How to plan your digital transformation journey using emerging technologies
I don’t know if you all realize, but most of us are part of an elite group of the digitally rich. The ones who are already immersed in digital technology. And in order to get to this point, especially if you are a well- established company, you have to go through a digital transformation.
Digital transformation requires three things. You first have to believe that digital transformation is within reach, and mature. You need to have an aptitude for continuous learning, adoption and experimentation, and you have to adopt digital technology. That technology is moving so fast that while many companies have not even adopted what’s currently there, it’s already evolving to the next thing like blockchain.
The Digital World
The first thing you need to do in order to convince people to make this transformation is to talk to them about what the digital world is all about. There are two forces that are catapulting us into exponential growth and transformation, The first one is technology accelerators, and these are the fundamental things that have allowed new digital technologies to be born. There’s three of them. The first one’s computer power. As an interesting fact, the fastest supercomputer in 1975 cost $5 million, and in 2013 a $400 iPhone had the same capability. That’s how far computing power has come.
The second force is bandwidth, and I’m sure not everyone in the room remembers this but who got to use the old modems where you took the phone handle and put it on the cradle? You could only transmit a very small simple spreadsheet of data, over a modem like that. While today we can stream video and TV on our smartphones, without even having Wi-Fi. It’s pretty amazing. That’s how far bandwidth has come. As for digital storage, you can get a whole terabyte of data on just one thumb drive. But the really interesting thing about storage is not just how much you can get on there, but how fast you can move data into storage and how fast you can take it out. It’s these fundamental technology accelerators that have allowed digital technology to grow in an exponential phase.
But it doesn’t really do you any good unless you're adopting it, and it's the process accelerators that help you adopt those technologies. The important thing is to understand that both the technology and the process accelerators are necessary in order to adopt the technology. The reason adoption is so important is that we have another thing going on, and that is cumulative innovation. So, Jedidiah Youehe wrote the book ‘disrupt or die’, and it's an awesome book. He contends that companies are in denial about innovation, that the pace of innovation is inadequate, and that's why companies end up in decline or disappear altogether.
Let's kind of step through an example of cumulative innovation. Let’s starts with the iPhone right? What's the first thing is that a platform like smart phone disrupted? The camera. The first company to get disrupted by smartphones was Kodak. Kodak developed the technology for digital photography, but they couldn't change their mindset or fathom that they would have to cannibalize their film industry with the arrival of smartphones and so they didn't take any action on business innovation. Now, this is cumulative innovation. The next thing to happen is mapping software and GPS software. When that comes about what's an industry that ends up getting disrupted? The taxis? Exactly! The taxi industry is the next thing to get disrupted, by companies like Uber. And now we're accumulating this innovation over time and now we're adding other things like autonomous vehicles or even just highly connected cars, and there's even more data being generated and this has some subtler effects, because now we're talking about all the data being generated from mapping software, from autonomous vehicles, from connected vehicles and it's easy to get blindsided by this. The industry that's getting disrupted by this kind of data is actually the insurance industry. Because all this data can be used to more quickly identify who's a good candidate, and to deliver insurance. When you then add things like blockchain to the mix, you're now even reducing the cost to deliver insurance. Morgan Stanley predicts that eighty per cent of the insurance industry is at risk here and that's because the auto insurance industry actually upsells to life and home insurance. The interesting thing is when you add blockchain it becomes less expensive to deliver, that money gets freed up and it goes back into the cumulative innovation cycle. So, let's remember two things about the innovation cycle.
There's this rise of platform ecosystems happening, and Breeze is an example of an awesome platform ecosystem in the digital age. The second thing that's happening is for every one of these cumulative innovations that disrupted something, there was a factor in there that was key to that disruption, and that was that it changed the human experience. It made the human and customer experience better, which motivated people to not use taxis anymore and use Uber. To not use their film anymore and to use digital. That experience is really important. So, what does it mean to have a digital experience? What does that actually mean? Well, a Digital experience is all about people. and in particular, if you have a smartphone, with location services turned on. I did. It was probably after some cyber security talk that I turned them completely off. This was many years ago, and then I slowly started turning them back on, because I was missing the experience I had been having when my location services were on.
What's actually happening, when your location services are turned on? Well there's a continuous flow of information across your digital twin. Each smartphone is a digital twin, right? We can't live without it. This continuous flow of information is triggering events, often through autonomous agents, and that allows us to either take action or opt into inaction. So, if you use an example it makes more sense. One of the first things I turned my location services back on for was the Starbucks app. At least when in the US, when you walk into the store, it recognizes you! It's so cool! Well not really, it recognizes your digital twin. A little notification then comes up, that says swipe to pay. Now all I have to do is swipe, and then the bar code comes up. This is a very simple example, but my experience of just walking in and swiping once, instead of going through my phone, clicking five times and finding the App to pay is awesome! I love it. That is an example of digital experience, and I think the really important thing about that experience is to understand that it's creating an ambient user experience. It's happening as I walk around. It's event-driven, not data-driven. The idea is you have to believe that this technology is mature enough to actually implement, and a lot of large companies don't believe that. But they are. You can use all of them.
Learn to Apply New Business Models
In order to thrive in the digital world, it is really important to believe that modern technology is mature enough to implement today. You have to believe that. You also need to continuously seek to learn, to understand and to apply new business models and new technologies. And I can tell you that you cannot achieve the outcomes of the digital business by using legacy technology. It cannot be done. And once you do move into getting rid of that legacy technology and moving into digital technology you will never look back.
So, are we keeping up? Actually, we're not. You may be familiar with the author Thomas Friedman, he wrote the book ‘The world is flat’. He also wrote a book called ‘Thank you for being late’. And in that book, he has a graph by Eric Teller, and I love this graph because it shows that technology is now on an exponential growth curve. We’re on that vertical part of the curve, where it's just coming out faster and faster and faster, while human adaptability is not there yet. And look at where we are. The technology is coming out faster than we can adopt it. In order to adopt it faster, we have to become continuous learners. We have to be very curious. We have to know that the technology is out there, and is mature. And we have to have flexible mindsets. Because there are specific things that used to be true that aren't true anymore. And if you don't change your mindset then you won't make the transition.
So, as an example of this, in order to implement a traditionally architected ERP, the only way to do it efficiently and cost-effectively, (which may make you laugh because like no one's achieved that), is to standardize your process end to end. And no large company has ever standardized their process completely end to end. And so, it's become a very bloated thing. Well, you don't have to standardize process end to end anymore, if you're using fully digital technology. Because you can break the process up into little steps, and you can then take those steps and rearrange them any way you want. And that is a simple layman's definition of microservices. Very simple, but it is true. And so, I was big into doing these large implementations and saying we have to standardize! we have to standardize! and I had to change that mindset as I moved into the digital world.
A Framework to Accelerate Digital Transformation
We covered what the digital world is, we covered why it is important to act now. But when you're in a fairly decent sized company that's been around for a while, it’s not easy to make this digital transformation. I have created a framework to accelerate digital transformation. And it's called the digital flow framework. The idea of the framework is to be able to explain to people, what it is and how it works and motivate people to get there. Let's take a slight tangent. This framework is a metaphor, it’s not meant to be full of techno-speak that everyone in the traditional business who doesn’t really understand digital doesn't get yet. Because it really just turns them off. It's a metaphor, and part of the metaphor is speed.
Here's the tangent. As a context for speed, start with climbing Mount Everest. To climb Mount Everest, you can go 0.8 kilometres per hour, if you're Ultrarunner Kilian Jornet. Most of us would have to go much slower in order to do this. The second context for speed is the jet stream. This is significantly faster than climbing Mount Everest, at 400 kilometres per hour. And the third one is the solar winds. Now, this I did not know, I learned it recently. The solar wind can move at over 1 million kilometres per hour. So, hugely faster than the jet stream. So, with that metaphor for speed in mind, let's take a look at the digital flow framework.
Down in the mountain climbing area is where our traditional business is. The traditional business largely defines business models that are dependent on legacy applications that take quarters and years to implement, and they're firmly anchored to the ground. They’re actually firmly anchored to some physical infrastructure. The jet stream level is digital business. It's pretty cool, because you can change and test digital business models pretty easily. That's something you can't do down in traditional business. In doing that, you're providing business capabilities in weeks and even days, especially if you have fully adopted digital technology. That's a huge advantage. All of these technologies that are up here (and this isn’t even all of them), are fully mature today and can be implemented. Now up in the solar wind is future of business, with some exponential technologies that aren't quite mature yet, but when they get there, they're going to fundamentally change the way we interact with the world around us. Fully cognitive AI, along with quantum computing and synthetic biology are the future technologies. Synthetic biology is already heading down towards digital business. This is the overall framework.
Business Outcomes & Actions
Now to motivate people to actually move from traditional business up to digital business, let's take a look at business outcomes and what actions we should be taking. When we're able to achieve a fully start frictionless business; where we can have real time business models that can be changed on a regular basis, along with automated processes. Value creation can happen so rapidly that you're going to want to have value generation engines to figure it out. You can take one of two actions in this area. You can either be part of building and evolving it, which right now consist of scientists, engineers and makers. Or you can choose to watch it, and that is perfectly fine. There's a lot of work going on that's highly technical here, and it’s not going to disrupt anybody, until it’s mature enough to start to be implemented. So, the key here in watching it is to make sure that you know when it’s mature enough to start experimenting with, so that you’re on the leading edge and not falling behind. So, what are the business outcomes for digital business? Well, I think near frictional business. You can start doing your business processes and create applications in days and weeks. You're gaining some business models and process velocity that just doesn't exist at the traditional level and you have a really high speed to value. We absolutely should be investing heavily, no matter what size of a company we are, and where we are situated, we should be investing heavily in digital business. And then you have traditional business, with static business models, because they're constrained by process and value and constrained by legacy applications that frankly have had a lot of self-induced complexity. You take quarters and years to build these applications and then by the time you build them they're not quite working for your business, and so then you highly customize them, leading to all the self-induced complexities.No business today can afford to be in a static state, because business is changing so quickly.
Steps to shift from traditional to digital business
In order to actually move from traditional business to digital business, you need to focus on a number of things. I'm going to cover three. The first one is talent. I think it's super important today, to move out of a scarcity mentality, such as a belief that there's a war for talent and move into more of an abundance mentality. If you are looking at your talent as talent capacity planning, you are going to find the talent you need. Let's talk about how that works. For the employees you have within your company, continuous learning is super important. Let's make sure we're keeping people internally up to speed on what's going on with digital business and technology. But you can also tap into alternate talent pools. You can try crowdsourcing or tap into freelancers and the gig society. Furthermore, you can augment your talent. There's a lot of things we can do now with AI. To be able to augment the menial tasks that we're doing and actually concentrate our talents on more focused things. It's going to produce more jobs, not less jobs. Then there's this whole thing about partnerships. In order to continually increase your I.P., you can do things like partner with research companies and universities. You can partner with your customers, and even your competitors, to develop new things more rapidly. And so, by taking on this abundance mentality of talent capacity planning, you can have the talent you need to do what you need to do in the digital world.
The second area that I want to cover is how to get digital flow in operations. This is probably one of the most important things to understand about what's going on with business and digital technology in general. You have to have a ‘Customer In Approach’. I'm not saying that a ‘Company Out Approach’ wasn't focused on the customer, because it was, right? We've had net promoter scores for a long time. We've always been very focused on our customer, but this is different. This is about understanding your customer at a deeper level, and understanding the experience your customer is having with your products and services. And to be so passionate about that customer that you're looking at what their problems are and looking at how to solve those problems. That is the ‘Customer In Approach’, and it requires a number of changes within your organizations. One of the things that we're starting to see is organizations shifting from being organized in these functions to be organizing into cross functional teams. We sometimes call them two pizza teams, because they're of a size that could feed off only two pizzas. They can't be too big, or it really slows you down.
So, moving into these cross functional teams that can get super close to the customer and close to the customer experience is really important. Having an agile methodology and an agile mindset is also very important, and as you can imagine, if you’re now organized into cross functional teams, the processes that each one of those teams uses are going to be a little bit different. And guess what? That's okay. Because if you're using digital technology, you no longer have to standardize your process from end to end. You're actually able to standardize some pieces the let those teams put them together however they want. These are some aspects of how your operations change as you're going through a digital transformation.
Digital Flow from Legacy to Modern
How do you get digital flow within technology? And I can say that traditional technology is vastly different from digital technology. And I often hear people say, “well we've had this forever, so that's not very different than digital technology?”, no, make no mistake, that is completely different. If we look at it, a moderately architected ecosystem has standardized process steps that are abstracted and organized into workloads that ride on a virtualized technology framework. While traditional technology is dependent on standardized processes. It's hard wired into three tiered applications that are fixed into physical infrastructure. I can hardly say that with a straight face, and the reason I say that is because that is not going to help someone who is in a traditional business mode. Understand the difference between traditional technology and digital technology, and that all those words up there are just buzz words. When down in the lands of the digitally poor, I think everybody in big companies is now hearing “we should do cloud, we should be big data, we should do this” they're like “Oh jeez, what do you see up there?” This guy's saying, “what do you see up there?” what does this guy say over here? He's at the top of the latter, it’s pretty good. “I don't know it's just like a bunch of buzzwords.” The other guy looks up again and says well I don't see anything.
If we are up in the digital flow, trying to explain to people in traditional business models how it works, it's better to use a metaphor than to go through all of these things. So, let's use a metaphor. What is a traditional application? Well the reality of a traditional application, is you are doing a lot of heavy lifting, you’re lifting boulders, building a mountain. And it takes a long time. So, what you initially thought were the requirements usually change before the mountain is built. So, you put all these smaller boulders in, in order to compensate for that. And there's mortar between the boulders. So, when you need to make a change, it's a monumental effort. You’re chiselling away the rocks, and you really disturbing a lot of things. And then it’s fixed to the ground, because all those boulders are directly connected to a physical infrastructure. When you finally get to the top, you're say “Oh awesome, but there's some stuff going on up there and people are moving faster. I know! I'm going to take my application, and I'm going to put it in the cloud”. So, you move your application, you don't re-architect it, and put it in the cloud. You're going to get a few advantages, but you're still not in that jet stream. That jet stream is just going to move around you. And furthermore, at this point it's probably been five to ten years, and the business is saying “Hey, we need to change our business model. Look at what we want to create, It's a new mountain!”. And you don't have time to rebuild that whole mountain the way you used to build it. These are the constraints of traditionally architected technology.
So, how is a modern architected technology actually built? But the way that it works is very abstracted. So, I'm taking something big, and extracting it into little pieces. So, if it's a process, I'm taking the process and breaking it into steps. Now, each one of those steps is tagged, it’s identified, so you can track it wherever you put it. In the example of a network, you're taking a network and you’re virtualizing it, pulling it into little pieces and putting tags on it. Now, the cool thing is, you can take those standardized process steps and you can put it into a workload. So instead of running processes on an old architecture, you're actually taking process steps and putting them into workloads. And you can rearrange them to your heart's content, because the way they're architected makes it very flexible. Then those workloads are actually distributed into virtualized technology frameworks. Now those clouds on the slide are not meant to represent ‘the cloud’ technically, it's meant to represent that you can put them wherever you want. So, it could be ‘the cloud’, it could be an edge device, it could be a virtualized server on your on-premise data centre, it doesn't matter. But the way that you've abstracted things makes it extremely flexible. And you can't take a traditionally architected application and replace it with the above. It's a totally different way of doing things.But why is it worth it? Because instead of taking quarters and years to get things done, you can do it in days and weeks.
So, let’s recap. We've talked about digital flow, we've talked about traditional business, how to move up to digital business, and the three things that you really need to focus on. There's more than this, but the big three things that you need to focus on are talent, operations and technology. You can't get away from focusing on that technology piece. I think it's really important that every single person within a company starts to understand the technology. That didn't used to have to be the case. But it is the case today. Being able to explain, to leaders, to different functions within a company is really important. Because what we're trying to do with convincing people in traditional business to move into digital business is, we’re fundamentally asking them to change everything they know about doing business. And that's why everyone needs to understand the technology at least at a conceptual level.