DIGITAL TRANSFORMATION: THE GREAT LIE – Part 3 - The future is a fast moving target

Lisa Gansky Non-Executive Director

27th July 2017 • 5min read

A three-part series by 11:FS Non-Executive Director, Lisa Gansky

Last week Lisa discussed how to become truly digital you must take a leap of faith, ask questions, make a mess and ultimately shake up business models completely. True transformation must fully pervade an organisation’s culture; it must be far more than just a project.

Read part 2 in full here

Part 3 - The future is a fast moving target

Why belabor the notion of transformation at all? Every person, business, city and industry on the planet is in a continuous transformation today. At a very high level, we are moving from a petroleum-based economy to whatever comes next. Like a five year old on a family road trip, every CEO, management team and board is asking the same question, whether quietly or forthrightly: “Are we there yet? Can this bloody transformation be over already?”

You may want to steady yourself, because transformation is not a magic trick where we all applaud and move on. Transformation is a relentless practice of being open, curious and broadly connected. What’s more, the outdated perception that your organisation’s transformation has an end point is what may be killing your business and deflating your team.

Transformation is a relentless practice of being open, curious and broadly connected.

The purpose of transformation is to refashion your business culture, organization’s social operating system and business models to be always open and learning. Taking safe little steps from one known to another known isn’t transformation, sorry. It’s only a matter of time before your factories, back office systems, truck fleets or bank branches are on display in a museum. We must shift from the notion that transformation is a predictable process, with a set end, to one in which we are a living, learning superorganism designed to continuously adapt.

Ditch the corporate lifecycle, become a superorganism

When I talk about business as an organism I tend to refer to a framework that I’ve used with clients over the past decade. The corporate lifecycle, as developed by Izhak Adizes, shows that businesses, industries and products go through a life cycle not unlike any other living thing. Just like you, your business will move from birth to death with representative and characteristic challenges and accomplishments.

On the left side of the graph, you have early ideas and startups with their trademark characteristics — high energy, loads of experiments, fast failures and … did I mention seriously caffeinated and energetic? Newly formed teams, nascent ideas and startup businesses play with ideas, products, business models and different kinds of team members and brand voices until they hit a winning formula. Once it emerges, this winning formula moves them into prime position then into a stable offering and business. They’ve figured out who they are, what they deliver and who their core customer is — at least for now. Sweet!

When it comes to technological progress, there’s no turning back the clock — only those who adapt to the pace and those who drop out of the race. If you’re in aristocracy, know that bureaucracy is just around the bend. Typically, a telltale sign of bureaucracy crops up in meetings where you’re not sure who can say yes, but anyone can say no. When this happens, it means that fear has taken hold of the culture and people are more concerned with preserving their image than they are willing to risk a wildly brilliant and edgy idea. If your company, business model or industry is in bureaucracy, it’s very likely all your competitors are too. What you need, obviously, are more youthful and adventurous competitors.

Within a super-organism such as a swarm of bees, a school of fish or a colony of ants, the entire organization acts as one and learns as together. Data is shared broadly and all the beings are in continual motion to adapt and respond to changes and opportunities sensed by some part of the organism and communicated to the whole. This ever-adapting self is what we are becoming — or, if to thrive, what we hope to become. The transformation occurs at the level of the whole self, of the entire social operating system. Reworking one process at a time and claiming victory is not the path to prolonged success. The simple reason is this: The future is a moving target and the only way to arrive there is by learning to move with it.

The future is a moving target and the only way to arrive there is by learning to move with it.

Beer talking & General Electric

During a cocktail hour conversation with a bevy of asset managers from one of the world’s largest funds, they opened up and claimed not to believe that many of the companies their funds invest in can survive without their 25% or greater net profit margins. These once colossal brands and profit engines must shed the bulk of their weight in overhead (non-performing businesses, real estate, IP and talent), to redistribute enough oxygen (cash and attention), to redesign their near future.

General Electric appears to have done just that. Under the ballsy leadership of Jeff Immelt and his astute team — in particular, his accomplice, Beth Comstock — GE in the past five years has wilfully retreated from its consumer businesses and doubled down on its Industrial Internet strategy. This strategic move was accompanied by selling its appliance business to former competitor Electrolux as well as selling off many of GE Capital’s assets including its retail finance business, Synchrony Financial. All of these activities are designed to focus the company around its core strength in smart infrastructure, (what GE calls the Industrial Internet), and advanced manufacturing and liberate value by selling assets that are no longer enhancing its business direction. By 2018, the company’s target is to generate 90% of its revenue from these now core businesses. (For comparison, in 2014, 58% of revenue was from industrial lines of business). Wheat from chaff is in the eyes of the beholder. You might see the same customer, opportunity or business as an asset one year and a liability the next.

You have to muster the courage to package up, sell off or wind down businesses, IP and talent that are remnants of former eras.

A successful digital transformation of an enterprise is an enormous challenge as two things must happen at the same time. Decoupling the profit rich declining businesses from the potential future is essential and requires rigor, candor and the ability to deal with weak-kneed peers and investors. The parallel plan involves winding down the currently profitable while rapidly refining and learning how future customers will value nascent offers and partners. This means redistributing operating expenses and talent to future and as yet unstable businesses. This new scrutiny applied to the currently profitable declining business is essential: if those generating the majority of profit today continue to absorb the company’s vital assets proportionally, there won’t be sufficient oxygen left for the near future. Shortly, the near future will be the present and you’ll want to be there. You have to muster the courage to package up, sell off or wind down businesses, IP and talent that are remnants of former eras. For any executive, this means dismissing or repositioning large groups of loyal employees who no longer fit well into the future. While this may sound harsh, it’s frequently accompanied with a mutual sigh. The truth is, not everyone is up for the ride.

Spin up. Wind down. Where are we?

For many businesses, today’s revenue or profit is the product of agreements made three to five years ago. For example, Scott Belsky, co-founder of Behance, an online design community, reflected on his experience of both running a startup, and life after his company’s acquisition by Adobe. He expanded on the concept of organizational debt as the intrinsic cost from leaders putting off the inevitably difficult decisions. Scott noted that the most common decision is to not make a decision. Thus, organizational debt accrues and accrues.

Transformation must be initiated and inspired from customers’ challenges and by observing failing markets

These companies have grown fat with a surplus of people, factories, sleepy IP, entitled competitors, outdated processes and a notion of forever employment. Unwinding the vertically integrated business is a complex task. Often envious of the unencumbered developing companies and economies, these opaque and archaic institutions are in desperate need of molting. Upon reading the classic case studies of disintegration, transformation or dissolution of 20th century bellwethers, one thing is clear. Transformation must be initiated and inspired from customers’ challenges and by observing failing markets, not from the reflex of aging businesses or tired leadership to protect the once highly prized models, margins and teams. If it helps, you’re most definitely not alone. Whole industries, cities and communities are in this awkward ‘in between’ phase. We find ourselves in the hinterlands between what worked well for many for so long though not clearly situated in a framework of how the new organization and models move forward.

Scaling confidence

Transparency was once something for the privileged and exclusive. You could be privy to certain details only if you were in the know, but most of us were outside that circle of trust. Which, for companies like IBM, ABB, Deutsche Telekom, Tata or China Shenhua Energy, translated to 98% of its employees flying blind. Look around you and see if you’re working in a culture of transparency or a culture of secrets and veiled trust. What are the signs of each? Which company or community cultures invite candor, disclosure and openness? To determine their “trust score,” as it were, you would need to examine their governance, as well as the practices in place to reinforce a culture of transparency. You’d also have to be relatively certain it wasn’t all hype. Companies and teams like this, opt for disclosure and are allergic to excuses.

In 2017, data is everywhere and accessible by the many. The socialOS of innovation requires rapid revamping of who collaborates on what with whom. Companies and their ecosystems thrive when they are geared toward adaptation. Here, we can take hints from nature.

The benefits to eyeing super-organisms rather than old school leadership practices are significant as the world is moving too fast for large organizations to transition in time. Consider the life of a whale compared to that of a school of fish. For a whale, it’s takes time to change course -- to respond to circumstances and stimuli. What if the lag between the meal and the effort expended in catching it effectively negated its nutritional value? So long, whale.

The benefits to eyeing super-organisms rather than old school leadership practices are significant as the world is moving too fast for large organizations to transition in time.

In business, by the time the organizational whale fully transitions, be assured that the optimal model will have changed. The so-called transformation is code for deconstructing our tools, teams, ecosystems and lens about work to form highly responsive networks driven by data insights and network monitoring tools. We are living in the era when social rules and business models are between the ‘no more’ and ‘not yet’. Your business is only be as strong as your team’s ability to collaborate with each other and machines in real time. The only way forward is to explore, experiment and embrace the transformational shift from operating like a lone giant to learning to sense, coordinate and grow — not as whales, but as schools of fish.