orbitz, taking another step into the digital future. The rest, as they say, is history. If Delta had settled for a more moderate set of changes, it wouldn’t have passed the necessary tipping point for change, and would have created limited, if any value.
A couple of years ago I wrote a paper with my colleagues Martin Danoesatro and Thomas Reichert: “A CEO’s Guide to Leading Digital Transformation.” Little has changed since then.
“The more disruptive the initiative,” we wrote, “the more the CEO and digital leader will need to free the organization from the shackles of legacy and habit.” At Tesco, digital change hardly caused a ripple. At Delta, a legacy airline with deeply embedded practices and protocols, the opposite was true; change might have been cataclysmic. Senior leaders of both companies acted accordingly.
Companies are different; their needs, capabilities and tolerances for change are different. Digital initiatives need to reflect these differences.
