Digital Transformation – Why We Get it Wrong – Techstrong Con 2023

Hello, everybody. Welcome to text strong con 2023. I'm Howard Holton.

CTO here at gigaohm. Normally when this is live I would now ask, please raise your hand if you've ever heard a gig at home the wonderful part is I get the exact same response when they're virtual. I realized I can't see your hands, but even when it's live and I've got a lot of hands so we're excited about the same.

So I'm sure everyone has heard of Gartner Giga home is in the same space as Gartner. We're a research and advisory firm. Research and analyst firm.

Excuse me. And I am the CTO and Lead analyst that means I spend most of my time working with vendors and customers our end user customers on strategy. So that strategy is it strategy data strategy digital transformation security strategy for our end user customers and then how to better reach customers where the market is moving where the market is going what customers expectations are and user customers for our vendors.

Today, I'd like to spend some time talking to you about digital transformation. I have a small slide deck that I was having some technical promise with so we're just going to do this as a conversation. If you look to the two corners on my screen I have here.

I have my LinkedIn connection. And then the QR code just takes you to LinkedIn. The reason I did that is if you have any questions any comments anything you'd like to discuss after this is over.

Feel free to reach out to me there. I'm decently active and so you are welcome to to ask me anything. So so let me start by saying I think digital transformation gets a bit of a bad rap.

Digital transformation has a defined purpose and a defined Focus. And like too many things it's seen as large and complex and people are constantly looking for the Easy Button. Well, I hate to break it to you.

There is no easy button in successful digital transformation. So I'd like to start if we may with the definition of digital transformation. The definition of digital transformation is changing your company to deliver your products in the way your customers.

Wish they could receive them. There is no other definition. I mean sure there's hundreds of definitions that people have created.

None of those are actually digital transformation. And the reason they're not digital transformation. It's digital transformation is about customer centricity.

I would love to start seeing questions show up at this point because I generally get a lot in that statement. Um, if you are changing processes to be digitized that is digitizing not digital transformation. Right, if you are doing anything else if you are adding data to your environment and becoming data informed, that's great.

But if it is not about changing the way your customers receive products to match the way they wish to receive them. It is not digital transformation. It is in fact something else and it's why we see so much failure to reach the goals that people set out to or understand of digital transformation.

So let's talk a little bit about why this is important why this is happening and why this is happening now. And this is the other part that I think people Miss digital transformation happens because we have disruption within the market the global market. Why do we have that disruption?

We have that disruption because of this little thing called the human value chain. The human value chain is why do we do the things that we do and what do we value? And when it comes to markets and how we spend money the human value chain goes all the way back to the Age of Enlightenment all the way back to when the printing press was invented and we we put knowledge in the hands of the Common Man.

And you started to see revolutions occur. Right revolutions occurred because people wanted to control the vet their own value chain. They wanted to own a home.

Right. They wanted to have some control over their career. Right?

If we look at the value chain of our parents our grandparents and our great grandparents. It was that it was I want to I want to own my home. I want to have a career.

I can be proud of I want to be able to retire and have a decent retirement. I want to own a car. I want to see the world what right all kind of all of those things.

So the value chain. And one of the things that we have noticed that that sociologists discovered more than anybody else is with Millennials the value chain started to shift for the first time since people started studying. the value chain and that shift was I no longer believe employers will be loyal.

And we created a gig economy. Millennials said housing is unaffordable and because of the crisis in 2008, not the good investment. It was always.

Talked about being so I don't trust that anymore. Right Millennials have the low started a trend of the lowest rate of driver's license attainment and car ownership. Especially being us being in the US right cars are a big part of kind of the American dream the ability to get in a car and drive coast to coast is something we advertised and talked about and made movies about and wrote books about right and that piece of the value chain started to shift.

Another big piece that started to shift is if my employer isn't loyal. Why would my bank be loyal? Why would my Car company be loyal.

Why would my cell phone company be loyal right? They don't really provide value for me. They just see me as a customer.

And so I I'm not going to be loyal to them either right and banking relationships that lasted 30 years Banks were now seeing weren't lasting people were switching banks based on their ability to quickly serve them right serve them in the way. They wanted to be served. Whatever.

It happened to be right and that's where the wish kind of comes from. The wish comes from trying to understand what your customers want. And how do they want to interact with you in digital transformation is about adjusting to that changing wish.

As a rapidly as your customer suggest, so it is in fact. A data-driven multi-channel experience. Otherwise again, you don't have digital transformation.

Right. So if we think about that, right digital transformation is changing your company to deliver your products and the way your customers. Wish they could receive them.

It's an attempt to match the change in value chain. Right, the goals are to move with or before the customer. So if you're doing digital transformation, like if you're sitting down with your organization, they're explaining what digital transformation is or you're helping design.

What digital transformation looks like for your organization? It's about customer centricity. Right?

And that doesn't mean the old kind of weird customer Centric. We're a customer focused. No customer centricity is about using data to inform who your customer is.

How your customers are segmented where your customers currently buy where your customers? Wish they could buy. And then how do you attain those customers in the way?

They wish to be spoken to in the way they wish to be recruited in the way they wish to be attained. And how do I deliver an experience that is consistent across channels? Right the best experience can't be when you call the bank.

It can't be when you go into the store. Right. The experience has to be as good in the store online.

Through Facebook through Twitter. At curbside pickup whatever the all of the channels that you offer. The experience has to be equal.

And even for those who don't know Costco currently does not offer an equal and even experience in the store versus on their website. They are separate companies run separately. Right.

They're also not necessarily a customer that's terribly interested in digital transformation as we think of digital transformation. So you must have be data-driven, which means you must trust your data. Your data must provide directionality and assist with up-to-date decision making if the data isn't designed to do that again, you're not digitally transforming.

You must enable constant feedback loops and the feedback loops have to be also nearly instantaneous. And all of this means your organization must remove the fear of action and must remove the fear of failure. If your organization has a core fear of failure and therefore they don't take action and they're so risk adverse.

They won't make a decision for fear that it will fail digital transformation will fail for that organization. You must change that because failure is part of digital transformation. Right digital transformation is effectively embracing agile.

right, which is the ability to fail and fail fast and recover from said failure in everything that you do so that you can better reach customers as your customers move from platform to platform move from channel to channel move from experience to experience So some things that are not digital transformation digitizing existing processes and not digital transformation. Having data, but not trusting it or not being data informed not digital transformation. Is your customer says they leave an empty seat for the customer in the room again, not digital transformation.

Um, if you if your company thinks the tools will solve your DX problems that there's any Easy Button. not digital transformation and again not having a culture that enables customer centricity. Means you will not find success in digital transformation.

now that was kind of a lot to take in. Yeah. So let's talk about some stories of successful digital transformation.

And Tim to make it easy on everybody including myself. I'm gonna use digital natives digital natives. Led the digital transformation wasn't even called digital transformation when these digital natives showed up on the on the scene.

It'll transformation comes out of the disruption Witness by these companies and the and the desire 10 for established companies to not be disrupted. So let's talk about Netflix. For those of us with gray and our beards, we we very much remember the the precursor to Netflix.

We remember the Blockbuster. Experience and the Blockbuster experience was great. The Blockbuster experience was great in really focusing in on the problem because you go into Blockbuster on Thursday Friday night because the kids wanted to watch a movie where you wanted to watch a movie you go to the new release section and everything's gone because you didn't get there Thursday.

And so you're standing there going this one's out and this one's out and this one's out and this one's out and this one's out so I have The Princess Bride or Die Hard which one do we want to watch? You take your movie home. You get busy you don't watch it that night.

I will watch the next night. Right four days later. The late fees are so high you now own that movie your fourth copy of Die Hard.

right Netflix wasn't created because getting DVDs by mail was easier. It's always easier to walk into the store Netflix was created because everyone hated late fees and with early Netflix. Free streaming there were no late fees.

Additionally I could make a list of all the movies. I wanted to see as long as it announcement had been made about their release. I would know what the next movie is.

I would know when I would receive it. I could keep it for as long as I want and I could send it back. And so almost immediately.

right Netflix disrupted what blockbuster had done for? AIDS right Netflix didn't just start as a male disc disruptor and then wait for the next thing to come Netflix continued the level of disruption by paying attention to where customers were and where customers were going. and when high speed internet access was able to sustain video.

Streaming video and customers started to look at streaming video platforms. Netflix was right there making arrangements building a video catalog. Again question.

I normally ask live when I can see everyone. Does anyone know why? Netflix did really deep.

Dramatic cereals like House of Cards and yet at the same time did a 13 picture deal with Adam Sandler. Couldn't think about it for a second. And the reason they did that is because they immediately became a data-driven company.

The they noticed that what people really wanted to do in cereals was get deeply connected to the characters. And the world and the spaces. And so shows like House of Cards gave that to people these are intense drum dramas that allow you to carry your love of the world for 10 12 20 hours at a time.

But when people watched movies, what they were really looking for was 90 minutes of popcorn fun. And a Netflix is mine. No one delivers 90 minutes of popcorn fun.

At the same return on investment as Adam Sandler. From day one. They're a data-driven company.

Netflix was so successful at changing the model of how we consume traditional. content right that the MPAA had to change their rules on Academy submissions. Because Netflix was wiping categories.

And they changed the rules so that every film that appears before the academy must have a theatrical release cannot be streaming only and they they did that in immediate response to Netflix. I'm Netflix wasn't the only one but they were the largest one. So Netflix is a huge disruptor has been a disruptor since the since the very beginning and the key takeaways.

Are they pay attention to the customer they use data to inform their decisions and they don't question that data. Right, they Embrace technology. They Embrace technology and all its forms including security.

And they're an organization that's built to support that level of agility. One of my favorite digital transformation disruption pieces of kind of trivia. Does anyone know how long it took Amazon to go from initial ideation to delivery of Amazon Prime as a service.

So if you think about it, right I have to negotiate two-day shipping. I have to make the changes to the website. I have to have a program that people can sign up for I have all these rules.

I have to I have to get all this stuff done. So from ideation to delivery as it was available for you to buy on their website and they applied it to a hundred thousand shipped and sold by Amazon products. with six weeks Right, they have these scrum style meetings where people people get together and and bring up ideas that ideation occurred said Hey, what if we offer two day shipping to everyone?

And they said oh that sounds interesting. Let's see what that looks like and from that point six weeks later. They had it on the website.

That's a crazy level of organizational disruption allowed. Right. So another kind of quick story Airbnb.

Everyone's familiar with Airbnb. So the largest the largest commercial landowner right now is a Marriott You could argue that Marriott's not a hospitality company. There are real estate company.

If Marriott wants to go to a new market, it's a four to five year process, right? They do market research to determine what Dynamics are look at penetration identify a property try to acquire something that already exists and Rebrand it which is a 18 month remodel process. Otherwise at the break ground and start from scratch.

So four year process, it's a it's a millions and millions of dollars Airbnb if they want to move into a new market. They advertise on Facebook. And in a weekend Airbnb can fill up can can acquire 5000 rooms.

That's a stunning change. In the Dynamics of serving the customer right Airbnb on zero properties. Airbnb moves into new markets and exits markets just as quickly and has the ability to support markets that no one else can support.

right for Marriott to build a property in You know Pine Tree California, which has 800 residents, but it's beautiful is a significant investment for Airbnb. It's a Facebook ad. The cost Dynamics is hugely different.

As of today Marriott's market cap is 50 billion dollars. It's pretty solid market cap. Airbnb owning zero properties.

Their market cap is 75 billion. to Crazy difference in valuation All right. So Peter Drucker said it best culture each strategy for breakfast.

No matter how good your strategy is. If your culture can't support it digital transformation. will fail All right.

I I there is a question and I'm not ignoring the question but it is part of there is a spot for it and we're gonna get into it here shortly. So customer centricity the stages of customer centricity. our customer identification you need to identify who you think your customers are who buys you why do they buy you?

Why did they buy you versus a competitor? Why should they buy you versus a competitor? Sometimes you're looking you're identifying customers that aren't yours yet and that you would like to retain you'd like to engage right and you have to do that not by guessing but by asking them.

Right. We don't use customer responses as the authoritative answer to any question. We use it as informational as Dr.

House said the customer always lies. Right, if you would have asked someone when they got when they exited a New York City Taxi Cab ask 30,000 people in the exit in New York City taxi cab. Why did you what would you change about the taxi?

They would say these three things one. I couldn't understand the driver and the driver couldn't understand me two. I think I sat in vomit and three every time the cab had a bump.

I thought I was going to die. None of those are the reasons that you get a cab not a single one. Uber solved none of those that was not their purpose What Uber did was give you the three things that you most need when you engage cab?

The first is I have a specific place to be please tell me when I'm going to get there. The second is since I have a specific place to be please tell me how much it will cost to get there. And the third one is please make it easy to find the car because the anxiety of waving for a driver is uncomfortable for everyone.

Those are the things ubersolved. No one was gonna give the founder of uber a hundred thousand cars and drivers or the funding for it and so much like Airbnb the best thing to do was not to own the asset. But rather put the asset ownership in the hands of the gig worker that they engaged.

Interestingly enough the question posited by the founder of uber was was how long would it take to get a car to anyone in America? Which I thought was funny since he's Canadian and the answer to that question is six minutes. Which immediately once they figure that out had them then ask the question.

What would Americans pay to have in six minutes turns out its food? All right. So customer identification.

The second thing we do is customer segmentation, right since since you can't have an infinite number of of ways to address a customer you then segment your customer into how you're going to approach them? What are the channels that we're going to to go after our customers with and that is customer segmentation what buckets do those customers? We've identified fit into and how will we address those?

We then create an equal multi-channel experience right all the way back to you can't have a better experience on the website than you do on the mobile app. You can't have a better experience when you're in the store. Right, the you need to have it as equal as possible multi-channel experience.

I don't know about you but I get really annoyed when I click on something in the mobile app, or I look for something in the mobile app, and I have to exit the mobile app go to my computer fire it up on the website will Define how to change something that logically should be available to me on the mobile? You have to embrace not just be to be not just B to C. But rather the B to B to C experience, right?

You have to be able to embrace and support those people that are reselling what you do that talk to the final customer. And support them and and how they interact with that Customer because ultimately that customer doesn't recognize the middleman right when I buy a ream hot water heater from Home Depot. I don't get upset with Home Depot when the hot water heater fails I get upset with Reem and therefore I need to embrace that middle Channel.

I need to treat every customer whether I deal with them directly or indirectly as though they are my customer. And then we need to be good enough versus Perfection, right Perfection is the opposite of progress or the enemy of progress. As an organization we need to be able to say what is good enough and how can we deliver good enough and have a change rate and be agile enough to continue to improve based on the feedback.

We get from our customers from our users from those who interact with us. Our organization needs to embrace change absolutely embrace. It not be for a full of it in any way shape or form but lean into change.

The organization must be data first. Healthy organizations create a center of excellence. I don't like Center events Excellence, but Innovation a center of excellence is a place for business and technology to work together to solve problems rapidly with the ability to make decisions.

And take action without a heavy steering committee. The company needs to make large investments in security and technology and I don't mean they need to be the number one place people spend money what I mean is they need to be strategic Investments made by the company not seen as cost centers but seen as value drivers and then it's both security and Technology need to be seen that way because as we grow as we become these rapid innovators as we Embrace change security has to be in lockstep. And has to be enabled to be friction.

Only when friction is needed not friction all the time. The technology leaders in the organization need to be seen as the organization's Navigator. And you want to have a chief digital officer?

Now I have all of this stuff in a series of slides that will make available after the the conference including kind of a 30 60 90 plan as we see it working. Now the key failure point in any organization. Is a failure to consider.

organizational change management right, you have to embrace that there are a lot of changes that are going to occur inside your organization and you must must invest very heavily in organizational change management if you do not digital transformation will fail and I don't mean you won't hit the targets. I mean, it will be an abject failure akin to burning money on the deck of a boat. So, please don't think and please don't allow your organizations to think that they can successfully manage digital transformation.

without broad communication and a significant investment in organizational change management and that likely means bringing an experts and building teams to manage organizational change. Change exhaustion is the thing. We most need to combat to be successful within digital transformation.

It's kind of the the two sides right? I talked a lot about the strategy. of organization of digital transformation but the execution can be tied so thoroughly to managing the change management properly setting expectations.

Right properly communicate what's happening now and what's coming in the future? Right. No one should ever be honestly unaware of the changes that are coming.

right changing your the way you measure employees your kpis to embrace rapid change. and understanding that all large change comes with a J curve. You cannot restructure your organization to deliver your products this way to deliver to your customers to embrace change to embrace agility without the J curve and the J curve is the drop in revenue and sales as you restructure and reorganize before you pick up and get the hockey stick.

I hope that makes sense to everyone so we've got about four minutes left. I've talked for a while. I'd love to know if there are any more questions that I can answer for people.

Okay. So let's go through. Let's go through some more kind of kind of risks that are involved.

So security must be consistent security is generally It so security is generally a place where there's a big Miss and even in organizations that are successful with digital transformation a failure to keep Pace with security security innovation and security investment leaves leads to large breaches that then cause a contraction of investment in technology and ultimately lead to the failure of digital transformation within the organization. So we got a question. So status quo with agile approaches and ocm seem to be looked down on yes.

Um amount I would argue that any status quo any calcification right any resistance to change anything that that people dismiss as as we already do that well enough or we're already experts at that. I would look down on as part of digital transformation digital transformation. You kind of have to look all the way across and all the way through the organization.

Right because you're asking everyone to respond. As fast as the data says we should respond. Right and therefore we can't dismiss how we currently how we currently claim to be agile and I say it that way because most organizations aren't actually agile.

Right again, the goal of agile is to fail and fail a lot. And simply recognize the failure early on and adjust accordingly. It's microfailure.

Organizational change management again, right organizations often have a change management group, but it is underfunded is poorly funded and they don't have any real authority to stop or start anything. Right and ocm needs to really be the place where these things are stopped and started no. No, we're not pushing forward with this because we don't have a plan that considers the whole organization.

Right or we've now got the green light ocm will be this the tip of the spear in bringing this information out bringing this information to light and really advocating. So I hope I hope that did a good job answering your questions again, I'm Howard Holton CTO and analyst here at gigaum. The QR code will take you to my LinkedIn and if you don't like the QR code the the link right up here in the corner.

We'll also take you to my LinkedIn. If you have any questions, please feel free to ask and I'd love it if you checked out our website. So next time I ask if you've heard a gig at home, you could say a resounding.

Yes. Thank you, everyone.