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How can organizations survive the disruption caused by digital technologies? By embracing a digital environment, encouraging a culture of technology-enabled collaboration, and having the courage to experiment and fail, say Deloitte’s Anh Phillips and Boston College’s Jerry Kane, authors of The Technology Fallacy .
In an age where there’s so much change and uncertainty and disruption, there’s more of a need for leadership now than there ever was before.
—Anh Phillips, Center for Integrated Research, Deloitte
Jerry Kane: Talking about digital is not enough. Thinking about digital is not enough. Action is what’s necessary …
Anh Phillips: Begin to understand the technologies that are out there. Understand the impact they can have. And this doesn’t mean go out and take a coding class. This means understanding, in a practical, functional way, the possibilities that it can offer for your organization.
Jerry Kane: I’ve often said digital transformation is much more about will than it is about skill.
Tanya Ott: Does your business make full use of the digital tools you have available? Get some new ideas today on the Press Room.
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Tanya Ott: I’m Tanya Ott, and years ago, when my daughters were young, they went through a phase—it was probably during middle school—when we were running to the store all the time buying more duct tape. But not your father’s duct tape. I’m talking tie dye, rainbow metallic, cheetah print … you name it. They’d cut and fold it like origami, one layer after another, crafting bracelets and wallets and even small purses that they could give to friends and, of course, keep some for themselves.
I’m pretty sure the company that invented duct tape during World War II could have never imagined a bunch of 13-year-olds turning it into fashion.
But, as well all know today, duct tape has lots of uses.
Jerry Kane: It was a waterproof tape ...
Anh Phillips: … and it was originally green, and because it was waterproof they called it duck tape. And then over the years after the war it began to be used in construction and used to tie together air ducts, and hence it changed to gray and we started calling it duct tape.
Jerry Kane: If you're anything like me, you can use it for just about any repair purpose in the house. There is actually a Wikipedia page on duct tape that looks at all sorts of different and unusual uses for duct tape. They used it to fix helicopters in the Vietnam War. There's actually some medical research on duct tape as a wart remedy, which was news to me.
Anh Phillips: Hi, I'm Anh Phillips and I lead our research on digital transformation in Deloitte's Center for Integrated Research.
Jerry Kane: And I'm Jerry Kane. I am a professor of information systems at Boston College and the director of the Shea Center for Entrepreneurship. I'm also the guest editor for Digital Business at MIT Sloan Management Review.
Tanya Ott: For several years now, Jerry and Anh have conducted an annual survey of business leaders around the world to find out how “digital” is going in their shops. They’ve now got more than 20,000 survey responses and 100 interviews—so a lot of data—and it all feeds a new book they’ve written called The Technology Fallacy: How people are the real key to digital transformation.
I sat down with them to talk about it, starting with duct tape.
Jerry Kane: The whole point was when you come in and you think there's only one possible application of technology, it's like saying there's one right use of duct tape. It just doesn't make any sense.
Anh Phillips: And part of it is discovering along the way how to actually use that technology. Sometimes you might buy a technology and you may have a sense for how you might use it strategically, but it's in the experimentation, it's in the use of that technology, that you begin to discover new ways of using it.
Tanya Ott: Let's move this from tape—which is very analog. Let's move it to the digital. One of the tools that a lot of us use in lots of different ways, both personally and in our business lives, is Twitter. It's been used [in] a lot of different ways by a lot of different companies, and that speaks to what you're talking about, Anh. Can you give us an overview of what Twitter was perhaps originally intended for, but how companies then started figuring out some really good use cases for them?
Jerry Kane: I really call Twitter the digital duct tape because it's this data stream from customers that companies are figuring out all sorts of different ways to use. Traditionally, we think of it as an opportunity for a company to get their brand message out. One of the case studies we used in the book was KLM Airlines. They used Twitter as a solution to deal with a crisis in the midst of the 2011 Icelandic volcano eruption. Basically, all their flights were down. They had no way to communicate effectively to masses of customers. They began to turn to Twitter as a way to begin to get this huge network back on track. Once they started using it in that purpose, they realized there was a great customer service tool. They use it for Lost and Found. So, if you've gone through the gate at security and you left your iPad® mobile device back on the plane, you could tweet KLM and they would have a gate agent bring it back out to you because then they could go back through security.
And then there are all sorts of other examples from companies. T-Mobile basically monitored Twitter to see what people hated about their biggest competitors. And that's what led to their un-carrier strategies. What people disliked was their contracts, and so T-Mobile said, “We can be the un-carrier. We're not going to do contracts.” The health care provider Kaiser Permanente used it to track what people disliked about organizations, and it turned out that parking was a huge issue, and they could actually use the geotags to figure out what facilities people were most upset with and where they could step in. So, it creates this data stream of real-time information that companies can figure out different ways to leverage for competitive advantage. It's very different than just, “Hey, let's tweet our brand message out over and over and over.”
Anh Phillips: And Tanya, the point is that social media was not created with these intentions in mind. Nobody created these tools and said, “This is how we're going to use it. We're going to use it for customer service. We're going to use it to really get a sense for what customers want and their preferences.” That was not the original intention of the technology. So, it's the idea that the technology gets released and people start to use it; they start to use in interesting ways, and then the technology continues to evolve as people begin to find different ways to use it.
Tanya Ott: Technology can also create the opportunity to work differently within your own company, and you write about one company that used technology to basically create a database of experts within their own company. Before I have you tell me about that technology and the hidden value in it for the company, explain why it is [that] a company felt that it needed to do this in the first place. Didn't they already know who their content experts were within their company?
Jerry Kane: There's a very famous saying from, I believe, the CEO of Hewlett-Packard: “If only HP knew what HP knew, we'd be three times more productive.” And so there is this concept that many organizations don't know what knowledge they have in their own four walls. They don't know what knowledge resides in the employees’ heads. And sometimes the employees don't even know that the knowledge they possess is actually valuable. When these digital platforms are able to surface this knowledge and make it more accessible to others in the organization, it can really have a significant performance impact.
Tanya Ott: How were they able to surface this? How did the tool work?
Jerry Kane: There are a couple of different examples I think in the book. One is research from my colleague Paul Leonardi at the University of California, Santa Barbara. He studied Discover Financial Services, and they had a social media platform where the employees would share information online. He did a before-and-after study and basically, by being able to look at this stream of information that people were sharing, they increased their ability to know who knew what in the organization by something like 70 percent. What was really interesting about that is that when they were asked what they learned, they said, “Oh we didn't learn anything, it didn't make a difference,” even though he had the data to say otherwise.
We have another active research project with a large professional services firm—a very similar sort of process where we're mining the electronic data that people are normally contributing and making that expertise available to others. And what we found was that not only did consultants increase their billable revenue by about 5 percent across the organization once they adopted this tool, it [also] disproportionately affected people who had previously been locked out of the organization or a bit marginalized. Namely, junior employees, in terms of rank and tenure, and women. They all performed disproportionately better as a result of adopting this tool.
Last but not least, the example we use in this book is a large chemical company did this, and on one project team they made their people stop using email and start using this collaboration platform. They found it increased the productivity of their team by about 25 percent because it reduced the effects of turnover. When somebody left, if they only communicated via email, all that knowledge was lost. When they communicated on a digital platform and somebody else came to take over, they could get up to speed much more quickly. So, it's that collaborative side of technology that [have enabled] really, new types of collaboration.
Tanya Ott: Interesting. Each year you both conduct a survey of company leaders where you report how they think their company is doing digitally. And then you sort of rate the companies by their level of digital maturity. Walk us through that continuum from the early-stage companies to the digitally mature companies, in terms of how they're finding and leveraging these sort of hidden advantages in the technologies that they deploy.
Anh Phillips: It's interesting that you asked that because we notice that early-stage companies use digital tools differently. They typically start off by using it to improve customer engagement and interaction. And then by the time you get to digitally maturing organizations, they're actually using it for much more than that. They're using it not only to engage with their customers but to improve efficiency and also to innovate and to transform and create new business models. And that's ultimately where the value lies. It’s in thinking how you can do business differently.
Jerry Kane: And another important follow-up point on this [is], and this is really the core thesis of the book, it's not just how they use technology that's different. Their leadership styles are different. The talent-retention models are different. Their organizational structure and culture are very different. Digital maturity from an organizational perspective is not just how you use technology. It's how you reorient your entire organization to be able to compete more effectively in a digital world. And those reorientations may or may not actually have much to do with technology. Yes, digitally mature companies use technology differently, but they do a whole lot of other things differently as well.
Tanya Ott: And I absolutely want to get to that leadership issue in just a moment. But just to stay here for a quick second—it seems like there could be a really fine line sometimes between missing out on an opportunity and maybe getting too far over your skis on an opportunity, particularly for those companies that are just in the early stages of digital maturity.
Jerry Kane: One thing we found is that risk tolerance is an important aspect of digital maturity. So being more comfortable with experimentation, with iteration and, let's face it, with failure. Things aren't going to always work out as expected. How you manage that risk tolerance—like what's an appropriate level of failure? How do you do fail small? You don't want to fail on a US$1 billion IT rollout, but failing on some small projects is very acceptable because you can learn as a result of that. You're never going to figure this stuff out unless you do those small iterative experiments.
But one of the biggest things that really separated the digitally mature companies out was not that they experimented more, but once they had those learnings and had those quick wins, they then use those insights to drive change across the entire organization. Everybody can experiment. It's what you do with the lessons you learn that really separates digitally mature companies out.
Anh Phillips: What Jerry is talking about is really when you talk about getting out over your skis, this book is about thinking of different ways to operate and behave and organize yourself as an organization. And when you do that, when you change the way you actually work, you're better positioned to not be out over your skis. It's all about preparing yourself and rethinking your organization so that you're better equipped to handle the unknown in the future.
Tanya Ott: You are both making the case that leadership is so important, and leadership means a lot of different things to a lot of different people. When you're looking at people and leadership and the intersection of that with technology, what [attributes] are you looking for these leaders to have? What are the qualities that you see in the more digitally mature companies?
Anh Phillips: We have to first start by making a distinction between managing and leading. There are lots of people at various levels of many organizations out there with various titles, and many of them are effectively managing people, managing projects, managing things. But leadership is not just about managing things. Leadership is really about leading people, influencing, creating a vision, showing people the way. It's always been that way. So, when we talk about digital leadership—digital leadership, in many ways, at the core is still leadership. It's always been that type of leadership. But what's a little bit different is, we found in our study that most organizations—even digitally maturing organizations—say that they need new leadership. In our study, we find that the need for new leadership doesn't drop below 50 percent, even among digitally maturing organizations. So, everyone's saying that we need it. The key is in an age where there’s so much change and uncertainty and disruption, there’s more of a need for leadership now than there ever was before. At the heart of digital leadership, it’s still core leadership skills. You still need to be able to influence people. You still need to have a vision. But now leaders have to be change-oriented. They have to be forward-looking. And on top of that, they have to have some new skills too. They have to be digitally literate. They need to understand technology in a way that can create a vision for the future.
Jerry Kane: I just want to follow up on to that because Anh dropped my favorite part of that statistic, and that is, although 50 percent or more of all companies report they need more leadership or need better digital leadership, what sets digitally mature companies apart or maturing companies apart is that they're actually doing something to help address that need. They are actively developing the type of leaders that can help their organization for the future, and it's not necessarily the technical skills, as Anh was pointing out. We asked them a question: What skills do digital leaders need? It was “forward-looking,” it was “visionary,” and it was also “change-oriented,” and they needed technical literacy as well. Not hard-core tech skills, just digital literacy and an understanding of what these technologies could and couldn't do.
Tanya Ott: So, are those more digitally mature companies doing talent development within their own existing staff? They're working to build up existing staff leadership capability?
Anh Phillips: What we find that's consistent across digitally maturing organizations is that if you look at talent and if you look at leadership, everyone is saying they need talent. Everyone’s saying they need leadership. But what sets apart digitally maturing organizations is they're actively developing their people and their leaders. So, it's figuring out a way to enable people to grow as individuals and grow into leadership.
Jerry Kane: And it's important to note also that when we talked to the executives we interviewed over the five years, they're pretty consistent that they're not talking about formal training initiatives here, necessarily. It's also about creating the type of work and the type of work environment where people can learn on the job. For instance, not just keeping people in their same function, [instead] creating cross-functional teams where they can learn from other people in the organization. Moving them from job to job throughout the organization so they can continue developing those skills. That's the sort of development they need to understand how to work in these sort of turbulent and agile organizations.
Tanya Ott: Let's pretend that I'm a leader, at least in title, of a company or maybe a department or a team and I'm listening to this podcast and I'm thinking to myself, maybe I don't really have my game together. Maybe we're not really doing what we need to be doing. Where do I start? What do I do?
Anh Phillips: I think there are a couple of things …
Jerry Kane: First, read our book. (laughter).
Tanya Ott: Good plug there, Jerry!
Anh Phillips: You're always looking for the opportunity, Jerry.
Jerry Kane: Yeah. Hey, I never miss the opportunity—The Technology Fallacy, available now through MIT Press.
Tanya Ott: Anh, you we're going to actually tick through a list for us. I think.
Anh Phillips: Yeah, there are several things. First of all, go to what we really know is core leadership and make a distinction between what leadership is versus just managing. We're confused these days about the two. So, if you think about those core leadership skills and then also add onto that this idea of, how do you start to think about your company 10 years from now, 20 years from now. What does that mean for your group that you're responsible for? For the company that you're responsible for as a leader? Where should the company go? And begin to look forward. And then on top of that, if you're not already familiar with all these different technologies out there, begin to build your digital literacy. Begin to understand the technologies that are out there. Understand the impact that they can have. And this doesn’t mean go out and take a coding class. This means understanding it in a practical, functional way and the possibilities that it can offer your organizations. And then start to think through what changes might need to occur in your organization. Culture is at the root and foundation of a lot of this. Without the right kind of culture in the organization, the organization can't move fast enough. It's going to be risk-intolerant. It's not going to be able to experiment. It's not going to be able to learn. You need the right kind of culture in order to encourage all those things.
Jerry Kane: Yeah, and the last chapter of our book is actually sort of a “digital transformation—a practical guide.” And we do have a 23-point survey in there recommending that people get a sense of where your organization stands. Pick two or three initiatives that can really move the needle for you. And then do a short six- to eight-week intervention to just try and get the ball rolling because it's about momentum. I’ve often said digital transformation is much more about will than it is about skill. You know, talking about digital it not enough. Thinking about digital is not enough. Action is what’s necessary because it’s only if you start doing things—even small things—that you can start to learn and to iterate and build on whatever successes or learn from whatever failures you have.
Tanya Ott: Jerry, Anh—thank you so much for joining us today.
Jerry Kane: Absolutely.
Anh Phillips: Thanks, Tanya.
Tanya Ott: Anh Phillips and Jerry Kane’s new book is The Technology Fallacy: How people are the real key to digital transformation. You can find it wherever you find books … and you can check out an excerpt on Deloitte Insights, where you can find a lot more conversations just like this one.
The Press Room podcast is available where you get your podcasts, online at deloitteinsights.com and on Twitter at @deloitteinsight (no S). I’m on Twitter at @tanyaott1. Thanks for joining us today. I’m Tanya Ott and we’ll be back here again in two weeks.
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Digital DNA refers to the traits companies need to organize, operate, and behave successfully in this fast-moving digital age. It’s about rewiring the organization for digital—creating the organizational environment needed for your customers, employees, and organization to optimize the value of digital technologies. The Digital DNA process includes understanding where your organization is in its digital DNA maturity, determining how digitally mature it needs to be to achieve its ambitions, and helping your organization to know how to get there.Learn more