Back in Episode 66, we spoke with Matt Loeb about digital transformation, and he brought up a great point: Just because you’re enacting some digital solutions doesn’t make you a digital organization. There’s a difference between doing digital and being digital. The latter is about culture and mindset more than anything else.

This week, Jeanne Ross takes that ball and runs with it.

Jeanne is a principal research scientist at the MIT Sloan Research Center for Information Systems Research and co-author of a new book titled Designed for Digital: How to Architect Your Business for Sustained Success. She says there’s a key reason why your organization isn’t crossing that digital divide — one that isn’t being talked about enough.

In this conversation, we cover:

• Being digital isn’t about strategy. It’s about design.
• Organizations that have successfully made digital transformations.
• Digitalization does not equal digital.
• Why digital transformation should start small ... think startups.

Listen to our conversation here.

3 reasons why digital transformations fail Harvard Business Review recently published a great article titled “The Two Big Reasons That Digital Transformations Fail," which cites two major challenges affecting all types of businesses.

The first is “an unspoken disagreement among top managers about goals.”

“If top managers aren’t on the same page, it makes it difficult for their direct reports to agree on what to prioritize and how to measure progress," authors Mike Sutcliff, Raghav Narsalay, and Aarohi Sen write. "The remedy: Define and articulate not only the opportunity but also the problem it solves, and how the company will build the organization around the desired solution before investing.”

The second challenge is “a divide between the digital capabilities supporting the pilot and the capabilities available to support scaling it.”

“When this problem isn’t addressed," the authors explain, "companies may face a choice between accepting long delays in ramping up production or attempts by leadership at rapid, unwieldy change to meet what they have promised. The remedy: Look outside to close gaps or nurture pilots internally, ramping up digital capabilities across the organization from the get-go.”

But there’s a third challenge that Harvard Business Review doesn’t address — one that my guest, Jeanne Ross, absolutely does. It's this: Your organization may not be built for digital transformation.

As Matt Loeb pointed out in Episode 66, there’s a difference — a major difference — between doing digital and being digital. Doing digital is just trying a bunch of shiny new digital toys, hoping they’ll take you to the next level, which they almost certainly won’t.

Being digital, on the other hand, is about transforming your entire business model. That starts with your infrastructure. Are you built, from the inside out, for digital?

“Technology advances won’t do you much good if you’re not a well-run organization,” Ross told us at the 2019 DigitalNow Conference. “This is about digitization. It’s about instilling discipline around core transactions and back-office processes.”

Here’s how Ross describes that distinction in her new book:

“Most established companies have deployed such digital technologies as the cloud, mobile apps, the Internet of Things, and artificial intelligence. But few established companies are designed for digital. ... In the digital economy, rapid change in technology capabilities and customer desires means that business strategy must be fluid.

“As a result, business design has become a critical management responsibility. Effective business design enables a company to quickly pivot in response to new competitive threats and opportunities. Most leaders today, however, rely on organizational structure to implement strategy, unaware that structure inhibits, rather than enables, agility. In companies that are designed for digital, people, processes, data, and technology are synchronized to identify and deliver innovative customer solutions — and redefine strategy. Digital design, not strategy, is what separates winners from losers in the digital economy.”

In other words, to become a digital organization, your job is to redesign your organization from the inside out. It’s not about bolting on some shiny new digital tools to your outdated business model. It’s about redefining your business model to fluidly adapt to future advances in digital strategy. There’s a huge difference between the two.

Resources:

• Read: Designed for Digital: How to Architect Your Business for Sustained Success
• Read: “The Two Big Reasons That Digital Transformations Fail"
• Visit the Center for Information Systems Research.
• Connect with Jeanne Ross at MIT | Twitter | LinkedIn