The Digitization Agenda

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Digital Freedom

The world has changed. Mobile devices combined with cloud apps have freed us from the traditional 9-5 commute to an office. “At work” is an activity and no longer a location or time in the day. This is explored in a recent article “Daddy are you still at work“.

And that change has happened in the last 5 years. It is a digital revolution, rather than evolution.

I am sitting under an umbrella outside a Peets Coffee shop on my super-light Macbook connected to free wifi with access to all my apps and content through a browser – on a public holiday.

I can buy almost anything online and get it delivered the next day. I can stay in touch to friends, family and work colleagues no matter where in the world they live. It is easy to connect and collaborate.

Life is so much better than 10, 20, 30 or 50 years ago. Businesses are so much more efficient now that information flows freely across corporate, department and organizational boundaries. Or is it? The rush hour traffic, overcrowded commuter trains and research tells a very different story.

Global Business Trends

For employees, and the huge swarm of ex-employees who are now sub-contractors, life has changed – and not necessarily for the better. For companies it is a pretty bleak story. Digital is making companies more complex to run, with far less margin:

 

  • Global competition: now buyers have access to the same information so that virtually every business has global competition.
  • Work is subcontracted: to reduce cost or increase capability, work is delivered by 3rd parties and this impacts the end to end process and therefore customer experience.
  • More compliance: to protect employees and customers, more and more regulatory compliance is imposed on companies.
  • Buyers have higher expectations; they want to connect on the device and channel of their choice, expect immediate answers and exceptional customer service – all at rock-bottom prices.

 

What is clear is that the digital revolution will be as impactful as the industrial revolution. Those companies that get “it” will be huge winners. Those that don’t will struggle to survive. But what is “it?”

Companies need to understand that the digital revolution is not tweaking the current product/services, business model and operational processes to appease customers. Instead it is looking with fresh eyes and coming up with new business models that serve the new customer demands, and then cherry-picking elements of the legacy only where they are relevant.

The only winners in this digital revolution are the investors and founders of those businesses that have used the digital upheaval to become the monopolistic player and exploit their dominant position.

Business is Getting Slower and Less Fun

The research from CEB, a best-practice insight and technology company headquartered in Arlington, Va. has some stark – and rather disappointing – figures:

In benchmarking the speed of key processes across the corporate sector, we find again and again that decision-making at even the most basic level has slowed materially over the past five to 10 years.”

In last 5 years, hiring a new employee now takes 63 days, up from 42. B2B sales take 22% longer as sales teams now need to get consensus from 5 buyers, rather than 2 just 5 years ago.

We all recognize that there is a cost overhead in increasing regulations, but probably haven’t understood the true impact. Risk management functions are now 900% larger than 10 years ago. And the increase in size and number of regulatory regimes has the added kicker that there is less coordination as companies struggle to comply to the different regulatory regimes. A process-oriented approach to business operations could provide a single, integrated way of providing regulatory compliance – as a by-product of a well-run business.

But the biggest issue for company efficiency and employee motivation is 60% of staff needs to consult with 10 people to get the job done and 30% need to consult with over 20. It is just tougher to get stuff done inside companies, and this has a knock on effect on staff morale.

On days when workers have the sense they’re making headway in their jobs, or when they receive support that helps them overcome obstacles, their emotions are most positive and their drive to succeed is at its peak. On days when they feel they are spinning their wheels or encountering roadblocks to meaningful accomplishment, their moods and motivation are lowest. This comes from research from the Harvard Business Review.

Boring, But True. Fix Your Processes

CEB’s recommendations point to the value of process redesign: “It would be foolish to suggest that the root causes of our current business slowdown—greater scale and greater focus on risk management—are in and of themselves bad things. Hardly. But leaders do need to design organizations and processes to take into account—and offset—the various choke points that technology and organizational evolution have created. Even at the largest and most traditional corporations, collaboration and streamlining don’t have to be at odds.” 

Digital Revolution = Digital Redesign

Marc Andreesen summarized the current phenomenon with a simple phrase “Software is eating the world” which was published in a Wall Street Journal article as far back as 2011. In that article he argued that every business in every industry would feel the disrupting force of technology and the new entrants to the market would have a lasting effect. This was more than a bubble or blip: “We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses.”

Designing those new digital businesses means going back to first principles. Reimagining a new digital business and designing it with the customer at the center – OutsideIn. This means modeling processes and only then automating as much as possible. The only place automation comes ahead of modeling is in the dictionary.

Companies will win and lose. But also employees will win or lose based on their ability to become digital natives. The real threat to low paid, manual workers are the 3 As – AI, automation and algorithms. Repetitive tasks can be done more accurately, quickly and cheaply by clever systems. And over time those jobs will be lost.

The ex-CEO of McDonalds recently reported “It’s cheaper to buy a $35,000 robotic arm than it is to hire an employee who is inefficient, making $15 an hour bagging French fries,” But job will not just be in western countries with high wage costs. Apple and Samsung supplier, Foxconn in China has reportedly replaced 60,000 factory workers with robots. One factory has “reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots”.

Operational Excellence Leads the Revolution 

Now has never been a better time to be at the heart of business operations and be an operational excellence professional. It is a time when every company is (or should be) making the largest step change in history.

Operational excellence is a key skill that is required at a strategic level as companies rebuild themselves around the digital business agenda. First, design the new operational business models and processes. Second, make sure that those processes are implemented as efficiently as possible. Digital businesses are forced to run on very thin margins and are extremely complex. So -operational excellence is mandatory.

But the old business analysis approaches need to be reinvented. The last 20 years has been characterized by lengthy process projects under the heading of Quality, LEANSigma or BPM. They documented processes as flowcharts in Visio, Powerpoint - or worse - as long MSWord docs. The flowcharts were useful to the project team who covered the walls of the project war room. Over a couple of years, the organization evolved and the processes became out of date and then the exercise was repeated.

Operational Excellence 2.0

That old approach is unworkable with the new world - high distributed teams, access on mobile devices, content delivered in shorter more appealing formats. But is still needs to be secure, managed and governed – and in the cloud.

Think of operational processes as the “on-line operations manual” for all staff, contractors and partners. Here are some guiding principles:

 

  • Describe the business at a strategic level to get executive level alignment
  • Drill-down to multiple levels to diagrams where detailed activities are described
  • Provide detailed guidance to end users and provide access to all the systems, workflow, documents, video, procedures, web pages, KPIs and media to get their job done
  • Have a simple notation so they are easily understood by end users no matter what their background, discipline or seniority – with no training
  • Activities are automated, wherever possible, and are seamlessly integrated and surfaced based on context – time, task or geography
  • Accessed securely on any device, from anywhere – and be as intuitive and elegant as the best consumer apps
  • Designed to encourage feedback and enable rapid, controlled change
  • Provide security, management and version control of all content
  • Scale from the smallest organization up to a major multi-national
  • Be constantly changing to reflect and even drive the continuous improvement and disruption that many of the best companies are inflicting on themselves to drive towards their potential

 

And to do this, the tools to support Operational Excellence will need to be built with new thinking, using the latest technology platforms and scalable, and freemium business model to take away the risk. The good news is, they are.

Comments

Armeda Vanderwoude
,
posted 30 weeks 3 days ago
Excellent article. Thank you Mr. Gotts.

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