The Big Picture
'Digital' is not a matter of convenience, but one of corporate survival.
Put another way, the limiting factor for many organisations is their resistance to change. They grew under the premise that the rules governing their internal and external environment would remain largely static, or at least predictable, and therefore ever increasing scale would provide continued advantage.
However, we appear to be in a period of extreme, exponential change, which suggest that the economies of scale are less relevant and organisation really need to develop economies of speed. Today, organisations need be able to adapt quickly and continually to emerging, and largely unpredictable forces.
Small, digital companies may not feel threatening to a traditional enterprise, but their hidden and substantial strength lies in their ability to learn quickly and move at orders of magnitude faster than their incumbent competition. And these new entrants have real ambition; they’re developing electric self-driving cars and space rockets, so it would be a mistake to think that regulation will provide a sufficient safety cage for traditional businesses. For example, applying for (or acquiring) a banking licence would unlikely be seen as an insurmountable challenge.
More pertinently, disruptive companies are not interested in rebuilding a complete bank or an insurance company. They tend to choose weak spots in existing business models that are highly inefficient, but not significant enough for large, traditional enterprises to pay attention to. They seek to tackle inefficiency, high commissions, and unhappy customers with business models that can scale rapidly with minimum capital investment.
There’s a school of thought that claims if the Titanic had hit the iceberg head on, it might not have sunk. Instead, it was taken down because the iceberg tore open a large portion of the relatively weak side of the hull.
And that’s where the disrupters hit big businesses.
The Big Shift
It’s will come as no surprise to hear that there’s no silver bullet (digital or otherwise) that's going to immediately catapult your organisation onto a 21st century operating model.
Shifting off an economies of scale agenda, onto one where economies of speed is the driving force, is a huge step. We're talking paradigm shift here without the air quotes.
It's genuinely daunting for most but just through accepting the nature of the challenge, we have already made a start. We have named the beast that is ‘transformation', and through experience we know there are three universal truths to any transformative process:
1. It takes time
I’m sorry to say, that despite the bold promises on the frontcover of those fitness magazines, you won’t be getting washboard abs in 4 weeks! Businesses are complex beasts and they take time to change.
What might be less obvious is that during the change process, you need to be prepared for a wilderness period where you’ll be living with an intermediate, far from ideal, transitional state. This can be tough to deal with at all levels, e.g. operational teams having to run and support multiple implementations; the delivery team having to integrate new technologies with legacy systems; and finance having to fund both old and new environments.
2. It’s unpredictable
You always set out on your transformational journey with a heart full of hope that things will improve, but it’s never a linear path and it’s often hard to judge whether you’re making enough progress.
The culture, technical environment, market, customer niche, and business processes all combine to make each enterprise unique. Significant change normally touches all these factors at different times, and because they are all mutually linked, changes tend to exhibit complex feedback effects.
Tools and techniques exist, but they need to be adapted to suit your organisation and goals, and this can be a challenge while you’re also having to keep the lights. The temptation is to try and outsource the problem, but unpredictable situations are inherently difficult to define, so you have to carefully plan how you engage a 3rd party and hold them accountable for delivering what you need.
3. It hurts
This is the most critical and least talked about aspect of change. Making significant and lasting change is not a comfortable experience. Obvious painpoints are when staff have to be reallocated or ‘moved on’; or when founding parts of the business need to be jettisoned.
But there is an even deeper and more acute pain that comes with transformation. It’s having to change how everyone thinks and behaves. You’ll find that the old levers and switches won’t work like they used to (if at all). You’ll find that the old reference points are no longer helpful, so you’ll feel like you’re continually charting new territory.
So how do you stop the ingrained and long proven wisdom of economies of scale and start living and preaching the economies of speed?
The Big Secret
The answer lies in how we successfully tackle any transformation process, business related or otherwise.
The secret is not to depend on willpower (i.e. brute force). Willpower is expensive and exhausting, and therefore finite. It is fragile and thus inappropriate for an unpredictable endeavour like a painful, long running, and volatile change program.
Successful transformations require you to form new habits.
When you set out to build a new habit, you intrinsically understand that you’re in learning mode. You don’t assume you know all the permutations up front. You don’t expect immediate flawless execution; you know it will take time to shape the new paths and how they might vary. You are continually making corrections as a result of feedback, analysing the parameters that led to a mistake, and then practising specific movements to try and prevent a re-occurrence.
If you want to appreciate how hard it is to learn a new habit, try moving your kettle at home to a different side of the kitchen. Or better still, swap the cutlery draw with another one. Notice how unsettling it becomes to perform even simple acts of making a cup of tea. Observe the impact on others.
What you’re likely to feel is a blend of friction, confusion, frustration, and most interestingly, reoccurring doubt. And there’ll be an overwhelming desire (and pressure from others) to just switch things back to the way they were as quickly as possible.
But if you understand that the trauma will be short-lived, and you persevere to get the habit ingrained, then you will eventually be able to execute in the new world unthinkingly. You will be efficient and effective by default. Like brushing your teeth; it’s a non-event. You don’t have to will it to happen on a daily basis.
Of course, like everyone else, new, digital companies need to form new habits too. But unlike existing enterprises, they don’t have to unlearn bad habits. As hard as it is to learn new things, unlearning existing processes, thought patterns, and assumptions is disproportionately more difficult.
Over the coming weeks, I’d like to explore further the realities of digital transformation in the context of habit building. I intend them to be more specific and technical in nature, focusing on topics such as adaptability, security, and integration.
My thanks to Gregor Hohpe – the terms ‘economies of scale’, ‘economies of speed’ and other select extracts were inspired by his book ’37 Things One Architect Knows’. You can find the rest of his great work here https://leanpub.com/37things