Part 2: Digital Transformation

For the month of June, we've teamed up with our partner, Dave Snowden, Founder and Chief Scientific Officer of Cognitive Edge. In Part 2, Dave explains the role Agile plays in a digital transformation and potential organisational implications. He also examines the social-human impact of such changes. 

Watch the full interview below:

What is a digital transformation and why is it necessary?

In a modern world, you need to be able to connect very quickly. You need people to be able to do things that are routine without difficulty, without problems. We need to have information in near real-time in many cases. So, digitisation is a key hygiene factor aspect of that process and essential within any modern organisation.  

What are the organisational implications of a digital transformation?

They are many and various. Part of the danger here is that people are seeing digitisation, like people saw business process reengineering back at the turn of the century - an excuse to reduce staff numbers rather than to increase the quality of services. So, the organisational expectations are that many of the routine tasks would go and instead become automated. 

However, those are in the center of a normal distribution. You also need to account for the fact that the exceptions will be many and varied, particularly in the early days. You need to create an organisation that can handle both the automation and nonautomation, the digitisation, and personal interactions. So, it’s not just simply a process of saying:

  • what can we do?
  • what can we automate?
  • what does digitisation affect?

You actually have to rethink the culture and the aspects of the organisation around digitisation - what it will mean for you, what it will mean for your staff and what it will mean for your customers. That is an exploratory process and not necessarily something that can be planned in advance.  

What role does Agile play in the context of a digital transformation?

Agile at its heart, is about fast cycles, high levels of customer interaction, high levels of experimentation, a willingness to be wrong, and a willingness to do things again and again until you get them right. Those sort of short-cycle, high interaction processes are key to digitalisation. Agile, properly applied, has a key role to play in making this transformation successful.

What is the social-human impact of such changes?

This is the area which everybody is neglecting. So, if I’m a customer, digitalisation can provide me with a very powerful way of doing routine tasks very quickly. However, when I start to move into exceptional states, everything sort of just goes wrong. 

To give a personal example; I got a package from Amazon the other day containing an expensive item that I never ordered. I contacted Amazon and they said, “do you not want it?” and I said, “well I never ordered it so something is messed up in your system”. Their digitised system couldn’t cope with me returning it, so I got a pair of size 8 shoes, which I can never use, for free.

You need to be able to interact with somebody in real-time and you need to have somebody who actually understands the concepts of your inquiry. At that point, digitalisation is supporting a human actor and not replacing a human actor. We also need to consider the degree to which society-level access is an issue. For example, if you live in a middle-class household, you are likely to have high-capacity broadband and digitised services that are easily accessible and make perfect sense. However, some people may not have the same digital access and are excluded from these new services and products. We need to think about making technology pervasive and open access widely enough to handle some of these societal implications. The danger is in the creation of a digitised class and an undigitised, disenfranchised class. 

What is the impact on customers?

For customers, if it works well, it becomes a very different, and often better, way of interacting. It was like when ATM’s took off -; you didn’t have totalk to the bank manager if you actually didn’t have enough money, the machine would tell you, not a person. The level of personalisation and automation was actually very powerful. The same is true with digitalisation – the customer now has more autonomy and agency in their interactions

As a customer, that impact is quite a powerful one. It makes my life easier and gives me more freedom. Except in cases where a high level of human interaction is required. When something happens that couldn’t have been planned for, the system needs to have the ability to adapt and change. One of the problems in a digitisation market is that, if you lose customer intimacy, you become a commodity supplier and customers might as well go to somebody else. So, even if you can automate things, even if you can digitize the whole experience, it’s really important companies also focus on maintaining intimacy and human contact in that relationship as a part of their overall approach to loyalty.

Watch the recording of Dave's webinar on "Digital Transformation".

*Click here to read Part 1 blog post* 

Part 1: Digital Transformation

Part 1 of our monthly theme, “Digital Transformation”, kicks off with agile42 coach, Martin von Weissenberg. In his latest video interview, Martin explores what is a digital transformation and why it is necessary. Delving also into the organizational implications of a digital transformation. 

Watch the full interview below:

What is a digital transformation and why is it necessary?

A digital transformation is at its very simplest, a replacement of existing processes with electronic or digital processes. Basically, you could start accepting PDF invoices instead of having them sent on paper via mail. It’s also much more, for example, you could join an e-invoicing platform and use that to send and receive information about those invoices. This opens up so many more opportunities. 

Digital, first of all, allows you to do things faster, reduces the likelihood of errors, and also allows you to build new business models. That is where agile comes in and that’s where it gets interesting. Some companies go digital to save costs or they think of it as a way of laying off people. If you can do more with less, then why have 10 people on the payroll when you only need 5. At agile42, we feel this is shortsighted. By having those people in place, there is so much more you can do if you look on the upside. And that is why we believe an agile approach has a very strong impact on your digital transformation.

What are the organizational implications of a digital transformation?

Let’s explore this question from two different perspectives. Classically or traditionally, companies have seen this as a cost-savings effort. You go digital because you can now save costs, you can do more with less. So with fewer people, you can retain the same level of service that you had previously. This unfortunately has somewhat of a negative impact on your company. People, as always under layoffs, are nervous and uncertain of their future. Typically they will also be stressed after the change. They are now going to be doing more work as people have been laid off and dissatisfied employees are leaving the company.  It is very difficult to find a way of making up for that loss in added value.

Let’s look at it from a different perspective — thinking about your organisation as a value-producing unit. So you have a certain burn rate and now you are interested in finding new ways of producing value. This is where digital transformation can play a part if your organisation is willing and able to explore things and experiment to figure out new ways. For example, new niches where you can take your products, or figuring out how to bring in new customers to your existing products.

This is going to be a very interesting game, unlike the cost savings game, where your cost savings are basically limited to your burn rate. On the values side, you can earn much more than you can save on the cost savings side. Also if you do it right, you can do it in an exponential manner. For example, once an investment is made, serving one million or five million customers is not actually that more expensive because the margin cost goes down. 

This requires that your organisation is capable of agile thinking and using agile methods. With an agile culture, there is the flexibility and the ability to take risks, not in a reckless way obviously but considering the risks together and trying to figure out what we could experiment with together:

  • self-organisation
  • backlogs
  • agile practices, etc.

So that’s where also the agile concept and agile thinking models play a part in the context of a digital transformation. 

Agile is an enabler of digitalization. By becoming agile you can simply explore the opportunities faster. We can also say that digitalization is an enabler of agility, as the backlogs and all the new possibilities you now have at your disposal help you move so much faster than you did previously, enabling the organisation to operate more effectively. That is why we can say that digitalisation is also an enabler of agility. 

Watch the recording of Martins's webinar on "Digital Transformation".

*Click here to read Part 2 blog post*


A culture of Growth

Growing Agile

At agile42 we dislike the term scaling applied to agile, or better agility. The reason for our not liking it, is because it evokes metaphors which are bound to manufacturing such as: “scaling a plant”, “scaling production” and all the rest that can evoke assembling and building things.

Effectively establishing continuous improvement to an organization at large requires to develop quite some discipline, infrastructure and most of all openness and trust. Senior coaches Andrea Tomasini and Dhaval Panchal have spent a significant amount of time in analyzing data and cases from different case studies all around the world and the experience has been included in agile42 tools like the Enterprise Transition Framework™ (ETF) and the Agile Strategy Map™.

A snapshot of our approach is included in the new article Growing Agile… Not scaling! just published thanks to InfoQ. Some of the key topics discussed in the article:

  • Why it is important to focus on growing your own agility instead of taking shortcuts and adopting someone else’s model
  • Which role culture plays in an agile transition and effectiveness of organizational change
  • How to make sure you are agile at heart, and move continuous improvement to an organizational level, to become a more agile organization
  • How to leverage your organizational structure to better focus on customer value and deliver what is important to them
  • How to increase your organization autonomy by decentralizing control and creating containers for empowerment

You can read the full piece at InfoQ.