What are the top 20 mistakes firms make in digital transformation? The first mistake is to ask that question. It implies that the transition to digital-age management is a question of execution within an existing state of mind. It’s not.
The ongoing transformation of management involves a re-imagination of the discipline of management itself. It’s a new set of assumptions, a fresh set of values, a deep change of heart. As shown in Figure 1, it’s reflects one simple powerful idea: loving your customer as yourself, rather than operating as industrial-era management came to represent, on the basis that “greed is good,” to quote Gordon Gecko.
Figure 1: the re-imagination of management
The greed implicit in maximizing short-term shareholder value is not a mistake: it’s a fundamentally aberrant form of behavior. When most big firms in a society engage in it, endorse it, and even celebrate it, we are not dealing with a simple error that can be corrected. We are dealing with a segment of society that has lost its way.
Fortunately, change is happening fast. It turns out that greed in business is self-defeating. A preoccupation with maximizing short-term shareholder value not only harms customers, staff, and ultimately society. It actually results in a decline in long-term shareholder value.
By contrast, firms that love their customers as themselves and dedicate themselves to creating value for customers are the fastest growing and the most financially successful.
True, before firms and their managers have this change of heart, they do tend to commit a set of debilitating errors. The errors are not fixable in their own terms: they flow from a wrong orientation, wrong assumptions, wrong mindsets, and wrong values. The errors are symptoms of a deeper malaise, not mental errors or mistakes. Their correction requires a change of heart.
Mistake #1: Failure To Grasp What Digital-Age Management Is Like
Managers often fail to understand the concept of re-imagined management, examples are available, with new goals, new principles, new processes, new interconnections, new attitudes and assumptions. Everything is different. Yet, they can read issue after issue of Harvard Business Review without coming across this different, comprehensive conception of what digital-age management now entails.
Mistake #2: The Mission Statement Does Not Give Primacy To Customer Value
The most obvious mistake is to fail to have a mission statement that commits the firm to creating value for customers, as opposed to maximizing short-term shareholder value. Twelve of the 30 firms in the Dow Industrial Index commit this error.
Mistake #3: Failure To Implement The Customer Offering
My bank, for instance, claims that its mission is “to be my trusted partner.” The reality is that when I visit the bank, they have no clue who I am, and make no effort to find out. A transaction with them is like breaking into Fort Knox. I have to produce multiple credentials. They keep throwing multiple new products at me, which get in the way of the things I want to do with the bank. It feels like anything but a partnership.
Mistake #4: Investments That Make Customer Experience Worse
Verizon has the admirable goal of “delivering superior customer experiences” and uses automated systems to achieve that. But as Columbia professor Rita McGrath explains. “The better your automated customer service options, the worse your customer service experience”.
Mistake #5: Failure To Take Seriously The Need To Change
Firms are complacent. They are still making money and boosting sagging profitability through share buybacks. Their firm is growing slowly, if at all. They are exploring digital transformations, but the results are generally disappointing, and so assign it lower priority. They fail to see the peril that other firms are moving faster, quicker, and more efficiently, and will soon eat their lunch.
Mistake #6: Working On Piecemeal Change
Industrial-era management fits together as a coherent and internally consistent system. It is like the auto-immune system of the body: when one part of the body starts to malfunction with, say, an infection, the other parts of the body combines together to defeat the infection. Similarly, when one of an industrial-era firm starts operating in a different way in the name of improvement, the other principles and process of the firm kick in to defeat the change. We see this in HR. We see it in Agile. Now we see how “financial accounting screws up HR.”
Figure 2: Piecemeal repair doesn't work
Mistake #9: Leading By Consensus
Yet, the choice of leading through consensus versus fiat is also a false one. Any institution-building comes from having a clear vision and culture that works to motivate progress both top-down and bottom-up.
Mistake #10: Failure To Go All-In
There is often a failure to realize that this isn’t a framework or a playbook. It’s more than following rules. It has to come from the gut. This is a different way of living. It’s drawing on everyone’s creativity to pursue a common goal.
Mistake #11: Failure To Be World Class
Back in 2008, Microsoft was innovating on three-year cycles. At the time, Satya Nadella as a mid-level manager was shocked to find that other firms innovating on one-week cycles. He and others like team leader Aaron Bjork, led the movement to practice world-class management and technology.
Mistake #12. Failure To Discard Baggage
Many firms stagger on with their losing business models, because they are still making some money. One key step that Satya Nadella made shortly after becoming CEO of Microsoft was ditch Windows as a business model and the Nokia phone, into which Microsoft had pour billions. This meant huge amounts of staff could be redeployed to winning ideas.
Mistake #13: Create Change Showcases
In 2014, when Joe Kaeser became CEO of Siemens, he grasped the monumental impact of digital technology and set out to have Siemens exploit it. But instead of bringing technology to the whole firm, one group was chosen where the new technology would be tested, from which it would spread. The problem is that it lets the rest of the firm of the hook.
Mistake #14. View The Change As A One-Time Fix
In many firms, the question is “When will this be over? When we will get back to normal?” The right answer in genuine transformation is, “Never!” This is the new normal. This is a re-imagination of the discipline of management.
Mistake #15: Use Technology To Create Sweatshops
Digital technology can be used to save time and make work better. It can also be used to terrorize staff and create the most invasive management conceivable. It can also be used to “feature factory”, where company build feature after feature, without focusing in what customers really need. It’s focusing on quantity, rather than quality.
Mistake #16: Limit The Change To IT
Firms like Novartis invest heavily in digital technology and expertise, but place them in the IT group. Consequently, business executives, managers, and front-line workers don’t see the point of the newly available information, or how data could enhance their teams’ work.” It is only by bringing the groups together that gains can be made.
Mistake #17. Practice Fake Change: “Change In Name Only”
Some instances of supposedly digital-age management have as much relation to the real thing as someone wearing flamenco costumes and talking about flamenco, without having mastered flamenco dance steps or displaying a feel or flair for flamenco music.
Mistake #18: Focus on Existing Business At The Expense Of Innovation
Often firms focus on the existing business at the expense of innovation. It is all too easy to prioritize what is currently working at the expense of a much larger future.
Mistake #19: Neglect Diversity And Inclusion
As Nadella wrote in Hit Refresh, “we are at our best when we actively seek diversity and inclusion. If we are going to serve the planet as our mission states, we need to reflect the planet. The diversity of our workforce must continue to improve, and we need to include a wide range of opinions and perspectives in our thinking and decision making.”
Mistake #20: Failure To Become One Company
Many firms are warring fiefdoms, operating in silots, and pursuing their silo’s self interest, rather than that of the firm. But “innovation and competition don’t respect silos, or organizational boundaries, firms must learn to transcend those barriers and become one company united by a single, shared mission.
And read also:
