Once an organization marshals the resources required to embark upon a major digital transformation, any effort to decelerate that transition will for all intents and purposes doom the initiative.
Speaking at Mendix World 2016 conference, Geoffrey Moore, author of Crossing the Chasm and most recently Zone to Win, told attendees that no business should embark on more than one major initiative at a time.
“In the next five years, all of you are going to have to deal with an existential threat,” said Moore. “Meaning the fundamental business model is under direct attack.”
Given the all forces lined up against the success of such efforts, Moore also said that these projects need be overseen by the CEO directly if they are to succeed.
“You are now changing the core DNA of your enterprise,” says Moore. “It’s a big, big deal.”
Moore stresses the most important thing CEOs need to recognize is just how unpopular these projects are likely to be within their organizations. From salespeople concerned about making quarterly goals to investors worried about the company’s stock price, CEOs at almost every turn will be reminded about how much of a drain a large digital transformation initiative can be on the business.
“Because of the inherent conflicts inside any established enterprise, disruptive innovations create a crisis of prioritization,” says Moore. “Interests are not aligned; they are inherently conflicted.”
It’s up to the CEO to not only get everyone associated with the company bought into the effort, but also make sure that funding for the project is not constrained.
“We sometimes refer to this as crossing the chasm inside the belly of a whale,” says Moore. “The whale’s antibodies and immune system can be somewhat challenging to overcome.”
Because of the rise of new technologies such as cloud computing, big data and the Internet of Things (IoT), Moore told conference attendees that it’s almost a certainty that their business is either now facing some existential threat created by a new competitor to their business or soon will be.
“What a disruptive innovation does is take something that was scarce and expensive and make it ubiquitous and cheap,” says Moore. “You need to think about the resource very differently.”
For example, Moore says historically automation was applied on a limited basis because it was expensive and very hard to accomplish. Now, thanks to cloud computing, businesses can automate any service, quickly, cheaply and at scale.
The truth is that the IT budget in most organizations today only represents one percent of total operating budget. That budget, adds Moore, is highly earmarked in the sense that it’s already allocated to maintaining legacy applications and systems. In fact, Moore says most IT vendors are too narrowly focused on a tiny fraction of the total operating budget inside a customer’s organization.
Today Moore says software deployment and automation only represents a highly stressed one percent of the total budget. In the future, Moore says it will be 20 percent of the total budget because IT will be the fabric of the company as every company becomes a software company.
The advantage those startups have, says Moore, is that they are not internally conflicted the way most large enterprises can be.
Moore says how each organization responds to those threats will vary. Some will be able to leverage their strength in the market to compete effectively.
“If you can align a large enterprise it will defeat anything in its path,” says Moore. “It’s a thousand times larger than it closest startup competitor. But it’s so conflicted it hasn’t been able to put that energy to work.”
Recognizing that fact, Moore adds that other business leaders may choose to simply make use of new technologies to enhance their current processes in ways that are less disruptive to their business models. In fact, he outlined three different categories of digital innovation, each with a different sponsor, focus and business impact:
“There is no right answer,” says Moore. “They all have very different rewards, very different responses and very different priorities.”
The one thing Moore says CEOs that do decide to embark on a major digital business initiative can’t afford to do is lose heart.
“It’s the number one priority,” says Moore. “Once you start you’re not allowed to stop.”
Of course, these days there is a lot of appetite for digital transformation at the board level. But the difference between success and failure when it comes to digital business will come down to perseverance because as Moore notes once that project stalls most CEOs will never be able to jumpstart it again.