You Call Yourself a Digital Business. But Do You Truly Operate as One?

It’s 2022. All businesses are digital, right?

That assumption is not only not as safe as you think it is, it’s downright dangerous to the health of a company.

Over these last few decades, we’ve forgotten the bumpy road to digitalization – even as we’re facing another historical inflection point. In the late 1990s, Many businesses went online kicking and screaming. Many more refused to make the substantive changes to accompany their minimal web presence – which is why today nearly 50% of the Fortune 500 from 2000 are gone today.

Sometimes, if you want to go forward, you have to look back: One of the problematic legacies of the 2008 downturn is the idea that IT is a commodity that can be outsourced to the lowest bidder. With wide competitive moats, it seemed like a no-brainer to save on cost, but that short-term savings came at a long term cost. Today, those companies find themselves lacking in enterprise agility: the ability to change, adapt, and compete. 

Now the tides are turning again, and companies stuck in this outdated mode are at risk. The velocity imperative reigns supreme: Customers want value faster than ever, and plenty of companies are happy to meet their ever-increasing demands. In 2021, VCs invested nearly $675 billion worldwide in companies that are disrupting: born digital, born to move fast, and armed with a massive war chest, they’re breaking down the competitive moats that some companies relied on. Digitally native brands (DNBs) know why their consumer is drawn to their brand, and they have the data to predict what they’ll want next.

Some companies get it: JP Morgan invested nearly $10 billion in tech last year; Walmart acquired – and now they’re giving Amazon a run for their money in certain areas; Domino’s has gone 100% automated, allowing franchisors to know every step of the process from order to delivery to satisfaction.

Other companies transform for the sake of transformation, not for the underlying business problem they need to solve. I’ve seen companies try to launch themselves into the cloud, one, two, three times, only to fall flat on their face when they realize they bought themselves spiffy new technology with no idea how to make it mesh with their people and processes.

Buying or building the shiniest new system does not make you a digital business. In fact, if you make that investment without undertaking the necessary steps, you could end up going slower than before.

It’s not just legacy companies that are facing this kind of challenge: Even digitally native brands (DBN) need to commit to continuously evaluating their operations. It’s easy for a pared down startup to operate in a lean way; but as organizations scale, egoes and politics can lead to the creation of traditional siloes – even in the most innovative of companies.

Signs of a True Digital Business

A digital business does not mean throwing dollars at fancy tech partners and walking away. It requires a true transformation in how you operate at all levels.

When you’re operating as a digital business:

  • Change is a constant. As the environment becomes more dynamic, more strategic options are on the table. Instead of fearing change, teams accept it as a constant across the Enterprise, not just in software teams’ continuous improvement retros .
  • Teams drive towards acceleration . As velocity increases, teams learn to make faster decisions with imperfect data. Once the decision is made, they couse correct in real time with the data that flows in.
  • Teams get comfortable with As uncertainty increases, scenario planning replaces single-point forecasts. Instead of waiting for direction or approval from “leadership,” teams move forward with constraints.


How do I Get There?

A full-scale transformation is neither quick nor easy. Author Fred de Vito had it right when he said, “If it doesn’t challenge you, it doesn’t change you.”

The specific steps, of course, will depend on your company’s maturity, its goals and its position in the marketplace. However, in my work as a strategic adviser and coach, I’ve been able to discern patterns. A successful digital transformation requires shifts in every aspect of your company, from mindset to organizational structure.

You get what you organize for, as programmer and visionary Mel Conway taught us: If you have an old-fashioned, siloed organizational structure full of friction, you’ll never produce a game-changing product, as fast or as cost-effectively as a company with true agility.

You need to move from…

  • centralized decision rights to distributed decision rights with constraints (typically critical thinking frameworks like OKRs)
  • valuing technical experts to valuing business experts who solve business problems instead of checking boxes
  • disconnected multidisciplinary silos to t-shaped delivery teams
  • accountability focused on efficiency/effectiveness to measurable business outcomes
  • an industrial to an entrepreneurial mindset.

As you confront transformation, take a hard look at how a great idea moves through your organization and into production. If it’s a tangled, unpredictable mess, with multiple choke points, start by simplifying. When you do, you minimize constraints on your system, at which point you can:

  • move to t-shaped technology and business teams with boundary-crossing competencies
  • integrate business, sales, marketing and technology departments into high performing pods
  • invert control, maintaining focus by implementing OKRs.

Not only do these changes massively increase Enterprise Agility, they also boost employee engagement, which means a win all around.

Instead of being bound by the old saying, “Pick two: Speed, Quality and Cost,” you get all three. You’ll be able to up your technology teams’ table stakes, expecting them to be: fast, scalable, portable, disposable, high-quality, reliable, resilient, observable, cost-effective, maintainable, continuous and automated. And their operating model should change to adaptive, responsive, autonomous, collaborative, fast-to-fail, blameless, t-shaped, flexible, responsible, data-driven, integrated and most importantly trusted by their business partners.

Other benefits will include:

  • Your corporate KPIs will become multi-dimensional.
  • You’ll stop calling teams “devops” because you know it’s an operating methodology.
  • You’ll have a relentless focus on reducing toil for your employees and customers. By automating away soul-crushing activities, you free people up to focus on high-value activities.

Now you know what’s in it for you. But the challenges are real: Seven out of ten businesses fail when trying to undergo a digital transformation. In my next blog, I’ll explain why getting the right technology is only part of the recipe for success. Without changing people, process and technology, you’ll never make it into the elite who truly achieve enterprise agility.

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