How established organizations can overcome barriers to digital transformation – for product managers
Today we are exploring digital transformation in large organizations as well as other challenges leaders are facing in a digitally transforming business environment.
With us is David Rogers, an expert on digital transformation, a member of the faculty at Columbia Business School, and the author of five books, including The Digital Transformation Roadmap.
Summary of some concepts discussed for product managers
[1:38] What kind of problems are executives of organizations talking about now?
There’s a tension between the external and the internal. Established organizations are seeing a lot of external change—new technologies, new behaviors among customers and employees, and digital change. The pace at which each new wave of change comes is speeding up.
On the other side, businesses find it hard to adapt internally to respond to change. Many companies are working on digital transformation, but they’re struggling to see results. Seventy percent of large organizations are failing in their efforts to transform. I’ve been diving into the key problems that are holding organizations back from digital transformation. They understand the urgency to transform, but inertia is holding them back.
[5:43] What is digital transformation?
Digital transformation is the transformation of an established business to thrive in a digital age of constant change.
This is about established businesses. Creating a new startup is a different challenge. In an established business, you have a business model, customers, ecosystem of partners and distribution channels, employees, and a brand reputation. The challenge is adaptation. How do we turn a giant battleship in the water?
Digital transformation is not, at its heart, about technology. We need to change because of changes around us, which are driven by new technologies, but to change our organization, we have to focus much less on the technology and much more on the customer and our own business.
To respond when things seem to be changing so fast, keep an eye on the technology, but don’t lose sight of your real mandate, which is to solve customer problems, solve business problems, and pursue opportunities for sustainable growth.
[7:36] What part does artificial intelligence (AI) play in digital transformation?
The current wave of change is around generative AI. A lot of companies are pumping out demos of AI passing the bar exam or creating a marketing plan in 30 seconds. It’s uncanny how an algorithm can put things together that are shockingly similar to what a person might write.
Is it actually useful though? Most of the examples I see are not useful. The marketing plan created in 30 seconds is not good enough to implement. It’s a B-minus student’s effort.
Other people are using AI to actually solve problems. Khan Academy is using large language models to provide one-on-one tutoring. There is a lot of evidence that learners perform and progress better and faster if they have one-on-one tutoring, but human tutors aren’t scalable. Khan Academy is building an incredible application to provide tutoring that is as good as or even better than what a human tutor can provide.
We have to follow and track these fast-moving changes, but we cannot be distracted by them from the strategic question, “What problems are we trying to solve?”
[10:51] Tell us about your framework for digital transformation.
My framework address five barriers to digital transformation:
- Lack of shared vision: A lot of companies have a generic intent to become more digital or futureproof the business, but those phrases are meaningless and generic, as opposed to a vision that is specific to the company. Where do we see our world, context, customers, and industry going? What is the role that we see ourselves in, in this rapidly evolving future around our particular organization? Your vision must be rooted in your particular business and unique capabilities.
- Lack of clear growth priorities: Sometimes a company has no focused strategic process at all and is chasing after the latest shiny object. Other companies are purely looking at cost savings and efficiency, which is important, but if all you’re trying to do is optimize your longstanding business, you’re going to miss out on the biggest growth upside.
- Focus on planning instead of experimentation: Product management is all about iteratively learning through experimenting and getting customer feedback. Some companies lack that process and rely on detailed, traditional planning processes based on third-party data.
- Lack of flexibility in governance: If you have no flexibility built into governance processes, such as allocating resources and starting and stopping projects, you will have an inability to effectively scale good ideas.
- Lack of change in capabilities: Your technology stack may not have been brought up to the present era. You may have an inflexible structure. Your people may not have the relevant skills to pursue the ideas your product managers have identified as problems to solve. Or the culture of the organization may not have moved forward.
[19:43] Can you take us through an example of an organization that went through digital transformation?
Walmart has gone through digital transformation while going into ecommerce. Walmart has done a really good job of clearly defining problems to be solved. They’ve tested and learned which of their solutions or growth ideas are working and have not been afraid to shut down ones that aren’t and scale up ones that are.
One of their biggest growth opportunities is ecommerce or omnichannel commerce around groceries. Walmart understood they weren’t going to beat Amazon at its own game, but they have certain strengths—namely, physical stores. They looked for strategies that made their physical stores assets rather than liabilities. They created many pilots of different approaches for grocery delivery—drop off, pick up, and shipping. Ninety percent of Americans live within 10 miles of a Walmart, so the proximity of the stores is a tremendous strategic asset. They tried a lot of things and figured out what was working then built on that.
Walmart’s buy-online, pick-up-at-store model, which was already growing before the pandemic, became supercharged during the pandemic. People felt secure and safe getting groceries loaded into their trunks without even having to roll down the window.
Walmart tried a text-messaged-based commerce concierge service called Jet Black, which was an upscale product in select markets. They found they could drive change of customer behavior, so they could get product-market fit, but they found they couldn’t scale yet to a business model that would capture enough value that they could continue to grow it, so they wound that down.
They have had success with health centers and micro-warehouses in stores. They’ve brought in robotics in some aspects of stocking. They’re even looking at edge computing, building on their combination of retail footprint and tremendous data.
Walmart has tried a lot of things and been willing to test them and learn in the market what works. They’re not too attached to one idea but are looking in multiple places and scaling up those that are ready to grow in the market.
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“Everyone has a plan until they get punched in the mouth.” – Mike Tyson
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