arrows pointing to the future

When planning for a digital transformation, many executives focus on an “end state”, or an idealized picture of when the transformation is done, and all changes are complete. But transformations are an evolutionary process, and getting to the “end” isn’t possible—the rate of change in technology, fluctuating market demand and changing consumers preferences are the only constants.

Hoping to soothe stakeholders and shareholders, define a direction for the company, build momentum for change, and avoid resistance, it’s tempting for executives to plot when the digital transformation will be complete. But instead, they must think about a future state: An evolving roadmap that’s connected to the bottom line, and focused on three components: Creating an adaptive learning culture, applying a technology-as-strategy mindset, and enabling self-managing, customer-centric product teams.

Adaptive learning culture

In an adaptive learning culture, organizations embrace the uncertainty of the future. As a result, they recognize that creating fixed plans is a form of waste. Instead, with adaptability in mind, they work to understand continually changing customer needs and market conditions. With fast “envision/explore” learning cycles, they discover what customers really value, and experiment with new ways to delight them and improve product-market fit. Learnings from these experiments drive future investments and strategy for the organization.

From a governance perspective, this means shifting the measures of success to focus on business outcomes and customer value, rather than traditional measures like scope, budget, and schedule. While the traditional performance measures are still important, they must not get in the way of the higher goals of learning and creating customer value.

Adaptive learning cultures are ones where leaders are intentional about regularly building capabilities in technology, data, analytics, infrastructure and people, so that when new market opportunities emerge they are ready to meet the challenges.

To get a sense of what this looks like in the real world, consider the case of Kroger, a 134-year-old American grocery chain:

Unlike many of their peers, Kroger made the decision to invest heavily in digital as a response to Amazon’s acquisition of Whole Foods and the introduction of Amazon Go, the semi-automated cashier-less store.

Their goals included deep investment in data, analytics, mobile and IOT. But being based in Ohio, they faced a challenge in finding the right talent for their teams. Here’s where it gets remarkable: Rather than outsourcing, Kroger focused on building a learning culture. They believed that if they could nurture and empower their people, they could both build the talent they needed and attract new talent.

And they were right. In just two years, Kroger’s Technology and Digital team was named 51st among the “Top 100 Best Places to Work in IT” in 2020 as ranked by ComputerWorld magazine.

Building a learning culture not only does wonders for talent attraction and retention, but it also helps the bottom line. In Kroger’s case, digital sales have soared year over year since 2018.

Technology is the strategy

In many traditional organizations, technology largely plays a supporting role. In a digital transformation, technology shifts to the core of the business strategy on two fronts:

First, developing in-house skills in data, analytics, cloud, IOT and more increases the technological capability of the organization, and allows them to meet evolving consumer tastes.

Second, focusing on technology allows the organization to build world-class platforms and systems. These boost organizational productivity and responsiveness, and empowers teams to respond to customer needs regularly and rapidly.

Without these investments in technology, organizations will be unable to stake their place in the market.

According to a 2018 McKinsey study, technology plays a role in three key factors that determine digital transformation success: Top organizations were 2.1 times more likely to have implemented digital tools that make information more accessible, and were twice as likely to have implemented digital self-serve technology for both employees and business partners. They were also 1.8 times more likely to have changed their standard operating procedures to include new digital technologies.

Not only does this approach dramatically boost organizational productivity and responsiveness, but it also enables customer-focused product teams to build innovative products, capture data that provides feedback on those products, and quickly release new products and experiences.

This is good for the bottom line, too: A recent study by Harvard Business Review shows that digital leaders outperform other organizations in three financial measures.

digital leaders outperform laggards on three financial measures

With an adaptive learning culture and the proper technological capabilities in place, organizations are ready to meet the third goal of their digital transformation: Creating customer-centric product teams.

Autonomous, customer-centric product teams

The third indicator of digital maturity is when the organization successfully shifts from a project to product mindset.

Project teams are typically short-term, with arms-length access to the customer and a mandate to deliver a product, service or experience on a predetermined budget, schedule and scope. Product teams, however, take full ownership of the entire product and the customer value it creates, for the whole of the product’s lifecycle. This mindset and culture shift makes the product team self-governing, with the power to make decisions and changes based on what is best for the customer. The leaders who work with these teams remove obstacles and roadblocks on the path to success.

This T-Mobile case study provides a clear example of this transition. Due to the rapid growth of their customer base, T-Mobile recognized that they would need to transform their IT group to focus on customer outcomes. To do this, they broke down silos between departments, combining IT and product development into one organization. Next, they shifted their company structure to make multidisciplinary teams that focused on either business outcomes or business enablement. They finally created a plan to make self-service technologies for customers and employees, and reduce hand-off problems between departments by removing those dependencies.

The results speak for themselves:

  • T-Mobile has added a net increase of 1 million customers for 25 quarters straight
  • Creation of new customer experiences increased by 40%
  • Their teams went from releasing upgraded experiences or new applications every seven months, to releasing every day
  • Customer complaint tickets dropped by 83%, and the customer service department’s ability to resolve the tickets rose by 67%

The transformation journey is unique for every organization, but these three core components are critical to each one. To learn more about creating a culture that supports digital transformation, check out my recent post:
Want your digital transformation to succeed? Focus on how it feels.