In The Absence of Organizational Transformation, Technology Innovation will Fail

"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things." — Niccolo Machiavelli The Prince (1532)

I submitted in my earlier blog (https://www.comakeit.com/blog/is-disruptive-innovation-the-exclusive-domain-of-only-startups/) that you don’t have to be a startup to be successful at innovation, and even established companies can transform and adapt themselves to the rapidly changing technology and business landscape. In this blog, I will try to outline the kind of organizational change that is needed to facilitate this transformation.

First and foremost, it is important to understand that business transformation is not merely technology innovation, but also an organizational transformation.

Orchestrating organizational transformation

As many studies have pointed out, more than 70% of business transformations fail. The reasons could vary from inadequate preparation, failure to strategize, to not empowering the right people to be the champions of the change initiative.

Business transformation initiatives are inherently complex, and are characterized by risk, and uncertainty. It is therefore important to understand the key levers for a successful business transformation and adhere to them scrupulously.

Strategic vision and leadership

The single most important factor impacting the success or failure of a business transformation initiative is the strategic vision along with a sense of purpose and direction provided by the senior executive leadership within the company. It is imperative for the leadership to communicate to all stakeholders the purpose of the transformation, why it is important for the business, the value it will generate, and the strategic plan for implementing the change initiative. At the same time, the leadership should also make very clear the risks of status quo, and the consequences of failure to transform. A good strategic plan for business transformation should include its impact on every facet of the business, and how internal and external processes should be redesigned to achieve the strategic goals.

Focus on shifting from command and control to responsive

Very often successful companies will focus on what product or service will give them the highest revenue and profit. This mindset is important, because at the end of the day, if you don’t earn a profit, you won’t survive. But preoccupation with current success is a sure way of losing focus on what the customer needs and will lead to failure in anticipating the changes and trends in the business and technology landscape.  A command and control kind of setup and mindset may give you success in a traditional and predictable environment, but could be counter-productive in an uncertain and less-predictable environment. A successful business transformation initiative will include concrete measures to transform the business into a Responsive Organization[i], which is designed to thrive in less-predictable environments by balancing the following tensions:

More Predictable <-> Less Predictable

Profit <-> Purpose
Hierarchies <-> Networks
Controlling <-> Empowering
Planning <-> Experimentation
Privacy  <-> Transparency

An extreme customer centricity in organizational culture and mindset will enable you to transform your processes and decision making structures, and ensure your continuing relevance to the customer. This will require the right kind of change in people behavior and organizational processes, with an emphasis on transparency, communication, and ownership.

Process Change and metrics

To embrace innovation and successfully transform your business, the underlying internal and external process redesign is an extremely critical element. Some of the key elements that must be factored into process redesign are:

• Decentralized decision making
• Flat hierarchy
• Customer centric focus
• Business decisions driven by speed,innovation, and flexibility
• Risk taking with a strong bias for action

As part of a comprehensive change management initiative, it is also important to clearly define the metrics, and attributes to measure the efficacy of the business transformation. Appropriate metrics to measure the effect of transformation must be based on customer outcomes and value addition, and should answer key questions such as how we are perceived, and are we relevant?

Classic cases of failure to innovate

The business landscape is replete with case studies of well known companies, which failed due to their inability to embrace innovation and transform their businesses. It will be instructive to briefly note the underlying factors behind two well-known cases of business failure, namely Borders and Kodak.

Borders was a pioneer of the mega book store format. Along with Barnes & Noble, for more than 40 years it dominated the book retailing business in North America. In spite of a clear technology advantage, which allowed it to better manage its inventory, it failed to anticipate the trends in music retailing as well as online sales, and paid a steep price leading to its bankruptcy and liquidation. On the other hand, Barnes & Noble, a similar sized company embraced digital technology and online sales and is still a major player in the US market, competing with the likes of Amazon.

Kodak is perhaps the most studied and documented case of failure to transform. Until the 90’s it was one of the most valuable brands in the world with a commanding lead of film, and camera sales in the American market. In spite of being an early entrant into the digital market, Kodak failed to anticipate the impact of smart phones on the camera market, and its failure to diversify and develop alternate business lines and revenue streams left it grasping for breath, and is now a mere shadow of its former self. While the core businesses of both Kodak and its Japanese rival Fujifilm are battered beyond recognition, Fujifilm is still surviving and thriving, as it has successfully diversified and developed new business lines, while Kodak failed to.

In my next blog, I will talk about the kind of IT transformation that is needed to facilitate the business and organizational transformation of companies.

[i] http://www.responsive.org/manifesto/