How much time does your organization have to digitally transform itself?

During the past few weeks, I’ve given a number of speeches on Digital Transformation.  There is a question that I always ask at the beginning and at the end (after laying out my story of change and disruption): “How much time does your organization have to digitally transform?”

Sometimes, I ask individual audience members for their answer to that question. A lot of people respond that they have until today to transform themselves.  Upon hearing this question, I believe that the listener takes it as a dual query which includes two components: by when will your industry undergo a marked change and how long will it take your organization to adapt to the change. Sometimes, I feel they are really answering the second component (e.g., “we need to start changing now).  In my experience, people tend to overestimate the velocity of the former and underestimate the lethargy of accomplishing the latter (getting an organization to transform).

By when will your industry undergo transformative change? 

During my talk, I go over examples of industries (primarily in media) and companies (and their CEOs) who have already faced disruptive forces. There are some key lessons to be learned, in my opinion, from the decisions made and not made by previous and current CEOs and I go into some of these with some pointed questions to the audience.

I also go into a number of trends which are accelerating changes to remaining industries at varying speeds.  I’ve gone into some depth with regards to five of these trends in a separate post.  I like to have the audience (and myself) choose a specific timeline for transformative change in each industry because it makes things that much more concrete.

Now, with regards to estimating when a certain industry will be disrupted, we need to define when that “point of no return has been reached.”  You could make the case that, in the past, once a disrupter or digital innovator has achieved only 10% of the market share that the leader (e.g., Blockbuster) or leaders (e.g., newspaper advertising) in the industry possess, it’s all over.  In order to be conservative, let’s choose 15% of industry market share.

If we accept this answer, in order to answer my question, you’d have to guesstimate, by when you feel that a digital disrupter would be generating 15% of industry revenue. There can be a lot of obstacles to this occurring such as engrained customer habits, regulatory obstacles, etc.  Nonetheless, I believe that most professionals have an educated guess of this in their mind.

How long will it take your organization to adapt to this disruptive change?

As I mentioned, the reason that I believe a lot of my audience members talk about changing immediately is that, even if their industry is dominated 99% by incumbents, they innately recognize the difficulty of changing their organization.  I use the analogy of a large wave swelling.  In order to get in front of it, you need to start swimming far ahead of it.

Most estimates that I’ve seen, state that you need at least a decade to transform a large organization.  If we would go into depth (good idea for a future post) into what kind of organization will thrive in the future, this estimate should probably be increased to at least 15 years.

I’ve had my opinions about how a large organization goes about changing and, lately, I’ve come face-to-face with some key obstacles.  These are:

Middle Managers – Hiring a top-notch CEO who “gets it,” is a great first step.  Nonetheless, middle managers are where the rubber meets the road and that’s where I believe that transformation initiatives meet one of their biggest obstacles.  Here, I really believe that the least common denominator rules. In other words, even within a team impressive managers, one or two overly insecure and subpar managers can still achieve traditional business goals (e.g., sales quotas, etc.) while at the same time derailing the best-laid efforts to move the organization in a new direction.

When leaders hire and/or support middle managers who are guided more by human nature’s foibles such as insecurity, ego and the willingness to step on any and all who stand in their way, the failing is that of the leader.  Particularly, in well-oiled organizations, where everyone has a set of idea and paradigm of what a successful executive should “look like,” will lead managers to ignore objective results and employ subjective means of homogenizing the workforce.

Incredibly, this can all happen while the company promotes special programs such as diversity training initiatives.  In fact, such situations are the most destructive to company employees who pick up on this lack of coherence and will understand the lowest common denominator message as the way to survive and succeed within the organization even when such messages are at odds with transformation platitudes.

According to a recent Boston Consulting Group study, “increasing the diversity of leadership teams leads to more and better innovation and improved financial performance.”  Achieving this is much easier said than done.  I know that I truly enjoy people that are more synched to my way of thinking, but I have, during the last year, tried to be much more open to working with people who make me uncomfortable.

As I mentioned, having highfalutin platitudes and then trying to be true to them through tactical training without real buy-in is a recipe for increasing employee turnover. Attracting and retaining top talent, in my opinion, is the real measure of success towards transformation goals, yet it’s one of the hardest things for organizations to accomplish.  In fact, McKinsey states in a recent report that, “many companies do an awful job of finding and keeping them.”

Mixing business models – Running a well-oiled machine is a thing of beauty and it’s easy to become engrossed in the tactical activities required to continue hitting performance goals. Nonetheless, mixing an organization’s traditional business model with new business models is rife with challenges that, in my opinion, are better not to attempt (they should be separated).

Even CEO’s with a clear vision of the future (something that is not super prevalent) may believe that they can manage mixed business models (new and traditional) with the same managers and processes.  I believe that this is a considerable mistake and give a pointed example of a CEO who understood this within my talk.

Myopia – As humans, we have inherent blind spots.  It tends to be very difficult for us to assess future challenges when things seem so well and good at the present time.  This is true for governments amassing huge budget deficits as well as for companies that continue to generate healthy revenues from current businesses.

Myopia, to me, has more to do with the emphasis that a company places on different aspects of their business and not a lack of articulating initiatives that cover their bases.  Many companies, today, talk about their innovation initiatives so it’s tough to call them myopic (only looking at their current business and not the changes ahead).

Nonetheless, I tend to ignore such messages and look at concrete actions and where investments are being made.  During my talks, I give two examples on opposite sides of this coin with vastly different results.  Hence, I’m talking about a myopia of action compared to a myopia of messaging.

Conclusion:

As anyone who knows me can attest, I am fascinated by the changes that are happening and accelerating in our world and our industries.  I’m not only excited about the opportunities that this situation presents for startups (e.g., new companies), but how larger organizations need to adapt in order to survive and thrive.

I enjoy talking to business executives and listening to their perspective.  In the coming weeks, I’ll be holding more private presentations at two large financial institutions and at a telecommunications company and I’m sure that I’ll continue to learn a great deal from these interactions.

Even though I believe that most business people underestimate the accelerated change we will see in the coming decade, I don’t believe that large organizations will simply disappear.  I do suspect that many of these will be irreparably harmed and replaced.  Nonetheless, I am convinced that some will figure out how to adapt.

The transition will undoubtedly be painful.  I do believe that.  However, my hope is that, in the process, the new status quo will be more beneficial to many who are disenfranchised by the current system.