7 hard truths about digital transformation

Your brilliant new idea? Your customer may not think of you that way. At MIT Sloan CIO Symposium, digital leaders shared advice on handling transformation pain points
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Some hard truths about  digital transformation, today’s CIOs know all too well: “Even though digital is supposed to be all about speed, it takes a really long time, ” noted Dr. Jeanne W. Ross, principal research scientist, MIT Sloan Center for Information Systems Research, at last week’s MIT Sloan CIO Symposium in Cambridge.

What’s more, she said, the definition of success for IT leaders and business has changed mightily in the digital era. “Success is about being able to execute constantly changing strategy,” she noted – not the strategy itself.

[ Read also: 5 takeaways for IT leaders from the MIT Sloan CIO Symposium and Digital vs. digitized: Why CIOs must help companies do both. ]

That need for constant change – and the associated culture shift – remains a huge pain point for CIOs executing on digital goals.

At the event, a variety of CIOs from across industries, as well as academic experts, shared insights on what’s working and what’s not as leaders grapple with digital transformation. We’ve rounded up seven for you to use and share with your team:

1. Collecting digital products does not equal digital transformation

What most companies consider digital transformation is the equivalent of collecting fondue sets, said Nils Fonstad, MIT CISR research scientist. They are chasing digital products and offerings that don’t add business value at the end of the day – not unlike that fancy fondue set collecting dust on top of your fridge.

To avoid this, Fonstad said companies must set parameters around digital transformation that let them continually test hypotheses, gain actionable learnings, and either adapt or discard experiments along the way. Companies that do this well share three best practices:

  • Link innovation to a big-picture vision
  • Make experimenting easy for employees
  • Share responsibilities among everyone with a stake in the innovation

2. Your brilliant new idea? Your customers may not agree

Research by MIT CISR’s Ross finds that successful digital companies have five architectural building blocks:

  • Shared customer insights – as opposed to data silos
  • Operational backbone – technology that handles core operations
  • Digital platform – so you can recreate an idea for the next customer
  • Accountability framework – balancing autonomy and alignment
  • External developer platform – because your customers will ask for more and more, and you can’t deliver it all

Companies putting these blocks together can come up with powerful new ideas for new product and service offerings, she said. “One problem: Customers won’t pay for a lot of those.”

“Especially in B2B, when you’re developing, you’re going to think you have a brilliant idea. Your customer may not agree,” Ross told the audience. She likened it to asking a friend out in high school: The person’s answer may be “I don’t think of you that way.”

She gave the example of Schneider Electric, which used energy data to offer up new services, such as an energy/resource advisor – which Hilton Hotels now uses to save energy in guest rooms. When your company thinks up a new offering based on data, you will have to convince the customer to think of you in that way.

3. B2B platform opportunities require big thinking

At a later panel discussion, “Get Ready for the Platform Transition,” CIOs from several industries discussed the challenges of creating just such new offerings, on a platform that works for customers and new partners. The idea and execution must be laser-focused on the customer, CIOs agreed.

Adriana Karaboutis, chief information and digital officer for energy company National Grid, discussed her company’s set of new possibilities. “Customer sentiment has become very important,” Karaboutis said. “With the onset of more sources of energy (like solar), the utility doesn’t own those sources of energy, but it is our job to connect to them.”

“We need big, hairy, audacious goals, and our CEO calls it that, around the customer.”

Her company has an opportunity to deliver consumer choice, she said. Perhaps in the future you will buy energy from multiple places, she suggested, then National Grid will bill you at the end of the month. Other offerings might serve the autonomous cars market or the automated home market. National Grid is in the early pilot test days of this journey, which comes with regulatory and security challenges.

“There’s a recognition that we need big, hairy, audacious goals, and our CEO calls it that, around the customer,” she said.

4. Collaboration moves outside your organization’s walls

During the “Creating a Digital Innovation Toolkit” panel discussion, Fonstad noted an ongoing tension: While companies want to empower teams to experiment, they can’t afford to waste time and resources on initiatives that don’t add value. Roman Regelman, head of digital for BNY Mellon, said he keeps teams focused by making them cross-functional to ensure a variety of perspectives from across the business are represented.

[ Want more advice on this topic? Get our related ebook, The Open Organization Guide to IT Culture Change. ]

“People talk about letting teams fail. I say we need to let them succeed,” said Regelman. He also urged attendees to embrace the collective intelligence of the world to make experiments more fruitful. “When you have an open system, you can solve specific customer problems faster,” he said. “Someone else may already be doing 90 percent of the work. Combine it with your 10 percent, and make something happen.”

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excellent article. I have experienced this in spades.

Thank you for the article. I believe that your are missing a point #8. The Human Side of the Digital Transformation. At the end of the day the DT is 95% human challenges and 5% technology. I really believe as the Chief Digital Officer of a 130 years old company that we should invest significantly on trainings, skills, etc. for "traditional" companies to be successful on the Digital Transformation. Do you agree?