Companies are slowly beginning to realise the existential nature of the challenge that digital hypercompetition poses to them.
When they see the destruction wrought by disruptors on incumbents in music (Spotify), media (Google) or retail (Amazon), it’s difficult to deny that the writing on the wall is for them.
Executives are beginning to take notice: a Sloan Management Review survey found that 90% of executives anticipate their industry will be digitally disrupted to either a great or moderate extent.
But taking action is much harder. In the same study, only 44% of executives thought their company was adequately prepared for hypercompetition. Boards are bombarded with offers of advice from large vendors and consultants, but settling for panaceas like innovation studios or lipstick solutions won’t be enough to secure a company’s digital future.
That requires three steps:
Companies need to be product-focused: product management should be the core function in a company and everything else should support delivery of brilliant products in real-time. Product management is the ongoing improvement of a product based on changing understanding of user needs in real-time.
IT’s response must be to shift from the start-and-stop project model to continuous iteration under the direction of a product manager. Internet companies release updates to their products hundreds or even thousands of times a day, not once every 6 months.
A great digital product isn’t just a user interface; it is an ensemble of great people, processes, policies and systems. It doesn’t make sense for companies to split product responsibilities between a Chief Digital Officer for the front-end and a Chief Information Officer providing the back-end. Organisations need a single Chief Digital and Information Officer with oversight for consolidated digital service delivery, which is orchestrated by the product management function.
Abolishing the digital/IT split is also useful from a product lifecycle perspective. It allows the CDIO to match people’s aptitudes to the methodologies suited to different stages of product development. Simon Wardley breaks digital workforces down into three categories of talent:
We shouldn’t expect digital workers to be all things to all people. Their skills and mindsets correspond to specific points in a product’s lifecycle. Allocating them to the roles that fit their aptitudes and attitudes makes the best use of employees’ skills, and enables a conveyor belt to move products from ideation through to commercialisation and then platformization.
Too many companies suffer from what I call ‘The Square of Despair’: four structural forces that collude to resist change, especially within large organisations:
Tackling the Square of Despair means making procurement fast, nimble and chunking it down into smaller purchases. This allows access to innovative solutions from start-ups and SMEs; that’s why government agencies have developed Australia’s Digital Marketplace and the UK’s G-Cloud.
Most importantly, tackling the Square of Despair means reversing the deskilling and learnt helplessness of the organisation on which it feeds. The reason why so many firms rely on contractors and heavy governance is ultimately because they don’t trust their employees to deliver anymore. In too many companies, that’s for good reason: a BCG report found digital capability and training is lacking, across industries like retail, financial services and consumer goods.
There needs to be digital training at every level of the organisation, including in the boardroom and executive suite.
Transformation can be painful. There will be challenges and resistance, especially from people in the legacy parts of the business. That cannot be used as an excuse to pull back from deep-seated transformation and turn to surface-level solutions.
Transformation by consensus, or by occasional hackathon, will not work, because transformation is not iteration from a low baseline: it requires making fundamental changes to an organisation’s structure and processes.
Waiting any longer to embrace digital change means exposing your organisation – and its employees – to the risk of being driven out of the market.
Transformation is difficult and it’s essential, if businesses want to remain off a Receiver’s watch list in a digital world.
Organisations that want to thrive in the digital age need to redesign their internal structure, tackle the Square of Despair, upskill their staff and have the political will to radically transform themselves, rather than adopting tokenistic solutions.
Business as usual is no longer an option.
Paul Shetler is a technologist and entrepreneur with over two decades’ experience working on large scale IT and organisational change projects – spanning the public and private sectors. He has co-founded two start-ups, worked in two others and also been in leadership roles at large suppliers like Oracle, Microsoft, and the global payments network, SWIFT. More recently, Paul was responsible for transforming the way government delivers public services. He was appointed CEO of Australia’s Digital Transformation Office in July 2015 by Malcolm Turnbull and served in that role and later as Australia’s Chief Digital Officer until November 2016. Before that, he was Chief Digital Officer at the UK Ministry of Justice.