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When Your Employees Refuse to be Eaten by Software

“Software is eating the world” is the pictorial representation of digital transformation. But what happens when your employees refuse to be eaten? For example, an Uber driver refusing to abide by the rules of Uber’s algorithm. Or similarly, a doctor refusing to accept an AI recommendation from the MRI.

As an organization undergoes a digital transformation, one of the keys to enabling a successful role-out of new technologies is ensuring that employees are comfortable with the level of change. Recalcitrance from employees to digital transformation can set back your organization’s progress, and stymie an otherwise successful implementation. In that light, it is critical to view them as partners in the journey rather than as an obstacle.

In organizations where digital reigns king, such as companies which rely upon algorithmic technologies to manage their employees, this dynamic challenges organizations daily. One dramatic case study of this phenomenon is Uber, which provides a powerful example of employee dissatisfaction with new technologies.

As Uber continues to transform, employee resistance to change and algorithmic management has grown, according to a study quoted recently in the Harvard Business Review (HBR). Uber’s drivers are reliant upon the whim of an algorithm to assign them customers and determine their routes, fees, and more. This, according to the HBR, has left them feeling as though they are under constant surveillance, dehumanized, and understanding little about the algorithm which manages their daily lives. As a result, employees have been known to resist, whether by attempting to manipulate the algorithm, or by organizing in political forums without the knowledge of the company.

To manage this problem, the HBR offers four best practices to mitigate the discomfort brought about by algorithmic management, which can be extrapolated out to broader challenges in digital adoption:

  1. Share information. In theory, algorithmic management can increase transparency, since even learning algorithms that are used to manage workers reflect a set of rules and procedures that comply with the strategic goals of upper management. It may not be possible to share the algorithm itself with workers, but company leadership can and should share with them the data and goals that informed it.
  2. Invite feedback. To counterbalance the unidirectional commands that the algorithm hands down to drivers, companies should find ways to democratically include them in decision-making, for example by involving them into committees or councils that discuss and negotiate work related internal regulations. Getting workers actively involved in discussions about the design of algorithm-driven systems would do much to build more engaged and supportive workforces.
  3. Build in human contact. People need people. Organizations should develop formal, supportive communities where workers feel like members and can make social connections. Adding a human element to the way people are managed will help workers feel less like they are being treated as machines.
  4. Build trust. Implementing benefits that improve worker’s welfare, such as providing financial support in case of illness, or better sick pay or maternity leave, may be a first step to humanizing the company and mitigating the anger of employees who are managed by faceless algorithms.

To view the article by the Harvard Business Review on , click here

 

Prevent turf wars by selecting one digital leader

Due to both the “strategic importance” and the “organizational challenge” of the digital transformation process, a procedural question naturally arises:

Who should lead the digital effort? Here are a few options:

A. A new senior executive position of Chief Digital Officer (CDO) to lead the digital AXA, GE, CVS, Michelin, Caterpillar, and Starbucks are among the leading organizations that chose to appoint a CDO.

B. Other organizations have decided to designate one of their top executives or board members to serve as the Digital Leader or even assign the title of VP Digital, in addition to their other duties.

C. In some organizations, the CEO is leading, personally take charge of the digital transformation effort.

As the digital transformation evolved, additional positions with the name “digital” began to appear – despite the different focus in their role. One example is the use of the title “digital manager” for a marketing manager who is assigned responsibility for marketing and advertising in the digital channels (the website, mobile, social media, email, etc.) Digital channels are currently attracting more attention and resources at the expense of established channels (newspapers, radio. TV). The marketing digital manager usually receives responsibility for a specific area – marketing and advertising in digital channels, and not overall responsibility for leading the organization’s digital transformation

Let’s look briefly at two findings from the report “A New Class of Digital Leadership” survey published in June 2017 by Strategy &, a subsidiary of PWC. This study was based on responses from 2,500 managers who serve as digital leaders in a wide range of companies, business sectors, and countries. The survey indicated that

  • 19% of the organizations had a designated digital leader in 2016, up from only 6% a year earlier.
  • About 60% of the digital leaders identified in the study were appointed to their position since 2015 – that is, the process has accelerated in recent years.

Another survey shows the distribution of officers responsible for leading the digital transformation. The survey was conducted in April 2017 by The Economist’s research unit for British Telecom and included 400 CEOs in multinational corporations in 13 countries.

  • In 47% of the organizations that participated in the survey, the CIO was placed in charge of the digital transformation;
  • In 26% of the organizations, the responsibility was assigned to the CDO, and
  • In 22% of the organizations, the CEO decided to personally lead the process.

Neutrally, there is no correct or incorrect answer here. Each organization should choose to implement this idea of designating a Digital Leader in the way best suited for its business objectives, organizational structure, work processes, organizational culture, and relevant personnel.

Yet, one thing is clear: Someone must assume OVERALL responsibility for the digital transformation effort because it is a strategic mission that encompasses the entire organization – avoid the turf war (for example between the CDO and the CIO) and select ONE leader.

2019 Survey – Big Data & AI are Center Stage for Competitive Advantage: NewVantage Partners Big Data and AI Executive Survey 2019

NVP (NewVantage Partners), a strategic consulting company focused on data-driven business innovation, has published its 2019 survey on Big Data and Artificial Intelligence. The 2019 survey main theme was to understand how Big Data and Artificial Intelligence (AI) are accelerating the business transformation. They first started to survey this topic in 2012 when they sought to understand the potential impact of Big Data and its implications on businesses.

Prof. Thomas Davenport and Randy Bean wrote the foreword to the current survey. Prof. Davenport is a Professor in Management and Information Technology at Babson College, and one of the world-renowned thought-leaders and gurus in the areas of management practices, analytics, and its impact on competitive advantage on organizations. Mr. Randy Bean is the Founder and CEO of NewVantage Partners – a recognized thought-leader in the areas of Big Data, AI, and business innovation.

As explained in the foreword, the 2019 edition of the survey results is a reason for celebration. 65 Fortune1000, as well as other leading organizations, are represented in the 2019 survey- with a high level of C-executives participation.

The main findings of the survey, which is a worthwhile read for anyone dealing with Big Data and AI, are the following:

  • 92% of the respondents are increasing the pace of investments in Big Data and AI.
  • 62% have already seen measurable results from their investments in Big Data and AI (slightly less than in 2018, but still remarkable).
  • 48% of organizations say they compete on data and analytics. When Prof. Davenport first introduced the concept of competing on analytics in his famous 2007 book, perhaps 5% of large organizations would have said this.
  • 31% have a data-driven organization, and 28% have a data culture.
  • 75% fear disruption from new entrants.
  • 88% feel a greater urgency to invest in Big Data and AI.
  • 92% are driven by positive objectives – transformation, agility, or competition – and only 5% are driven by cost reduction.
  • All respondents agree that data privacy and cybersecurity are important priorities and 56% see “data ethics” as an important topic, probably a concept anyone would have mentioned a decade ago.
  • 77% say that “business adoption” continues to represent a challenge for their organizations.

NewVantage Partners full survey

Looking at the finding of this interesting survey, you may conclude that Big Data and AI are on their way to significantly impact the business environment, and every organization should seek how to implement these technologies for their benefit.

Raz Heiferman and Prof. Yesha Sivan have introduced the concept of “Data is the Oil of the Digital Era” in chapter 7 of their e-book “Doing Digital” emphasizing the importance of managing the data as a strategic asset that can be leveraged for improving the competitive advantage, and monetized to create new revenue streams. Data and Artificial Intelligence, and specifically Machine Learning, have become a must for most organizations that want to thrive in the digital era.

“Doing Digital” e-book (Hebrew) on the e-Vrit application

Small is Beautiful – How Digital Transformed Scale Advantage into Unscale Advantage

How Digital Technologies transformed the Economies of Scale to Economies of Unscale

A new and interesting article written by Taneja and Maney and titled “The end of scale” was published in the Spring issue 2018 of the MIT Sloan Management Review.  The two authors write about the exciting and challenging change in the new business environment – the change from the well known and popular concept of economies of scale to the new concept of economies of unscale.

They write: “For more than a century, economies of scale made the corporation an ideal engine of business. But now, a flurry of important new technologies, accelerated by artificial intelligence (AI), is turning economies of scale inside out. Business in the century ahead will be driven by economies of unscale, in which the traditional competitive advantages of size are turned on their head.”

For decades we were taught that there are advantages of scale due to mass production, distribution, and marketing, meaning that the marginal cost of production is getting lower the more units we produce. This was the rationale behind the investments of companies in scale – larger factories, mass production, mass marketing, and more. Organizations of all kinds spent the 20th century seeking scale. That’s how we ended up with giant corporations, and universities with 50,000 students, and multinational healthcare providers. Scale was also a barrier for new entrants.

And then came the digital technologies and turned everything their head. These technologies (big data, artificial intelligence, machine learning, robotics, 3D printing, drones, and more,) the emergence of new types of business models (e.g., the platform business model, freemium, the XaaS – Everything as a Service, digitization of physical products, virtualization of markets and their transformation to e-commerce and virtual markets, etc.) reversed the relationship between fixed costs and output which is the foundation of the economies of scale. Suddenly you can sell to new customers for very low prices or free of charge (e.g., the marginal cost of Apple to sell a new song with iTunes is close to zero, the cost of selling e-books by Amazon on their Kindle platform is close to zero). Companies have developed platform business models by matching demand with supply and generate money from the fees they charge the involved parties (look at Airbnb, Uber, Lyft, Waze, Booking.com, etc.) Some services are now free of charge for the customer while the advertisers are paying the bill (Google, Facebook, and others). The marginal cost for serving an additional customer is zero or close to that.

In this new economic order, David beats Goliath and small is beautiful – small companies benefit the advantage of unscale. As a matter of fact, these companies can scale up to unheard scale (hundreds of millions of customers) without having to scale their investments accordingly in equipment, employees and marketing channels.

As this article emphasized, digital transformation is a massive change and companies must understand the new business environment with all the new opportunities and risks.

You can find more on this exciting phenomenon in our e-book https://bit.ly/2odl5th

Digital Champions: A 2018 PWC Strategy& Research

Strategy&, the strategy division of PWC has published recently a new global study “Global Digital Operations Study 2018 – Digital Champions”. This new study is focused on understanding how companies and their leaders have built an integrated ecosystem to provide value to customers based on end-to-end solutions. The study is focused on the industrial sector but can provide inspiration and guidelines to many other business sectors.

The integrated digital industrial concept, named Industry 4.0 (or Industrie 4.0 in Germany, one of the leading countries that promote this concept,) deals with the adoption of digital technologies and how they affect the processes and products in the industrial sector. As we can see, these technologies have a profound impact on all the related processes – product design, supply chain, production and operation processes, customer delivery, accounting, and invoicing processes. The digital technologies are now embedded directly into the product, augmenting it into a physical-digital product. These technologies are the foundation for new innovative business models.

We are now in the stage of transforming from the Digital 3.0, which was focused mainly on automation and the single machine view, to the Industry 4.0 concept which has a much broader view, a systemic view. Industry 4.0 is focused on digitalization of end-to-end processes, integrating the different parts of the human and machine automation, data collection from all the processes, and using that data to support real-time decision processes while providing new and exciting customer experiences. Industry 4.0 is the realization of the digital transformation of the industrial sector.

Industry 4.0 requires deep collaboration between all the stakeholders, executive management commitment, a clear business strategy for the digital era, and more. Companies that don’t understand this deep paradigm shift will, probably, face the risk of disruption.

For the study, PWC Strategy& experts have interviewed and met 1,100 executive managers of leading industrial global companies. The study was focused on understanding their point of view on the Industry 4.0 concept and implementation. One of the main findings of the study was that there are quite a few companies that have fully adopted and implemented the Industry 4.0 concept. They deserve the title of Digital Champions. The study found that the Digital Champions excel in four categories: Customer Solutions; Operations; Technology; People. They have successfully developed four ecosystems to support each of those areas.

The link to this interesting study.

In our e-book “Doing Digital”, published on the E-vrit application (desktop and mobile), we refer in Chapter 8, paragraph 8.2, to the seven sectors that most probably will face disruption in the coming years. We quote a previous PWC Strategy& study, named “Seven Surprising Disruptions” and present the industrial sector as a candidate for disruption if companies will not adopt the Industry 4.0 concept. Leading industrial companies like Philips, Siemens, GE, and others have already adopted that concept.

To our book: Doing Digital

We recommend all industrial companies to start their digital transformation as soon as possible. If not, they are taking the risk of being disrupted and being too late to recover.

Case Study: How China’s Wanda Group succeeded to merge physical with digital worlds

How Wanda Group, China’s largest shopping center network, succeeded to combine the physical and digital worlds and bring new value to its customers

This post is based on an article written by Prof. Howard Yu, a professor of business administration and innovation at the Swiss IMD business school.

The article presents the exciting case study of the Wanda Group, China’s largest real estate developer that specializes in shopping centers. The company is known for her excellent business performance and for understanding how to leverage digital technologies to support the group’s accelerating growth.

The shopping centers are facing competitive challenges from the e-commerce giants, like Alibaba and others, and therefore have to reinvent themselves to remain competitive in a world where the boundaries between the shopping experience in shopping centers and e-commerce are blurring quickly.

Wand Group operates a huge network of shopping centers that host and combine shopping, cinema, and children playing grounds, hotels and office spaces. Recently they have expanded into amusements parks, film production, sports, technology and internet.

To remain competitive, they decided to implement a two path action plan: improving the customer experience in their shopping centers and leveraging the power of digital technologies. Prof. Yu’s article shows how this business giant succeeded in this two path action plan and to continue to grow in this competitive business landscape.

Regarding improving the customer experience, they were one of the first shopping centers in China to include restaurants and by 2017 they have become the world’s largest cinema chain operators. Their shopping centers include spacious indoor playgrounds within the plazas where children can play on traditional slides, swings, ball pits and educational arcade equipment.

Regarding their digital systems, Wanda’s Group rapid expansion capabilities, is supported by their IT backbone that has enabled the company to carry out informed decision making, streamline operations, codify its knowledge and operate at scale.

Here is Prof. Yu’s article.

Wanda Group is a great case study of the digital transformation journey of companies, as described in our “Doing Digital” e-book. Using digital technologies has helped Wand Group to expand quickly and become one of the world largest shopping centers operator.

Here is a link to our e-book.

MIT Researcher Dr. Westerman: You Need a Strategy for the Digital Era

Dr. George Westerman, a Principal Research Scientist with the MIT Sloan Initiative on the Digital Economy, wrote an interesting article “Your Company Doesn’t Need a Digital Strategy”, published by MIT Sloan Management Review on its 2018 Spring issue.

As Westerman writes “…. the focus on technology can steer the conversation in a dangerous direction. Because when it comes to digital transformation, digital is not the answer. Transformation is….In the digital world, a strategic focus on digital sends the wrong message. Creating a “digital strategy” can focus the organization in ways that don’t capture the true value of digital transformation. You don’t need a digital strategy. You need a better strategy, enabled by digital

Technology by itself don’t bring value. The value they bring comes from the ability of organizations to do business differently, more effectively or optimizing the value in the eyes of the customer. As he writes ” Analytics is not about databases and machine language algorithms — it’s about understanding customers better, or optimizing maintenance processes, or helping doctors diagnose cancer more accurately. IoT is not about RFID tags — it’s about radically synchronizing operations or changing business models”.

Here is the link to the article.

In our book “Doing Digital” we referred to this article in chapter 3 paragraph 11 and emphasized how important it is for the organization to understand that digital technologies are enabling technologies and enable the business to reimagine and rethink the way they do the business.

Digital Mastery Today: Companies Still Struggling with Digital Transformation

Why Companies are Struggling with Their Digital Transformation? 
Revisiting MIT and Capgemini’s Research After 6 Years

 

Capgemini, the global consulting company, published in 2018 a new and updated research “Understanding Digital Mastery Today: Why Companies are Struggling with Their Digital Transformation”. This is an updated version of previous joint research of Capgemini and the MIT Center of Digital Business Initiative, published in 2012 and named “The Digital Advantage: How digital leaders outperform their peers in every industry.” This research was the foundation of one of the most popular books on digital transformation and written by Dr. George Westerman, Dr. Didier Bonet and Dr. Andrew McAfee titled “Leading Digital: Turning Technology into Business Transformation” published in 2014.

Prof. Sivan & Raz Heiferman presented the Digital Mastery framework in chapter 10 of their e-book “Doing Digital” published in Hebrew, the chapter that described the Digital Maturity concept. The Digital Mastery framework is based on two capabilities required to succeed in the digital transformation: digital leadership and digital capability. Based on those two capabilities, the original research mapped about 390 organizations on a two-dimensional matrix and divided the organizations into four categories:

  • Beginners
  • Conservatives
  • Fashionistas
  • Digital Masters

The main goal of the new research was to provide an updated view of the state of digital transformation by using the same research methodology. 757 organizations participated in the 2018 research.

The updated report presents a cautious picture – the progress after 6 years was small and slow. In the customer experience area there was real progress but, in other areas like business processes, the progress was slow (if at all). Companies are still struggling with issues like defining a clear vision for the digital age, digital governance and IT-Business alignment.

The conclusion of the updated research is that slow progress has been made in 6 years of digital transformation. The main findings were:

  1. Companies are facing difficulties in adapting the new digital technologies due to the dizzying pace of the introduction of new digital innovations (e.g. artificial intelligence, IoT, automation).
  2. Organizations might have been over-optimistic in 2012 and, now they understand better the magnitude and challenges of the digital transformation.
  3. There are many business models disruptions in many industries, which are challenging the current business models and value chains.
  4. The expectations of customers, employees, and markets are rising and put significant pressure on the organizations.

So how could companies cope with these difficulties? Here are some tips from our e-book on the required activities to make sure your organization will transform successfully:

  1. Board of directors and executive management commitment – the top leadership of the organization must be committed and engaged to the digital transformation. This is a significant transformation, and as such should be steered by the top leaders. The vision and strategy should be defined and well understood by all the stakeholders. A digital roadmap should be defined and executed. Chapter 11 in our e-book defines the methodology and the steps an organization should follow.
  2. A Digital Leader should steer and lead the journey – the organization has to define clear responsibility for leading the journey. It could be a CDO, CIO or somebody else. Chapter 13 in our book explains the different alternatives for such a position.
  3. Your employees must be full partners of the digital transformation journey – Chapter 10 in our e-book elaborates on the Digital Maturity topic and emphasize the importance of employee engagement. We consider this engagement as the key to a successful journey. The management and the CDO should invest in sharing with the employees the message of the importance of this transformation, opening a two-way channel so they can understand the “why” and the “what.”
  4. You have to upskill your employees – trained and digitally skilled employees are key to a successful transformation. You have to invest in your human resources to make sure they understand the new technologies and business processes.
  5. Make sure data and analytics are a top priority in the transformation program – leveraging the data and using advanced analytics to convert the data into insights, is key to digital transformation. Chapter 7 in our e-book is dedicated to the importance of data and analytics in the digital era.
  6. You have to invest in your organization’s digital culture – digital culture is an important ingredient of the digital transformation. By digital culture, we mean agility and flexibility, innovation, and open culture. Chapter 5 in our e-book is devoted to innovation and how an organization should make innovation as a part of its DNA.
  7. Using advanced technologies – part of the digital transformation requires the use of technology to improve the customer experience and internal business processes. Chapter 2 in our e-book is devoted to present some of the advanced technologies that are part of what we call the “third digital age.”

To summarize, to follow the digital journey, successfully, organizations should mobilize their leadership, culture, talents, technologies, and processes to make sure they succeed in their transformation.

You can find Capgemini research here (registration required for the full report download).

Who Should Lead the Digital Transformation: An Article by Boston University’s Prof. Kane

Prof. Gerald Kane, a professor of Information Systems at Boston College, published an interesting post in the MIT Sloan Management Review blog on August 2018. The blog deals with the question who should lead the challenging journey of digital transformation.

The post is based on large-scale research with 4,300 managers, executives, and analysts “Which functional area is primarily leading your company’s digital progress?” The researchers observed that digital transformation is more of an organizational and managerial challenge than it is a technological one. As organizations mature, they are less likely to report that IT leads this digital progress; 23% of respondents at early-stage companies name IT as the primary leader of digitalization efforts, versus 16% at maturing companies. When digital progress is led by technologists, companies often end up with glittering technologies that either go unused or fail to meet the business’s objectives.

 

The findings of the research are summarized in the above table. One may see clearly that as the organization matures regarding its digital transformation, the CEO’s or their office takes the lead. 41% of maturing organizations report that the CEO’s office is leading the transformation.

Following are the links to Prof. Kane’s blog and to the full research.

In the e-book (Hebrew) “Doing Digital,” by Raz Heiferman and Prof. Yesha Sivan, you can find, in chapter 10, our discussion on digital maturity and in chapters 13 and 14 our discussion on who should lead this strategic transformation.

Following is the link to the e-book