The threat of business disruption, as with the threat of an imminent demise, is focusing minds all over the globe. If Walmart, the once all-powerful king of retail, can take a beating in the stock market by acknowledging that its cozy brick-and-mortar market dominance is being threatened by mega-disrupter Amazon, then virtually any company’s business model is similarly vulnerable. And when a disrupter like Pandora, the (legal) streaming music pioneer can itself be disrupted by the likes of Spotify and Apple Music (as evidenced by Pandora’s recent pummeling in the stock market), then all bets for traditional enterprises are truly off.
Disruption and digital transformation were the talk of the fifth annual Business Transformation Summit that I attended last fall at SAP’s offices in Germany. Judging by the rapt attention given to these twin themes by an impressive list of long-time SAP customers like Unilever, Armani, and Bosch, the focus of the Summit was right on the money.
Digitally Transform the Business from the Inside Out
While the term “digital disruption” was on the lips of every speaker, it was clear in my conversations with SAP executives, customers, and partners that getting more digital is not all that it takes to avoid becoming the next Blockbuster, Borders, or Circuit City. The real issue facing disrupters and disruptees alike isn’t whether SAP’s latest digital technology, such as SAP Fiori or SAP HANA Cloud Platform, needs to be in the mix — though they can definitely play a major role. Nor is the real issue about how fast a company should move to embrace its Internet of Things (IoT) or cloud future — no matter how inevitable that future is.
Most important is that same old gating factor that bedevils technology and business innovation alike: people. Changing people’s habits, wants, and needs is the first order of business in disrupting an industry — as in Amazon’s case, getting consumers to buy everything from books to cereal to washing machines online. Changing people’s habits, wants, and needs inside the enterprise is the first leg in the race to avoid total disruption — as in Walmart’s feverish efforts to hire the tech talent and data scientists needed to create and diffuse new business processes and new key performance indicators (KPIs) as it becomes a digital enterprise. It takes people to disrupt a business from the inside before it gets disrupted from the outside.
It takes people to disrupt a business from the inside before it gets disrupted from the outside.
Tech has its role too, but bleeding-edge technology isn’t necessarily what’s needed, at least not at the outset. Several of the companies I spoke with at the Summit acknowledged that some degree of tech housecleaning was an important precondition to transforming the business, but those conversations were more about issues like consolidation and generally cleaning up the last few decades of digital detritus than about adopting the latest and greatest.
Adopt a Go-Slow, People-Centric Approach
The go-slow approach makes a lot of sense. It’s hard to imagine initiating a digital transformation of the customer experience, for example, without making sure that the back office was ready for what such a digital transformation would mean. A great, new online buying experience could definitely shorten the sales cycle, particularly vis-á-vis an older, brick-and-mortar shopping experience. But if the good old supply chain isn’t tuned to the new sales cycle, the result will be a lot of frustrated customers who completed their orders faster than any in-store customers could ever do and are now waiting for the old — as in slow — supply chain to fulfill their order. What was intended as a transformation from a dead-on-arrival, in-store shopping experience to a hot, new digital shopping experience instead becomes an annoying online experience — and a much needed transformation turns into a disaster.
This nuance wasn’t lost on the Summit audience, and to SAP’s credit there was no attempt to pretend that SAP HANA or any other hot SAP product or service was the starting point for anyone’s transformation. In fact, the hottest offering from SAP that was discussed was the Design Thinking workshop, a decidedly analogue, people-centric process that involves gathering people from the business and technology sides of the company and brainstorming about what new, different, and ultimately disruptive products, services, or processes can be developed and implemented. Only after the ideas have gelled a bit is any technology brought into the mix.1
Even the more standard, less gee-whiz transformations that were discussed at the Summit emphasized a people-centric approach. An example of this was seen in the presentation by FrieslandCampina, an $11 billion dairy cooperative based in the Netherlands. Its massive consolidation project, which is standardizing processes and data across the company, has placed the decidedly non-sexy concept of stakeholder buy-in as one of the core tenets of its approach. Such equally non-techy concepts like a company-wide communications strategy and a comprehensive training program were among the highlights of a presentation that was pretty much devoid of any specific references to SAP products.
What was also clear from the Summit is that digital transformation is a term that is at best redundant and at worse an oxymoron. It’s redundant because, in the end, we fundamentally live in a digital era, and even if you’re a luthier trying to make a 21st century violin sound like a 17th century Stradivarius, you’re going to be conducting business in a digital world. And, as I hope the above examples from the Summit have illustrated, digital transformation is an oxymoron: Real transformations begin and end with people, and the digital side is merely a means to an end.
Changing Habits Is the Answer
Walmart can build the best online shopping experience money can buy — which is indeed what it is doing — but unless its shoppers change their habits and flock to the online store the way they (used to) flock to the brick-and-mortar stores, then all the digital transformation in the world won’t solve Walmart’s problem. Likewise, if FrieslandCampina can’t get its stakeholders on board with its consolidation project, there will be no foundation on which the business can base its next transformation and the ones that inevitably will follow.
The concept of endless, perpetual transformation was my biggest takeaway from the Summit. This is no longer the age of the big bang. There’s no time to spend years getting IT and business processes in perfect sync, nor is there even a chance that an enterprise’s IT and business processes are ever completely done. Transformation only stops when the business stops. And that usually indicates an unhappy ending for all.
It’s the 21st century, and you’re either behind the wheel or you’re left on the side of the road. Don’t take my word for it. Anyone remember Blockbuster, Borders, and Circuit City? You might recall looking for them in the Yellow Pages — whatever that was.
1 You can read my column “Foster Creativity in Your Company with SAP Design Thinking Workshops” (insiderPROFILES, January-March 2014) at bit.ly/DesignThinkingGreenbaum. [back]