What sets digital masters apart, and how can you cultivate these capabilities within your own organization? In this Q&A, Derek Roos, CEO at Mendix, prompts George Westerman, Principal Research Scientist with MIT Sloan’s Initiative on the Digital Economy, to discuss the secrets of digital mastery. Find out how George responded to Derek’s questions. And learn what it means to be digital and the importance of collaboration between business and IT.
Derek: What does digital transformation mean? And why does it matter now more than any time before?
George: Everybody is talking about digital transformation. That’s a wonderful thing, but it also can be a little troubling. In defining digital transformation, it’s important to focus more on the transformation piece than the digital piece . The big driver here, I think, is the fact that technologies that used to sit on our desktop are now in our pockets. And these technologies that used to stay at work arenow in our home lives all the time. Digital is really amplifying customer expectations and brands need to change to meet their demands.
Derek: How can you compete with startups who do things differently, and are more competitive because of it?
George: Really, it’s about getting closer to your customers and getting more efficient and flexible in your operations, so you can be at the top of the pack instead of the middle or bottom. There’s no guarantee that these new competitors will win, but you can learn an awful lot from what they’re doing. Especially because large incumbents often have this tremendous base of capital and customers that startups don’t have. So you can sit around and watch them start to eat away at your business, oryou can learn from them and make progress because of it.
Derek: What does it mean to become a digital master?
George: We went out to look at how large traditional companies are making sense ofthe digital opportunity. And we found that the digital masters are doing two things better than the rest of their competitors. One is that they’re just applying digital better in transforming customer experience, operations, and business models. But, even more importantly, the Digital Masters are leading differently. They’re really aiming at transforming their companies rather than just adopting technology.
Derek: When people talk about digital innovation, they often first think of customer-centric solutions (new sales channels or ways to engage customers ). But you’re saying that the internal operations of an organization are just as important, correct?
George: I would actually say that the operational part is essential to getting the recipe right. It used to be that you could deliver a phenomenal customer experience no matter how ugly the backend was. Now, unless you can get the operational processes straight, unless you can get the platform straight, and unless you get that information straight, this kind of seamless fast experience just can’t happen anymore.
Derek: So digital innovation is not an option, this is essential to success?
George: I think that is really critical. Things are just moving so much faster, and the opportunities are out there. Every industry we studied already had these digital masters in it. So the idea of waiting because none of your competitors are getting there is not an option now. Some of your competitors are already there. And they’re not always these fast startups; they’re often the big stodgy companies that you think are kind of slow.
Derek: You’ve talked about two dimensions: digital capability and leadership capability. Which one is more important?
George: Well, we should talk more about the leadership capability, because that is the most critical part. As I said, it’s not a technology challenge; it’s a transformation opportunity. And that transformation happens through leadership.
We see leadership as consisting of four pieces: vision, engagement, governance, and technology leadership. For all the talk we’ve heard about bottom up change and innovating at the edges, every digital master we saw envisioned and led the change very strongly top down.
allow the edges to innovate. They created the vision and governance at the top level and then allowed the edges to identify ways to advance vision, rather than doing whatever they want.
Derek: Is digital innovation an IT-only topic? Or a business-only topic?
George: Many of the CEO’s that I interviewed early in our research said, “We’re going to give digital to somebody else because our IT people are just too slow.” Every digital master I talked to found a way to work with, not around, their IT people. Sometimes the CIO was leading it. At other places, the CIO is just on board in the same conversation that is happening everywhere else. And it’s so critical, because so many of your processes are embedded in IT, so much of your data comes from IT, and so much knowledge of how your company works lives in IT.
If you’re going to work around IT and try to lead digital transformation out of a part of business that doesn’t understand technology, you’re going to make the same mistakes that IT had to learn not to make over the years. And that’s why technology leadership is so important in this leadership piece.
What we’re hearing more and more is this idea of bi-modal IT. Traditional IT does what traditional IT is very good at, which is making sure that the systems are safe and well managed and operating the best way that they can operate. But there’s also another part of IT that operates at digital speeds. It is doing the experimentation, the prototyping, and innovation work, and working in concert with core IT to make everything work.
Derek: What is it going to take to effectively create a fast-moving environment in IT that is not distracted by maintaining legacy systems?
George: First of all, frame this in a way that you’re not punishing the slower groups; they actually have a really important role to play.
It’s just that there’s a new set of skills to add in there too. Second of all, make sure that although these two units are separate, that they’re communicating in the right way. When you separate two units, you immediately create processes and cultures that are different. And they can get wildly different, so that you’ll lose the ability to work together. So you need to pay a lot of attention to make sure that they integrate correctly.
Derek: What’s your advice for achieving the desired collaboration between business and IT?
that they call for ideas about technology. This conversation is already happening in companies all around the world at the most senior level. The key is to find a way to put yourself in the conversation. One good way to do this is to link into the vision, and to link into the governance, because great IT organizations already understand what that means.
This Q&A was excerpted from the webinar, “Discover the Secrets of Digital Masters.” View the on-demand replay.
As chief executive officer, Derek leads a pioneering team of software industry experts with the mission to bridge the gap between business and IT, making business application development dramatically easier, faster and collaborative. As a result, the company is achieving tremendous global growth and disrupting the way many of the world’s leading companies are innovating and differentiating.
Derek earned a Master of Science degree in Business Administration from Erasmus University, Rotterdam. He is a highly sought speaker at IT conferences and is guest lecturer at several universities. Derek has received the Ernst & Young Emerging Entrepreneur of the Year 2012 Award.