Transformation, Innovation and Growth
How to master the hidden dynamics of digital and business transformation?
A roadmap for project managers, contributors and leaders
By now you have probably started your digital transformation and growth initiatives and your first project. Not yet? Well, you are not alone. Many organizations are struggling with the first step: How to get started? Which projects to choose?
And if you have started and your first projects did not go anywhere you are not alone either: Many well intended initiatives do not yield the expected outcome or have to be abandoned altogether and require reset.
In this article and the related series I am taking you through the anatomy of digital and business transformation projects. The goal is to provide not only the insights but the concepts and tools for you to be successful in your projects.
How can you increase the odds that your projects are successful? What can you learn from successful projects? And more importantly, how can you find ideas and accelerate growth in your own organisation, business, and ecosystem?
Before we explore the landscape and each driving factor one by one, let’s step back and take a look at the bigger picture: What are the key challenges when it comes to digital and business transformation?
Top Challenges of Transformation Initiatives
In a recent poll and insights survey we asked about the state of digital and business transformation initiatives and the key challenges.
The results were in line with the reports from project managers and leaders.
First of all it is remarkable that most respondents state that the key challenges are not about the financial resources or the technology. And even management support is not the key point.
Successful transformation is not a matter of financial resources or technology.
The major obstacles are related to management area which are not necessarily new. But the are increasingly challenging in an environment where project selection and implementation agility matters to keep up with the exponential pace of change.
Triggers for business and digital transformation
The starting point for digital and business transformation can be caused by different impulses:
- a new idea
- a competitive threat
- a fundamental change in the customers, such as a demographic change.
Most successful projects do not start with a grand master plan which is then being followed in all detail. Instead, the successful projects start with an idea, a business case or even only with the incubation of an idea which is designed, tested, refined before it is spreading through out the organisation or being standardized as a successful process, pattern or practice.
Even though your project may start on on a small scale or even as an experiment, it will soon start touching other parts of the organisation, of the ecosystem and supply chains. It has to in order to be transformative. And that is the moment when the touch points, the feedback loop and the collaboration become critical elements in your project.
The Anatomy of Digital and Business Transformation Dynamics
But how do you know if a project has a potential to succeed and what the implications are? This is particularly challenging when there are interdependencies and feedback loops. For example:
- Customers are not adopting your new product. At the same time your legacy product is becoming obsolete. Customers are churning away. Revenue is declining. This leaves even less room for innovation projects.
- The first attempts to launch your new product failed. The people in your organisation are gravitating back to the legacy product. And your digital talent pools is shrinking, reducing your ability to transform and innovate even further.
- The new product has been developed with existing capacity and under-utilized resources. As managers shift their focus to existing business, the new product is making less progress. This makes it difficult to release an improved version of the product.
- In the meantime your management team has created the capacity and supply chains to deliver the product and to serve clients. Back paddling would be costly and create a reputation issue with partners and potential clients.
All these feedback structures have the potential to create unforeseen and often unintended consequences.
How can you manage such a system as a whole? This is pretty challenging. But a good starting point is to understand the dynamic behaviour of the sectors and their dependencies and impact on each other.
Let’s take a look at the fundamental dynamics in each sector.
Dynamics of developing new products and services
Your new product and service development process plays a central role in your transformation strategy for several reasons:
- It is highly linked to all the other areas.
- It determines your ability to unlock future generate revenue streams.
- Customer retention is driven by your ability to respond to quality issues or new requirements.
- A product quality problem sends ripple effects through the entire organisation and may block progress in other areas for months.
Why projects run late and over budget
But one of the most fundamental challenges during a new development project is caused by the project itself. At the core of every project is a feedback structure which determines your team’s ability to stay on track in terms of budget, schedule and quality. In upcoming posts and episodes we will hear more about that. Watch the videos from the Transformation Dynamics Summer Academy to get a first overview. The first video is an introduction to this topic. And in the second video I am talking about some advanced topics such as the impact of scope changes.
The inherent feedback structure of product and service development leads to complex and non-linear behaviour of the project management system.
Before you even get started on your new product or service development effort, make sure you have the basics in place:
- Customer and audience listening and feedback systems.
- A project management approach and system to track task completion and progress.
- A feasible project plan.
- A KPI dashboard.
- Collaboration and communications tools.
Again, the ideas for new products and services can come from different “aha”-moments. And the idea may surface during a strategy planning workshop, a customer conversation, competitive analysis or in other forms. Make sure to have a place and funnel which captures your new ideas in order to assess and implement the winning ideas. For example, for growth marketing ideas you may want to have weekly session in which the growth team is going through the ideas, picks the most promising and feasible idea, implements and checks the impact.
Dynamics of Growth
How does your audience respond to the new product and services? And what is the rate of adoption? This depends again on
- the feedback structure
- the strategies and tactics you choose
- the allocation of resources in terms of timing, amount and area of impact.
For example, if the feedback structure is characterized by strong feedback loops your product may see an accelerating growth or even go viral. In this case the word-of-mouth feedback kicks in and contributes to the growth. And this is usually desirable because word-of-mouth promotion is way more cost effective and efficient than spending your marketing budgets. But in case of weaker feedback, the rate of adoption and market share attainment depends more on the productivity and effectiveness of your sales process.
The S-shaped growth curve
As a starting point, make sure you understand the s-shaped growth curve and how the feedback structure of your market system is driving a more or less accelerated growth.
The videos on growth from the Transformation Dynamics Summer Academy are a good primer.
Organisation Transformation Dynamics
Your best idea does not just happen just because it is a great idea. It takes the commitment and contribution of people in your organisation and in your ecosystem, including suppliers, co-innovation partners, and sales partners.
But even if you consider only your internal organisation, you will find that bringing a new idea to the market place is a fairly complex process. And again, the internal feedback structures determine your progress, the rate of change and the success potential. As a rule of thumb:
Success = Quality of the idea X Motivation to implement
For example, if your new product is ready, but the sales incentives are not aligned then it will go nowhere. The sales team and the sales channel is unlikely to pick up the the product.
But many organisations are struggling with even more basic challenges:
- How to convince the team that this innovation is not just an option or fad?
- How to make sure that the real progress is also perceived by the team?
- How to make sure that an innovative process is being adopted by the entire organisation?
Perception is reality.
Here are some of the basic ideas for you to consider for your transformation and innovation initiative:
- Establish a transformation change team.
- Establish a growth team early, including the key roles to make the idea successful.
- Consider a “branded project”.
- Ensure communication of progress and success stories.
- Re-align the KPIs and incentives with the goals and strategy of your transformation.
The videos of the Transformation Dynamics Summary Academy offer an introduction in this topic.
In the video about Organisation Dynamics I am talking about some of the core feedback structures and the resulting dynamics. Notice how similar the internal adoption is to the external adoption in the market place.
The sequel video talks about the tipping point in the change initiatives.
Customer Success and Retention
The focus on customer success is increasing. As more companies are moving their business model from a traditional approach to an “…as-a-service” model it is vital to pay more attention on customer retention. This shift towards a Software-as-a-Service business model requires new internal processes and a different approach to customer service and support.
One question to consider is how to migrate an existing customer base to a new solution. You want to make sure that you are loosing the least number of possible and that you safeguard your revenue stream.
When it comes to retention it is important to understand the composition, activity and the dynamics of your customer base. Implementing a customer success team can help your customers to be productive on the new product and it helps you securing your revenue streams, which again is needed to keep up the pace of innovation.
The existing customer base is not only a source of recurring revenue, but it may also help you win new clients.
Some basic ideas:
- Implement a customer satisfaction survey.
- Implement a lost customer survey.
- Establish a customer success team.
- Establish a product feedback process. Make sure to categorise the feedback by impact on winning new customers and retaining existing customers.
You may find the following videos of the Transformation Dynamics Summer Academy helpful to get more familiar with the system dynamics in this area:
Digital and business transformation, innovation and growth initiatives are challenging. Funding and technology is usually not the problem. But the difficulties emerge during the project, while the seeds for the challenges are often planted at the beginning. The world is becoming more connected and the rate of change is increasing. This drives the hidden dynamics which often lead to a higher degree of uncertainty, complexity and risk and finally to unintended consequences.
As a manager, decision maker and contributor you can improve the success potential of your projects by understanding the key business dynamics:
- Project dynamics
- Organisation dynamics
- Growth dynamics
- Customer base dynamics
- Supply chain dynamics
With this new system mind-set you will be able to design, implement and optimize successful strategies and resilient business models.