70% of digital transformations fail, are you measuring these 2 key metrics to keep ahead?
As an aerospace engineer, I'd like to draw an analogy from airplane takeoff for digital transformation. In case of airplanes taxiing for takeoff, acceleration, which is the rate of change of speed, is directly related to the distance rolled on the runway. The slower the acceleration, the longer the distance needed before the aircraft achieves takeoff speed. If the aircraft never achieves the required acceleration, it cannot take off on the given runway. That's not too dissimilar to digital transformations. Acceleration, or rather the lack of it, can become a challenge. The initial experiments take so long that both stakeholders and organizations never see momentum develop. The disruption never takes off.
Organizations are rapidly trying to evolve to survive the next industrial revolution. The rapid pace of change in the technology means that each digital idea has shorter-than-usual shelf life, which gives digital transformation much shorter runways to work with.
Speed and iterative execution complement each other to dramatically reduce risk of failure of digital transformations.
We would recommend that organizations on the path of digital transformations adopt speed (or in particular "innovation velocity") as a key metric.
Speed (Innovation Velocity) as a Metric
Innovation Velocity- the pace of innovation- is a key metric in many forward thinking organizations. Given the shorter runway for digital transformations, evaluating a large funnel of idea, each executed at low cost and high speed, is the best bet for hitting a few successes. This focus on speed is an even bigger challenge in larger, more stable organizations that aren't usually known for rapid or low-cost iterations. Successful tech companies like Amazon, Netflix and Alphabet have build this expectations of fast iterations into their cultures. Start-ups on the other hand, tend to work on one big idea but are excellent at low-cost and high speed iterations. The motivation system in a startup helps with agility. When money runs out, the game is over, and you need to find a new job. This obviously doesn't quite work well with larger organizations, given their cultures of job security and stability.
Why More Organizations Don't Drive Speed ( and What Can be Done About it)
Most leaders are already aware that speed if an important driver for success of digital transformation. We strongly believe that the reason most organizations are not able to drive transformation at speed is related to structural issues. There are 2 main reasons for this.
We call the first the "clock speed" issue. A "clock speed" of operation is the normal pace at which decisions and operational change happens at the organization. Measuring each of the stages in the operational change can help you drive faster innovation. You should measure landscape assessment, design, hypothesis testing, field testing, and roll out. Each of these stages can be measured by time goal and can have maximum time allowed in each stage. This would help you fix the clock speed issues, and would act not just as measuring metric for your digital transformation ideas, but would also act as a great motivation for your team.
We call the second as the "two-worlds" issue. This issue arises because the organizations have become inherently slow due to checks and balances introduced over the years to manage risks. There are legal- and procurement-related boxes to be checked, IT policy and technology standards to be met, HR policies and global work processes to be kept in mind, while executing any new thing inside the organization. This restrict new ideas to disrupt the old practices, thus leading to the two world issues. A innovation index must be set to protect transformative ideas in early stages of development, to shield the innovative work from the normal brunt of corporate processes.
The specific translation of the enterprise's business goals into digital transformation strategies- both one-time and ongoing- must be led at the top (i.e CEO, business owner, leader etc).
The context of this write up was inspired by work done by Mr. Tony Saldanha at P&G to help it take off the digital transformation journey. Also thanks to Mr. Salim Ismail to inspire us from his write up in exponential organizations.