A year ago, I asked MIT researcher George Westerman to share a great analogy for digital transformation, and he nailed it by invoking imagery of caterpillars and butterflies:
"Successful digital transformation is like a caterpillar turning into a butterfly. It’s still the same organism, but it now has superpowers. Unfortunately, when it comes to digital transformation, many senior execs aren’t thinking about butterflies. They’re just thinking about fast caterpillars. And it’s hard to keep up with your competitors if you’re crawling ahead while they can fly."
A year is a long time in the digital world, and there's already been a lot of disruption since that interview. Since then, Westerman, who leads the research on digital transformation for the MIT Initiative on the Digital Economy, has observed quite a few fast caterpillars that can't quite seem to grow their wings.
[ See our related story with MIT's Jeanne Ross: Creating digital roadmaps: CIOs play a key role. ]
I caught up with Westerman again in advance of this month's MIT Sloan CIO Symposium to get some advice on how executives can stay focused when shiny digital opportunities fly into their conference rooms. We also talked about how fake business cases can hinder a company’s efforts to transform before they’re ready, and what it takes to win the coveted MIT Sloan CIO Leadership Award (hint: you’ll need those wings).
The Enterprisers Project (TEP): In a recent Harvard Business Review article, "Why so many high-profile digital transformations fail," you and co-author Tom Davenport write about how executives can lose their rational approach to decision-making when faced with the allure of new digital projects. What steps should executives take to avoid going overboard when considering the art of the possible for their digital future?
Westerman: First, be sure you’re taking a market and customer-driven view on what you’re doing and not a technology-driven view. Too many companies try to push with the technology, and as a result, they do the wrong things or they do it in the wrong way.
Next, you must be experimenting constantly. If you haven’t actually put your idea into use as an experiment, then it doesn’t exist yet. It’s so easy to dream about how customers feel about you and how wonderful your product is, but you really don’t know until you put it in front of them to find out. Dreams are cheap and ideas are easy; finding those ideas that somebody actually wants to use is much harder.
While experimenting, be sure you’re constantly trying new things, and then constantly try to figure out how well what’s happening is meeting your plans. Constantly be questioning yourself, “What else can we do? How can we make this better?” Doing so allows you to grow and change with the market. The important part about experimentation is not only doing the experiment but failing fast. Sometimes failing fast means actually cutting or slowing down while the market catches up with you. Very few firms can keep pushing and change the market. Often what you need to do is enter slowly and move forward and evolve yourself with the market.
Then you need to be sure you’re measuring your results. Many people will fall back on the adage that you can’t build an ROI for a truly innovative situation. But that doesn’t mean you shouldn’t be measuring whether you’re achieving the benefits you expected. Make sure you’re asking yourself, “If we’re not getting traction, is it because we have the wrong idea or is it because we have the wrong timing?” Then adjust yourselves appropriately.
TEP: You’ve said how important it is for CIOs to be very transparent about governance and the performance of projects. Why does a strong digital governance discipline play a critical role in digital transformation efforts?
Westerman: When planning for any digital project, CIOs must be clear on the outcome they plan to get and then they must make sure they get that outcome when they’re done. That’s what the governance loop is about; it’s being clear that when you make a decision based on a business case that the business case is very clear. You must also be clear on how you’re going to count the returns you’re getting. And then, when you’re done, you must go back and figure out whether you got the things you expected.
[ Want more wisdom on digital transformation? See our digital transformation guide. ]
In too many companies, business cases are fake; they’re magical thinking created only to cross some kind of threshold that needs to be met. They focus only on dollars counted in some magical way, as opposed to saying, for example, “We’re going to improve our performance by 4 percent in this process”; or, “We’re going to take 50 headcount out of this process”; or, “We’re going to increase customer satisfaction by 10 percent.” If your governance process allows people to get away with fake business cases, you’re setting yourself up to waste more and more money every time you spend.
TEP: Any advice or guidance for organizations that are, as you say, looking to "close the governance loop?"
Westerman: First, be very clear what type of project you have. On some projects, you can close the loop tightly. On others you need to have a different approach. For example, if it’s an infrastructure cost-cutting or a measurable business process change, then you can and should revisit after the project to be sure you achieved the benefits you expected. If it’s an experiment or customer-facing innovation, you should check often, during the development, whether the metrics you care about are moving in the right direction with each incremental release of functionality. Others, such as security or regulatory compliance will have a different logic, hopefully more disciplined than in many companies.
Then, make sure you actually review the results. Getting people to attend a meeting on funding decisions is relatively straightforward. Getting them to attend a project review is much tougher. It’s even tougher if the meeting feels more like a post-mortem than a review and learning opportunity. You may need to make future funding contingent on completion of benefit realization reviews for prior projects. And you may choose to review returns on only the biggest or riskiest projects rather than all of them.
If you’re having trouble getting people to participate in governance processes, it can be very helpful to make the CFO your best friend. In many companies, the CIO creates the governance process, but the CFO chairs it and business executives make the case for their own funding. The job of IT people, then, is to run the process and help business executives to be transparent – and as successful as possible – in the process.
TEP: This is the 10th year of the MIT Sloan CIO Leadership Award. At this year's Symposium you'll be speaking with finalists about how they've transformed their IT organizations. Are there any common themes or traits that you noticed among the finalists?
Westerman: What we’ve found through the entire nomination and judging process is that running IT well is not good enough anymore. The great leaders we’re finding are actually helping their business colleagues to identify and deliver big change in the business. Out of all the applications we received, there were 10 clear semi-finalists who were doing great things. Our judges immediately separated those delivering big business results from those just being good at IT. And our finalists are the ones delivering really interesting business results.
George Westerman will be speaking at the 2018 MIT CIO Symposium in Cambridge, Massachusetts on May 23. For more information or to register to attend the Symposium, please click here.
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