A Closer Look at Transformation: Thinking Differently


Next up in this transformation series is the ninth and final enabler: thinking differently. How can we enable the characteristics so important to future success, if we don’t start thinking differently? Status quo thinking is the cause of many transformation failures – a trend that will continue without the re-imagining necessary to support the coming transformative period. The keyword to reflect on is “re-imagine”. To do this in the context of where the world is heading forces us to think differently and involves creativity – a trait that consistently heads the list of key traits that CEOs look for in leaders. It requires design thinking, innovative approaches and a willingness to let go of models built for another time.

Blog - Thinking Differently

The two primary market drivers behind this enabler are pretty straight forward – and I’ve attempted to convince you of their merit throughout this transformation series: 1) the transformative period that lies ahead is unlike any experience to date and 2) The pending level of disruption impacts the very core of companies, rendering traditional methods and approaches increasingly obsolete. As a result, new ways of thinking about the models that usher in the future is perhaps the biggest determinant of success. The best way to support my argument is to summarize the key drivers that were woven throughout this transformation series across several broad categories.

Macro-Economic forces

  • Structural change – industrial age structures are shifting in a very profound way: from a manufacturing economy focused on physical production to a service economy based on idea production, knowledge, creativity and design. Along with this shift comes the shrinking of innovation cycles in the global environment and the need for every company to accelerate and broaden the production of ideas
  • Emerging markets – The rise of India, China, South Africa and other emerging markets represents a tremendous growth opportunity for companies. By 2025, three billion more people are expected to join the consumer ranks. This growth opportunity brings with it several challenges that could undermine growth initiatives
  • The Blurring (collapse) of Industry boundaries – emerging needs and value propositions blur the lines between industries. This blurring or collapse is enabled by technology innovation that now allows once distinct Industries to come together as value ecosystems.  Apple is the most talked about example, but the connected car is a great example of multiple industries involved in value creation for the car owner. This method of value creation shifts the dynamic from a vertical (Industry) to a horizontal (ecosystem) view of value creation
  • Societal change – digital is the primary driver of a societal change not seen since the first industrial revolution, impacting every aspect of society from business to war. It was digital (Internet) that accelerated globalization, and now the broader digital platform allows even a start-up to be global upon inception. We’ve seen the collapse of dictatorships enabled by social networking, the birth of a generation that only knows digital, and a fundamental shift in power from business to consumer
  • A sharing-barter economy – although in its early days, this move towards a collaborative economy could redefine the buyer-seller relationship. The rise of social technologies introduced disruption on many levels. The next phase of social could have a major disruptive effect on business functions and core business models. This broad trend promises to impact society, business and Government and could lead to potential revenue loss, as customers share products and services with each other
  • The rise of Consumerization – the shift in the origin of technology innovation that began with the growth of the Internet is widely referred to as consumerization. Innovation now comes from consumer markets first, reversing the decades old direction driven by business and government. This shift is having a profound effect on the enterprise and is radically altering customer and employee expectations
  • Ubiquitous connectivity and the connected world – It all starts with being connected, and never before has a communication medium been adopted as quickly or as widely as social media. The connectedness of our world has changed the game on many levels. It is this ubiquitous connectivity that leads us from the hierarchies of our past to a networked market structure
  • The changing workforce – for the first time in history, we have four generations of workers in our workforce, moving towards five generations by 2020. The demographic mix in the enterprise today poses a significant challenge for executives. Combine this with other workforce dynamics like digital-savvy millennial’s, technology savvy employees, the virtualization of work, perpetual freelancers, and the distribution of work across an ecosystem, and you have a re-imagining of the workforce to look forward to

The business environment

  • Rapid shifts in market and business conditions – the pace of business, the certainty of uncertainty, the accelerating rate of change, and accelerating innovation cycles all put intense pressure on the adaptive characteristics of a company. It is a phenomenon that just gets more challenging over time, yet we are simply not structured to deal with this type of environment. As Dave Gray says in his piece titled The Connected Company “Companies must reorganize to absorb variety.” If one thing is certain, it’s that the speed of business will only accelerate
  • Rapid commoditization and new consumer needs in mature markets – offerings commoditize at an accelerated pace, and consumer needs are changing. This is driving the need for new forms of differentiation in an effort to drive competitive advantage. Differentiation will come via new market offerings that address the changing needs of consumers and compelling experiences that fully support the customer journey
  • The start-up and Internet company phenomenon – I refer to this as the Digital DNA Imperative. Operating in the business environment of the future requires many characteristics and traits that are inhibited by current enterprise structures. Start-ups and Internet companies have a very high Digital DNA quotient and leverage it for competitive advantage. An inability to level the playing field and address the speed, agility, flexibility and responsiveness requirements of the future could be the undoing of long standing companies
  • The shift from a transactional to an experiential paradigm – the past has always been about transactions. A number of forces within the business environment have shifted the paradigm with an emphasis on engagement and experience. This critical shift in thinking effects the core of the enterprise and requires a shift to an edge-based organization
  • Disruption of traditional revenue sources – in many industries, traditional revenue sources are being disrupted by product and service alternatives (think Skype and its impact in the Telecommunication Industry). This disruption creates competitive pressure to mitigate the potential loss in revenue 

The Competitive Environment

  • High digital DNA quotients enable competitive advantage –  start-ups and Internet Companies are better equipped to operate in this emerging environment – and can use that for competitive advantage
  • The competitive environment is intensifying – new market entrants emerge at a rapid pace and for a number of reasons, barriers to entry are falling to create a competitive environment that is growing more intense. With this comes the need to create and sustain competitive advantage through innovation, execution and smarter decision making. Today, start-ups can enter a market quickly, new non-traditional market entrants are appearing, and Internet companies are entering non-traditional businesses
  • Experience is becoming the new differentiation battleground – more companies are competing on the strength of compelling, consumer-like experience. This shifts the differentiation battleground from traditional places like price and product features
  • The overwhelming availability of insight shifts competitive advantage to those that harness it – the insight potential of data flowing from unstructured sources, social channels, cars, appliances, and other sources, provides an unprecedented ability to drive business outcomes. Companies that cannot exploit this data phenomenon risk competitive disadvantage to those that can. The future belongs to those that can mimic the data and analytic prowess of Internet companies

The Enterprise Environment

  • The growth imperative – maturing markets, globalization, rapidly changing technologies, top-line pressure, and emerging markets have put an intense focus on growth. In maturing markets, differentiated solutions are required to drive growth. In emerging markets, companies will require new relationships to capture a share of the 3 billion additional consumers expected to enter the digital economy by 2025; a large percentage of which will reside in these emerging markets
  • Increased responsibility in the middle of the organization – the burden is falling on the middle of the enterprise to effectively interact with the market. The middle is ill-equipped to operate in a connected world, as companies have invested heavily in the core over the last two decades, but have not enabled the edge. Edge interactions are increasingly handled by the middle of the company, as more work is distributed and more stakeholders are involved in value creation
  • Business and IT convergence, Shadow IT – a very topical area of interest these days. The changing view of Enterprise IT, the broadening role of Marketing, the accelerated growth of Shadow IT, and the growing importance of technology to the business create a potentially disruptive force to existing enterprise structures
  • The need for flexibility in operating and business models – business and operating model innovation is critical to future growth and differentiation. The environment must be adaptable enough to support changes to the models that drive competitive advantage and growth
  • The Enterprise is not prepared for a future driven by insight – analytic excellence is critical to success in that future, and most companies lack both the analytic excellence and data-driven cultures required to succeed. This driver puts analytics at the center of future transformation initiatives and compels the enterprise to evolve through the analytic maturity curve
  • Talent is becoming more distributed – multiple trends like the distribution of work to crowds, the rise of perpetual freelancers, and value creating tasks performed across an extended enterprise all lead to the externalization of work. As more work is dispersed, knowledge is further distributed. This diffusion of knowledge further complicates enterprise efforts and drives the need for capability that effectively harnesses the intelligence of a broadening ecosystem
  • The growing need for fast and agile Enterprises – operating in the future requires a speed and agility not found in most traditional companies. This critical driver pushes transformation programs to enable these enterprise characteristics
  • Consumerization has raised the bar for work place technology – Consumerization has changed employee expectations. The BYOD phenomenon is a direct response to this growing challenge. This shift is a key driver behind the enterprise need to address the imbalance between the technologies we use in our personal versus work lives
  • Intensifying pressure – budgets remain tight, there are growing margin pressures, companies increasingly do more with less, and there are fewer opportunities to optimize using traditional approaches. These are just a few examples of the growing pressures felt by most traditional companies
  • Ill equipped for the future environment – traditional company structures and characteristics are obstacles to successfully operating in a future that requires speed, responsiveness, agility, flexibility and several other characteristics

The Customer

  • The shift of power to the individual – the connected world with its easy access to information has shifted the power to the individual and is driving many customer-centric agendas. Companies now talk of personalization and the segment of one – having learned from the many stories that describe the consequence of ignoring the individual. The most recent example can be found in this British Airways Incident
  • Interaction point proliferation – digital is at the heart of interaction point expansion. The way in which we can engage with a company is expanding faster than a company can respond. This proliferation further complicates the delivery of seamless experiences and is driving many Omni-channel strategies.  As Forrester describes it: “The next generation of customer experiences will introduce many more new ways to interact with customers and will make life for companies even more complex over the next several years”
  • The customer interaction shift to a multi-channel journey – the needs of the customer drive their interaction with a company, and these interactions represent the customer journey. Individual interactions – even those that are highly successful – do not necessarily create an experience that leads to advocacy and loyalty
  • Shift from traditional media to digital engagement – the shift from traditional media to digital engagement is accelerating, driving a key challenge for the enterprise to deliver content wherever and whenever the customer wants. Digital engagement is becoming the experience foundation, and through engagement trust and customer advocacy are built
  • Higher customer expectations – the net effect of all these drivers is the growing expectations of customers. With the growing number of product and service alternatives, meeting or exceeding customer expectations is mission critical

The emergence of value ecosystems

  • The growing importance and complexity of value ecosystems – horizontal ecosystems that cross industry boundaries will come together in the future to deliver market value. These value ecosystems will drive the growth agenda, as multiple stakeholders increasingly play a role in meeting the new and changing needs of consumers. As these ecosystems evolve, complexity increases and new models will emerge to drive operations. Effective collaboration becomes critical, and the complications introduced by knowledge diffusion must be addressed
  • The need for new capabilities that can adapt to changing players – as innovation cycles accelerate, new consumer needs emerge. To meet these needs, value creation in the future is likely to involve a changing set of services and stakeholders. This drives companies to design from the edge back in a continuous value creation cycle that assembles the assets required to address the needs of the marketplace
  • Critical information increasingly resides with stakeholders in the ecosystem – critical business information is increasingly in the heads of our employees, partners and customers rather than within systems of record. As this ecosystem phenomenon accelerates, this information shift intensifies

Technology and Innovation

  • The new platform: Social, Mobile, Big Data, Analytics, and Cloud – from a technology and innovation perspective, it all starts here. As these major innovations converge to create the new platform, their individual impacts are compounded. The platform is a major source of disruption, but it also provides the mechanism for response
  • The Internet of Things – as Andrew MacAfee recently said “We haven’t seen anything yet.” The data tsunami to date is just a mere glimpse into what lies ahead. As the instrumentation of our world accelerates, so does the onslaught of data. Through this instrumentation, companies will find smarter ways to optimize, automate, and make decisions, while bringing countless new products to market
  • Automation of knowledge work – computers are increasingly capable of doing jobs that were once assumed to be the exclusive realm of humans. The next transformative period focuses on idea production versus physical production, and knowledge work versus manual labor. As knowledge work is automated, so too are closed-loop systems. These systems leverage knowledge and insight to automate the action side of the insight-action equation
  • Advanced robotics – robotics is now seeing major advances that can make it practical to substitute machines for human labor in a growing number of applications. Advances in artificial intelligence, machine vision, sensors, motors, hydraulics, and materials that mimic sense of touch are leading the way. With the declining costs of robots, new forms of automation are possible, and with it comes the re-imagining of processes, supply chains, and other enterprise structures
  • Technology is ready to enable the digital enterprise at scale – technology from an innovation, price, performance, and scalability perspective is now a key enabler of the digital enterprise. Many of the models required for future success are viable through the use of technology – a statement that could not be made until recently
  • Advanced analytics and data – there is no denying that digitization is altering the data landscape. From the explosion of user generated content, to the emergence of sensor-driven data, the tsunami of the past decade is sure to intensify. This data explosion represents a great opportunity to leverage unprecedented levels of insight – but it creates considerable risk, as most companies are not prepared to exploit this new insight. Advanced analytic technology is evolving at a rapid pace

Other drivers

  • Customer experience extends across multiple owners in a sharing economy – products in the emerging sharing economy will have multiple owners. Customers in this economy will purchase goods and share them multiple times. This will pose interesting challenges for companies, as the experience is extended past the first sale
  • The need for optimal right time decisions and actions – the shift from command and control models to an empowered edge requires enablement. Edge interaction must be informed, as the middle of the organization moves away from rule-driven responses to informed decision making. Insight will increasingly be viewed as an enabler for: growth, smarter decision making, and next generation experiences. Companies are struggling with finding insight that is actionable. Much of the data-to-insight work is delivering nice to know information, but not the type of insight that can be acted upon
  • The importance of engagement to future success – engaging with stakeholders across the ecosystem is a foundational component of the future enterprise. Edge-based organizations will flourish in the future

This representative list of drivers underscores the critical need for leaders to think differently – but it is extremely difficult for executives to break away from status quo thinking. Transforming oneself on the basis of a future state vision is hard when quarterly results are the key driver. It has to start with leadership, a culture of innovation and an entrepreneurial spirit. Companies should encourage and reward out-of-the-box thinking and make creativity and design thinking key hiring traits. Beyond hiring, companies must address the structural issues that serve as obstacles to creativity, as creative employees cannot succeed if inhibited by their environment. In addition, companies should leverage the creativity of a broader community by including the entire ecosystem in the ideation process.

Wouldn’t it be great if we had a road map for thinking differently? If as in the earlier posts, I presented a series of tactics to address this enabler, the list would simply include vision, courage and leadership. In times of great uncertainty a natural aversion to change works against us. Throughout this multi-part transformation series, I have focused on those forcing functions that push us to transform – the drivers that stir us to action. Old models that were created for another time cannot lead us into this future – we must think differently. We must invent the models that define business in the decades ahead. So, I wrap up this closer look at transformation with the hope that I’ve convinced you in some small way that we are indeed heading towards what is likely to be the most transformative period in history. My hope is that leaders everywhere think differently to usher in a period of prosperity and societal advancement. Instead of talk of disruption, let us talk of enablement and advancement. May we each have the wisdom, vision and courage to lead in this emerging transformative period.

For a review of this entire transformation series, here are the links to each of the prior posts:

Forcing Functions:

Enablers:

6 thoughts on “A Closer Look at Transformation: Thinking Differently

  1. Instead of educational thinking and practice that tacitly assumes that the future is some kind of linear extension of the past, we need anticipative education, recognising the new conditions and discontinuities which face present generations, let alone future ones… This implies a ‘culture of critical commitment’ in educational thinking and practice – engaged enough to make a real difference to social-ecological resilience and sustainability but reflexively critical enough to learn constantly from experience and to keep options open in working for a sustainability transformation. (From the Afterword by Stephen Sterling, Professor of Sustainability Education, Centre for Sustainable Futures, Plymouth University, United Kingdom).

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