Since the publication of Leading Digital in 2014, there has been a lot of water under the bridge. In order to have a look into the updates of his findings and discover more about digital transformation, I interviewed Didier Bonnet, one of the authors of the book.
In terms of business maturity with respect to digital transformation, what has and hasn’t changed in the past 5 years?
First of all, I think a lot has changed in terms of the way companies have approached digital transformation. Five years ago, only a few companies were doing really well. Today it’s pretty much common parlance in company terms, as almost everyone has launched some form of digital transformation program.
Some companies like Nike are really making a big headway in this area. There are new technologies appearing on the scene such as AI, IoT and others, which are fairly complex. So, the difficulty of creating value out of these has increased tremendously, and therefore, what we see is a polarization of companies that have mastered digital transformation and are continuing to adopt and experiment with this technology very effectively.
Then, there are companies that are still struggling with the basics, which may not just be technological issues but are often organizational. Progress has been made since 2014 due to all the work that’s done on customer engagement, customer data, experience, and design. Also, what we find is that a lot less progress has been made in operations because operations are much more complex. Today, with an IoT application, if you’re looking at doing predictive maintenance, for instance, you’re talking about a mind-boggling application from the data capture to data transports, data communication layer and then the analytics, which is extremely complex to put into place.
Business models were the third pillar that we discussed in our book. So, in this regard, to implement a digital transformation program, a company has to deviate from the normal day to day work because its existing business model is still producing revenues and profits.
It’s how one orchestrates keeping an eye on making today work and at the same time, building the business model of tomorrow; but very few companies are able to do that. The second reason concerns all this talk about small startups taking over big companies and destroying entire sectors.
I think if you have a look at sectors like Fintech or Martech, it is chunks of businesses that are being attacked. But this opposition of startups versus big companies is a wrong way to look at the problem. In fact, most large companies that are successful, have built a very effective ecosystem of partners including startups, which they know how to use.
In Leading Digital, you provided quite a few digital transformation methodologies for companies. Now, what would you keep/change/delete in your methodologies? Why? How? When?
I think if I go for the framework, the reason why people are doing digital transformation has become much more obvious and compelling today. We mentioned that there was a profit motive to do this kind of program. It’s becoming more compelling now because we know there are consumers and customers out there that are also changing their habits. They are totally aware of what your product does, they can compare prices and have become very astute for getting the best deal they can.
The ‘what’ is driven by a multitude of new technologies that have appeared. The customer experience you can see, with some companies that have mastered the data-flows from their customers, how much better they are at recommending the next best action such as a film or a book.
So, it’s getting very granular in the sense they can understand you and there’s this connection between customers and companies where if the customer gets a good outcome, he is okay with giving you some data. A good example is that of Netflix.
I am quite happy with Netflix to feed off my viewing habits because I know I would get better recommendations as we go forward. So, this kind of collaborative experience is a big trend that’s happening right now that very few companies understand, because it’s about data and it’s also about the soft side of understanding human behaviour.
So, very little has changed in the effort to try to constantly provide better-personalized engagements with customers. Through the progress we have made in analytics, we’re getting much better at it. It’s not just about the architecture and the technology, it’s also about the emotional design that you put into your experience.
Big companies like Capgemini have bought design companies because they’re totally instrumental in designing a world-class customer experience. In the operations, as I mentioned earlier, it is very complicated because all the new technologies that have appeared are about some form of automation of the operation or some form of data flows that give you better and real-time visibility of your operation.
If you think about getting data on a boat engine’s performance in the middle of the sea, you need to put up sensors and data backs, bandwidth, analytics and then you need to take action on the back of that. So, it’s a fairly complex system to install. We’ll see a lot more activity in the operation going forward around this notion of automation and let alone the whole field of artificial intelligence, particularly machine learning.
Despite all the hype, I think we’re still experimenting with this. But I can see the potential of this technology to formally change the operation and change the business model that we have in operation, the operating model or the way we do operations. For instance, if you look at a warehouse that is completely automated, like the ones you’ll find with some of the big retailers, the role of the human working in it has changed radically. It’s more about controlling the automated processes and checking if they working correctly, rather than stacking shelves and picking items.
With the business model, I believe what we have seen happening in the last four years is really this notion of a digital platform, and we have tried to use platform economics, economies of scale, to really deliver services. It’s very hard for a large corporation to do, but not impossible. You really have to pick your areas where you can build platforms. If you do it well, you have a virtually exponential scale effect that happens in these offerings and all matching very disparate demand with very disparate supply and then you can create a new business model. These changes are driven by new opportunities to optimize or completely change your business and serve your customer better.
In the ‘how’, I think the visioning upfront is still as important as it used to be. I mean understanding why you’re doing digital, what you are trying to achieve, or how you devise strategies. Engagement, the second point that we raised in 2014, is also crucial. I have seen some progress but also some failures in collaborative tools where people thought if we deploy technology, people will use it. The key to engaging the workforce is to combine the understanding of how people can work better and training them how to use this tool efficiently.
The third one was governance and I think that’s still totally relevant. A lot of people, whether in highly centralized or decentralized organizations, can now find ways to develop digital applications to their benefit. We shouldn’t forget that we’re still developing this digital application cutting right across the departmental organization or the geographical organization that we built a hundred years ago, and the world has moved on since then.
We still need to be careful at understanding how we could deploy this program effectively in global companies that have existed for years with loads of legacy, systems and processes. The last one we mentioned was this notion of a new deal to some extent between the technology side of the business and the business side. We talked a lot in 2014 about marketing and IT in particular. I think it’s still very valid, but the data shows that it hasn’t improved much.
I believe what companies have got better at is getting from the ideation to the pilot or the MVP, but scaling is still a huge issue. So, we need to work much more tightly between technology and business to get this flow of technology really scaled into the business, because scaling is where a business finds success. In 2014, we did put some emphasis on the notion of competencies and people, and I would stick it right in the middle.
This is because every single company I see today is still struggling in some way about the lack of skills of their current employees or the specific skills they can’t get access to like data scientists, digital marketing and cloud architecture, etc. People tell us that if there are impediments in accelerating transformation, they are skill and competency issues and yet I see too few people and too few companies putting in programs for reskilling people. These are very complex programs because you can take your population and increase the digital IQ generally. Hence, they get to know what’s going on.
There is a lot of discussion about AI and robots taking over jobs. The changes that are going to impact jobs are going to be massive. The nature of jobs would change quite drastically, and we need to pay attention to that. The second issue is that there is a scarcity of some of these skill sets.
You can’t hire them all because they are expensive, but you need to figure out ways to access them.
My ‘new how’ would have a big proportion of capability, skilling and trying to involve the entire HR community; we need to reconnect the entire HR with the business. This is to take on the biggest challenge corporations are facing- to move the entire skill set of the organization forward to be able to deliver those digital transformation programs.
If we were to look in a crystal ball, what would be the main argument of your 2020 revision of ‘Leading Digital’?
Research has shown that customer experiences now have become much more collaborative, with firms and customers getting more involved. It’s physical, you go to the airport and print your own tickets, take your bag onto the carriage and so on. You are doing a lot of work the company would do. For the operation side, it’s all about automation and it’s less clear.
How do we run the operations in a completely automated format and how do we transform the workforce to cope with that is yet to be figured out. The business model is more about leadership, how we train people so that they can do the work they have to do today to generate revenue and profit on the current model, but at the same time build and design the future.
And this is quite hard to do. It’s a leadership call that has to be made if we want to crack the business model of the future for large companies that are making the transition.