Overcoming The “Transformation” Hype

It seems like the word transformation crops up about everywhere you look these days, so here’s a little secret. Since we haven’t yet achieved maximum hype, just insert the word “transformation” into any project title and it will significantly increase the odds that it will be supported or funded. Case in point. Maybe you have a project to replace some broken or worn out toilets. Just call it a “bathroom transformation” and I guarantee you can charge double. But, I digress.

Anyway, at one point in my career, my job was focused on identify emerging technologies, start-ups, or business models that might help us grow our business. I would spend my days meeting with venture capitalists, startup founders, angel investors, academics, and a whole assortment of other interesting characters. I was primarily looking for innovative ways to solve problems we had and to capture insights about problems we didn’t know existed.

One of my meetings inevitably led me to the offices of the venture capital firm Andreessen Horowitz. Here’s a shortlist of companies they’ve funded; Facebook, Github, Box, Dollar Shave Club, Instagram, Oculus, Lyft, Slack, Zenefits, etc… It’s also worth noting that their current tagline is “software is eating the world.”

Oddly, the thing I recall most from my meeting was their lobby. Tucked within tiny alcoves were photographs of hydrogen bomb tests from the 1950’s. After closer inspection I discovered they were all originals. I asked myself, “what kind of organization hangs original photos of hydrogen bomb tests in their lobby?” I filed this question in the back of my mind for reflection.

Fast forward to today. Everywhere you look “Transformation Offices” are cropping up in corporate headquarters.  My news feeds overflow with the latest cavalcade of articles zinging around the latest buzzwords such as artificial intelligence, machine learning, big data, block chain, and my all-time favorite…. the cloud.

Here’s the thing. I have yet to see a “transformation” occur at a company that is worthy of the hype.  Most transformation programs are incremental. They typically involve process automation, new technologies, or response to a competitive threat. This is valuable work, but it rarely results in a company being truly transformed.

Strangely the question of “why the hydrogen bomb test photos?” has stubbornly persisted in my mind and answer has slowly emerged. An organization that hangs original photos of hydrogen bomb testing is one that has no anchor to the past. It’s an organization that embraces the destructive, disruptive, and creative energies inherent in all technologies, with the intent of creating a different, and hopefully better, future. 

Because venture capitalists like Andreessen Horowitz manage large portfolios of different types of companies, they don’t have the same constraints as existing businesses. They can place multiple “bets on the future” by spreading their risk over numerous companies. One successful investment can offset the losses of countless failed ones. Existing businesses typically can’t approach things this way.

While there are plenty of books on the topic, I believe the main challenge for existing businesses seeking transformation is summed up in the Zen saying, “the sword cannot cut itself.”

This is why you’ve never read an article about Sears transforming retail by digitizing their catalog, or Kodak transforming photography by digitizing how photos are taken, processed, and socially shared. To embrace true digital transformation requires one to also embrace the destructive side of the equation. Pursuing the future often requires wrecking an existing business, i.e. the sword cutting itself – the hydrogen bomb.  This is indicative of why Jeff Bezos was recently quoted as saying “I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”

This takes us to the primary trouble with transformations. If you’re in an existing business, and you know your industry will be disrupted, what can you do? Is a “Transformation Office” the answer? Possibly invest in cutting edge technology or acquire a start-up? 

Well, unfortunately the challenge really isn’t as simple as creating a new organization or pursuing some new technology. It is primarily about talent, culture, and leadership. This is a much harder problem to navigate – but it’s not insurmountable. From my experience I’ve observed at least four general paths. The trick is to walk the paths simultaneously, without losing sight of your day to day business.

1. Technology Led Improvements – In the not too distant past, technology was viewed as an enabler. The “business” would define a need and the “information technology” function would initiate a project to address it. This approach needs to be flipped. It requires market savvy technology oriented leaders to demonstrate what’s possible and then work with the business to implement it. I believe this reorientation best captures what most organizations are doing with digital transformation. Culture and outdated organizational models are the biggest barriers here, not to mention that market savvy IT leaders are very hard to find!

2. Rapid Competitive Response – Today’s competitors can quickly emerge from anywhere. Even historically “stable” industries like razor blades or mattresses are seeing small disruptive competitors that present real threats. Addressing this requires adding agility to the organization. A variety of companies have invested in cross-functional project teams, light-weight infrastructure, and externally focused leaders to mobilize rapid responses to competitive threats. For example, Best Buy was able to respond to Amazon’s next day shipping by offering ship from store capabilities. This was a cross functional effort spanning retail operations, logistics, e-commerce, accounting, etc… to digitally transform the delivery function. They started small by testing the capability in a handful of stores. Once proven it was quickly expanded across the entire business.

3. Diversified Partnerships – Joy’s law sums it up best; “no matter who you are, most of the smartest people work for someone else.” This means that in order to succeed, businesses need to develop diverse external partner networks. The goal here is to gain insights about new threats or opportunities while tapping into external talent to experiment with emerging capabilities. It often requires establishing a dedicated group within the organization to cultivate these partnerships. To be clear, these are not transactional vendor relationships and are typically not something that might be delegated to purchasing organizations. Some examples include Unilever Ventures, P&G Connect and Develop, Johnson and Johnson Innovation, etc…

4. Research and Disruption (the new R&D) –  This is the hardest one to explain and pursue. It’s really about taking a lead role shaping the future of an industry. I think a good example of this is Elon Musk (and associated investors) being on the forefront of disrupting transportation. While Tesla gets most of the headlines, Musk plays a leadership role in the areas of space travel via Space-X with reusable launch systems, self-driving automobiles, ride-sharing services, hyper-loop, and the aptly named Boring Company. If you’re leading disruption in so many facets of the transportation industry, then it’s difficult to completely get left behind, even if several ventures ultimately fail. This implies an approach where existing businesses pursue concepts that may undermine their current operations (i.e. the sword cutting itself). Jim Hackett’s decision to pursue “mobility services” at Ford is a real-time example of just how difficult this is.  It requires leadership capable of opposing internal and external forces who are content with the status quo.

In order to survive and thrive, practically every business needs to embrace elements of transformation. It’s really about overcoming the forces within your business that are resistant to embracing all aspects of transformation – including the destructive ones.  Understanding this is one of the first steps on the path to success. And, if all else fails, go ahead and hang up a few photos of atomic bombs going off, at minimum it’s sure to spark some lively conversation.