What is digital transformation and how do you ensure your investment is successful? Ryan Lahm, co-founder of Arch & Tower, an FD company, discusses why digital transformation has become a trillion dollar topic, as well as why so many initiatives fail.
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Arch + Tower is a consulting team specializing in customer experience, employee experience and operational excellence. Learn more: www.archandtower.com.
Untangling the Technical | Navigating Digital Transformation
This transcript was assembled by hand and may contain some errors.
It has been edited for readability.
Adelle Starr Welcome to Untangling the Technical, Frazier & Deeter’s podcast, in which we take a look at complex business issues and break them down for business executives navigating today’s complicated and ever-changing business environment.
This is Adelle Starr, and today I am delighted to welcome Ryan Lahm to the podcast. Ryan is one of the founders of Arch & Tower, which is the newest addition to the Frazier & Deeter family of brands. Ryan works with companies in areas of technology implementation, operations improvement and business analytics. Ryan, welcome to the podcast.
Ryan Lahm Thanks for having me.
Adelle Excellent. Ryan is here to talk to us about a topic that’s been getting a lot of attention – digital transformation. We offered a webcast on this topic in late 2020 and we asked Ryan to come on the podcast to talk more about some of the realities of getting a digital transformation off the ground, because there are a lot of layers to successfully navigating digital transformation. Before we jump in, Ryan, could you start us off by defining what digital transformation really is?
Ryan Thanks, Adelle. That’s a great question because digital transformation is one of those terms that can kind of be a “catch all” for a lot of different things and it’s thrown around a lot today without a lot of context. The easiest way, I think, to think about it in my mind is your digital transformation is reimagining of the business in a digital age. This process is all about how we use digital technologies to create or modify or tweak either our business as a whole, our culture, our customer experience and you know how we meet their changing needs inside of our industry.
The size of a digital transformation can be relatively small, it could be implementing a new communications tool inside your organization to help people collaborate better. Or it could be something massive like totally reimagining how your go-to market strategy is or how you’re serving your customers because it touches all parts of the business. Digital transformation is one of those topics that kind of transcends the traditional silos of sales or marketing or operations and really ends up touching all of the parts of the business.
What’s kind of cool about that, is when companies start off and are going to embark on digital transformation efforts, or something that they feel is in that mark, it really forces them to kind of pull back and think about what they want to do, and sometimes it opens up some questions about their business as a whole.
Adelle Thank you, for that. It’s good to set the stage on something that’s kind of a buzzword that may mean different things to different people, so thank you for that.
As you think about the clients you’ve worked with, what do you think is the biggest hurdle? I know there’s different challenges that different organizations face when they’re trying to transform your business, but what do you think is the biggest hurdle that you see?
Ryan Yeah, it’s funny because if you start to Google, “digital transformation” you start to look at the success, the metrics around it are pretty terrifying. It’s easy to see if, especially as this word is used in so many different places, numbers out there, like 70% of all digital transformation initiatives fail in 2018. The number floating around was $1.3 trillion was spent a digital transformation, and 900 billion of that went to waste.
It’s amazing when you see those kinds of things float around, it’s amazing that anybody would actually even try. And this really speaks to the hesitancy I think that a lot of organizations feel when they hear words like digital transformation.
The funny thing about it, I think, is that usually the technology component is the easiest part, or I’ll say it’s at least the most straightforward. I see the biggest issue usually comes with your people, the culture shock that ensues as a result of it. You have the competing priorities inside your organization or just a general resistance to it. You have politics that come along with it, and different silos popping up or maybe even have a talent deficit and there’s something you need to close to successfully execute on what your grander vision is. The bigger the company, the bigger the impact any kind of significant change will have on your culture.
I think we focus a lot on the tech because that’s what’s natural to do. We hear the word “digital” and we associate it with the technology that’s already out there. We draw out our project timelines, we set our milestones and there’s an immense amount of complexity that a lot of times goes into that so it’s right to do that, but the first thing that sometimes gets lost is how do we address the cultural change that’s going to take place as a result of this. It’s not to say that the technical transformation that’s taking place is easy, but it’s usually just the outcomes a lot more clear.
Tech startups, the companies out in Silicon Valley that are celebrated for these agile cultures, are kind of built with this inherently from the start. So, there isn’t necessarily a mind shift inside the organization that needs to take place to have that level of commitment or embarrassment or flexibility. But if you’re an established business that’s been around, you’re in a legacy industry or you’re just starting to kind of take steps into the space or you’re trying to play catch up, it’s really uncomfortable and so you really have to flex into that culture to make sure that you have a successful foundation to move from.
Adelle That makes a lot of sense. As somebody who’s been in a lot of organizations as they’ve launched a CRM system or some sort of enterprise system, it’s always the people that are trying to get their brains wrapped around something and trying to get on board. So, that sounds right to me, it resonates.
That’s like that famous quote, “Culture eats strategy for breakfast” so if that’s the thing that’s most likely to cause you to wind up in that that big bucket of dollars that didn’t get spent well, how do you evaluate your company culture to figure out how to create a culture that’s ready for transformation?
Ryan That’s a great quote, it’s timeless, “Culture eats strategy for breakfast” and that was Peter Drucker that originally said it. He said it, I think back in the early 2000s, but it’s still really rings true today. I think when everybody hears that quote, they know that he’s not saying that strategy is unimportant, but in order to create the lasting and successful change, we know that we have to focus on the culture and the people in order to have the lasting effect that we’re hoping for. And again, the bigger the organization, the harder it is to kind of rewrite that culture to create that adaptability needed for innovation.
Oftentimes, when it comes to transformation or innovation, it’s demanding new behaviors from your leaders and employees that are maybe counter to what you’ve been focusing on up until that point. We focus on operational efficiency and excellence and delivering our focusing on our business process, and when we’re implementing some new digital technology or something new, we’re disrupting that culture and we’re somewhat having to create a tension or an environment that feels counter to kind of what we’ve been doing and what we’ve been successful at to that point.
And it’s not something you can mandate top down, you can’t simply say as a leader say, “Now we’re innovative. Now we are going to embrace this new thing.” You really have to work on building it up through the organization, so you can probably dictate compliance as a leader, we probably wouldn’t recommend that, but you can theoretically dictate compliance of your organization. It’s really hard to dictate optimism or trust or conviction or creativity as you’re trying to really engage your people to think differently than maybe they had up until that point.
So, when we think about it, we think about it from a couple different angles and there’s a lot of different ways to do this and every organization is unique, but I think it’s important from the beginning to set the vision and really be clear about what you’re trying to achieve. Don’t short cut the strategy portion and understanding how what you’re trying to do fits into your core business model or as an extension of what you’re trying to grow into. Always focus on the people, not just your leadership’s down, but who are those key stakeholders? Who are your people that are going to be the most resistant? The bigger the organization, the more likely you are to have people that say, “We tried that and that won’t work,” or “This is why.” It’s so easy to poke holes in a vision, especially when it’s transformative you really need to bring them on and make them a part of the process, so that they can feel attached to it and attached to that success.
There may be influencers in your organization that aren’t necessarily in those high-profile leadership roles and bring them in. Those are your voice; we’ve all seen the power of social networks and how those influence our everyday life now. But bring those in, those exist inside your organization have if you have more than a couple people you’re not all in the same room together you’re probably interacting over some kind of social tool today, especially now in this world where we’re all working at home or just coming back to the office and where the attention is there and then, again, focusing on the people. Think about those talent gaps. is there’s something you’re asking the organization, maybe to do something that it’s never done before? Is there, somebody you can bring in or some group that you can bring in to help bolster that success and set them up for the bigger effort?
Another thing as a leader is you have to really learn to embrace that unknown and celebrate the process. There’s a certain amount of messiness that comes with the transformation, and so as you’re thinking about it, you have to celebrate that process and the process to it in a way that maybe you hadn’t done before. I had an older mentor at a previous career stop and he used to say, “To be on the cutting edge, you have to be willing to get bloody.” It doesn’t always take that, it’s a quippy quote, but sometimes organizations aren’t ready for that kind of dynamic. So, what do you do? is there a different way to kind of start the process and build some confidence?
And then, as a leader, you have to commit and you have to sell the vision. If you’re at the top of an organization and you’re embarking into a new territory which maybe the company hasn’t done before or it’s a new space or it’s outside of your core comfort level, as a leader, you do not get to divorce yourself from the outcome or put that ownership of that project onto the technology lead. You have to fully commit because it can’t be the company, which is you and the technology resource, you have to own it and you have to be a part of that. You don’t have to be the expert in the tool, but you have to own the vision and be able to be willing to carry that forward.
In all of this, I would say, as you’re embarking on a change, you know there’s always going to be an underlying fear with your employees. Any kind of disruption in our everyday lives, we always have some worry, you know it’s just natural to be as invested as we are in any company, we want to know how it’s going to impact us. Especially as you get into building sophistication into a business that maybe had before, “Is this going to replace me or are they trying to? Are they asking me questions because they want to get rid of me?” that’s scary and it’s totally natural.
And they want to know, man, that’s where they get on board and they’re like, “That’s really cool but I don’t know if I can be a part of that. I don’t know if I have the skill sets.” So, thinking about that fear and if you haven’t created the trust inside your organization already, if you don’t have a lot of real cohesive trust if that’s been a hurdle you’ve been facing, that question becomes really, really, really difficult.
The last thing I’ll say on this one, is what I think is really interesting, is what’s happened in the last year. With the pandemic that we’ve been all experiencing, it’s really forced companies to be adaptable in a way that they never even thought was possible, or they would never have attempted before this kind of experience that we’ve been through. And what a lot of leaders seen is this has galvanized their workforce and brought them together.
But as they’re going through this, they see their company and they see their organization being more adaptable. Crisis mode kind of brings people together in a different way, and it’s a really cool inflection point for the culture of an organization. We can’t stay in this in this mode forever, that will take its toll over time on an organization. But as we think about what the post crisis world looks like, I think it’s really interesting for leaders to start to think about, “How do we think about those elements that have been reset inside our organization and make sure that those continue forward?”
My company does a lot with personality profiling and behavior profiling, we are big believers in all of those things. In a personality, only a really traumatic event causes a personality to be reset. A death, a divorce, something significant can be traumatic enough to your emotional state to reset your personality.
What I think is a fascinating question is, is the last year that we’ve all experienced a traumatic event inside the culture of an organization? And have we effectively reset our culture in a lot of ways? As we’re moving back into the workforce, how do we make sure we’re shaping that culture to both be receptive for digital transformation? Let’s keep that sense of adaptability, maybe we can keep that sense of adventure, maybe we can keep that sense of growth and openness to help transform our business for the next step.
Adelle Well, that was fascinating. There were a lot of different areas that you covered there, and I am fascinated by the idea of the pandemic as a traumatic event for the organization, that might be an inflection point.
One of the other things you mentioned was the idea of the fear of change and answering questions that are going to ultimately somehow hurt me. How do leaders avoid the fear factor that’s often associated with change?
Ryan When I talked a little bit earlier about the focus on people, I think, really over indexing on that people change management component of whatever you’re doing, there’s going to be the project timeline, there’s going to be the deployment steps, the technical expert in that area will be able to speak to how you drive to that deadline. But what often happens is as you’re marching towards that deadline, if it’s incumbent upon the technical resource to drive the people change as well, they get wrapped up in all the hurdles they have to face to get the ones and the zeros to talk to each other.
And the last thing that comes to mind is how to communicate people. Did we establish enough buy in at the front? Are we listening appropriately along the way? Are we creating the supporting environment post launch to really make sure that it sticks inside our culture? Thinking about all those things, sometimes they’re too close to the project and they feel like, “Man, all this should be easy, it all makes sense to me.” And the reality is that if you hadn’t been in the weeds, if you hadn’t been in it from the start, you probably don’t feel that level of connection or understanding.
Sometimes it helps to just attach an external resource to a project timeline and just say, “Hey, this is someone who’s going to really make sure we understand the why.” Do we have our internal sales strategy? Do we understand how it fits into the strategy of our overall business? How are we going to communicate this to the market? Again, depending on the size of the project, that can kind of flex around but the more dramatic that change, the more you have to lean into that tension of understanding that not everybody’s going to be on board, how do we create the safety around that to help them come along on this ride?
Adelle That makes a lot of sense. I especially like what you said about how there’s a technology project lead, but then there’s essentially the organizational change is really well beyond that narrow scope, no matter how big the project is. So, fascinating.
Assuming we have some listeners who may feel like they’re operating the same way they did, well, maybe not exactly the same way they did, but more or less the same for 20-30 years. How do leaders avoid chasing trends that sound cool and make sure they’re pursuing the right technology for their situation?
Ryan That’s a great question, and I love this question because we celebrate the innovators. We celebrate the Steve Jobs, we celebrate the Netflix. As we celebrate all those disruptors and the makers and the doers, it’s hard to know where to start. And a lot of that may sometimes depends on the, like you said, the digital maturity of your organization. Where do you fit on that continuum? If you’re a Fortune 500 company, you’re a lot farther along than a smaller organization or an organization that’s been operating under the same paradigms for a while. Sometimes the easiest place to start is not those big transformative moments that are really celebrated. Sometimes it’s just the small steps, making the first step to stabilizing your infrastructure and making sure that your IT systems are working coherently across each other, can you start digitizing your data so you can start to take that first step to building analytics platforms? The first step to our AI and machine learning is, you first have to start to digitize that data and get it in a way that’s able to even step into those systems.
It might just be updating a legacy system to the current version, so that you can now start to bolt on all those new cool things that you’ve been hearing about, but sometimes those micro efforts aren’t celebrated in the way that a big Wholesale changes. But they’re also a great way to build momentum, especially if you’re stepping outside of your comfort zone. The farther you get outside that comfort zone and the core strategy that’s helped you be successful in your business up until that point. There’s a certain level of trust you have to build with your employee base, they see us doing something that’s totally different, they’re really going to struggle to understand that. But if you can start to build those micro wins along the way, I think it really helps build some of that trust inside the organization, it creates some momentum.
There’s some big successes of that, one that came to mind when I was thinking about this with our chat today, was Disney+. They’re not the first to the market in terms of a streaming service, but they took the time and they took a very methodical and slow approach to come to market where they built a very unique asset base in terms of the streaming content that they would be able to provide. They were able to kind of survey and lay a really solid foundation of what are the best practices in each of these tools from the Netflix and from the Amazon Primes or Hulu and whoever else. They were after all of those to market but they’ve had an amazing success because they took a slow methodical approach and didn’t rush to jump in with both feet.
Adelle That makes a lot of sense. When you were talking about that in the micro wins, I was thinking about my sons taking Karate when they were younger and it’s like, you don’t go in and next week you go for your black belt. You got to do, in this case, the digitization is maybe your green belt or whatever you have to build toward the end goal.
Ryan There’s a ton of different ways you can end up having to approach this, but the first step is really to kind of build that solid foundation, because what you don’t want is to never take that first step, you have to start. We are becoming, as a culture, so attuned to having extremely clean digital experience. Especially as a customer, think about all the things you interact with. The gap and where you notice it becomes especially more pronounced. You notice when it’s bad more now than ever, and if you don’t you got to start somewhere and just take that first step.
Adelle That’s true. Well, this has been pretty fascinating and Ryan, I want to thank you for joining us today. And to our audience, thank you for listening to Frazier & Deeter’s Untangling the Technical podcast.