As part of our “Best of Subscription Show” members-only series, we’ll look back at some of our most popular speakers and sessions and share key takeaways that show why this information remains relevant and how you can use it to grow your subscription business or inform your decision-making. In this article, Errol Glasser, Partner at Triangle Capital, and Brendan O’Brien, Chief Innovation Officer and Co-Founder of Aria Systems, share their ideas on how start-ups offer established businesses insight on achieving digital transformation.
Digital transformation is not only popular but often necessary for many businesses. So why is it that only a small percentage of companies that undergo a digital transformation actually succeed?
“Subscription and recurring business models for a lot of companies is aspirational. A lot of companies are trying to get there or have recently gotten there, which is inherently demanding a transformation,” says Brendan O’Brien, Chief Innovation Officer and Co-Founder of Aria Systems.
As O’Brien and Errol Glasser, Partner at Triangle Capital, suggest, businesses may benefit from emulating start-ups to better understand how to successfully achieve transformation.
Insight on start-ups
One of the most common phrases about start-ups is that most of them fail – as many as 70%! And though there are many answers as to why start-ups fail, there are a few important learnings that come out of start-ups that can benefit established businesses.
“The reasons why start-ups fail overlap not so much with the reason that transformation efforts in incumbent going concerns fail. However, the reasons that start-ups succeed overlap quite a bit with when transformations succeed,” says O’Brien.
With this insight in mind, Glasser and O’Brien urge business owners to approach their own digital transformation with a start-up mindset. To do that, there are seven important factors to include.
1. One person in charge
“What is the one thing you should do if you want to achieve a successful transformation?” asks O’Brien. “That one thing is to hire a transformation czar. What I mean by that is someone who is fully empowered, at the highest possible level, ideally with a ‘C’ in front of their title — chief digital transformation officer is, in fact, a thing right now — hire that person. If you think you’re instead going to put the digital transformation on the CIO’s desk or the CTO’s or the CFO’s and have them achieve that as a side project along with their job, and by the way get buy-in from all of their peers, you’re going down the wrong road.”
Instead of treating digital transformation like a side project, treat it like the full-time job it is. Business owners should hire someone who understands what areas of the company the transformation will disrupt and discard and who is able to communicate those changes to the stakeholders and what it means for them.
“If there’s one thing that differentiates success from failure, it’s when you have that [person] in place, and they are there, and they are empowered. [The transformation] is much more likely to work,” says O’Brien.
Of course, there’s more to it than dictating authority from the top. Digital transformation is difficult. Replacing systems, which often translates to replacing people, takes a lot of skill to manage. It crosses into the territory of many stakeholders within the organization, which is why full buy-in is crucial.
2. Full-buy in
If the internal messaging about transformation comes out as one stakeholder is working on it as a side project and the other stakeholders aren’t involved, it’s never going to stick. Everybody in the company has to buy in, much like in a start-up. If everyone is not involved, the transformation is more likely to fail. It also increases the likelihood of hitting unnecessary roadblocks along the way.
“I think the best way to do it is to have that centralized voice in the form of whatever you call it — chief digital transformation officer, transformation czar, office of digital transformation — that has the CEO’s backing,” says O’Brien.
“That begs another question,” says Glasser. “Where do you solicit input in terms of setting organizational goals and targets? How much do you solicit ahead of time and then after?”
“I don’t think it’s an either-or choice,” says O’Brien. “I think you have to solicit a lot ahead of time. I can’t do any transformation effort without at least starting with, ‘What are the pain points in the org?’ The people who are managing these painful spreadsheets every day and the people who are having to manually maintain these rickety old systems every day, I guarantee they have pain points to bring to the table.”
It’s important to not only discuss digital transformation at the key stakeholder level but also with the people at the bottom of the organization. This information-gathering process guides the decisions stakeholders need to make and garners the support needed from the rest of the organization. But business owners can’t stop here.
3. No fear of failure
In addition to getting full buy-in from everyone in the company, it’s crucial to manage change intelligently. Once all of the information needed to start effecting change is gathered, people must be put in place and empowered to squeeze those changes out of the organization.
“Empowering the people who are running the organization to [manage the transformation] is probably the most critical thing in making sure the organization survives,” says Glasser.
This ties deeply into leadership and how the key stakeholders think the company should be led. What are the key qualities that leaders should have?
“Lack of fear of failure is probably number one. You have to empower people to fail,” says O’Brien.
Remember that digital transformation is not simple. It can get messy and difficult, much like running a start-up. There will be aspects of the transformation that simply aren’t going to work out. Be willing to mess up early and start again, rather than constantly think that failure is not an option.
“You’ve got to fail if you’re going to be pushing hard; it’s a critical element,” says Glasser.
4. Unencumbered by the past
When undergoing a digital transformation, change is often rampant within the organization. This is where business owners should take the best aspects of a start-up and use them to power transformation efforts.
One of the major pitfalls of established companies undergoing a digital transformation is trying to bring everything they historically have been forward. More than anything else, this is usually what holds them back. Efforts to be inclusive of what was often prevent true transformation into what could be.
The ideal approach to digital transformation is to crawl, walk, run. Instead of approaching transformation as a business that is well-established, seek a net new or relatively small footprint where failing with impunity is not a major problem. This space can serve as the starting point for the larger transformation process.
When success is achieved in this area — however “success” may be defined — that often creates the momentum needed to go through the rest of the organization and the technology stack and start to incrementally change it over time.
The crawl, walk, run approach also establishes proof-of-concept and encourages buy-in from the rest of the key stakeholders, an approach very common with many start-ups. It’s important to have a small win for that net new agile business line to then leverage against larger change moving forward over time.
Doing everything at once is not realistic or effective. This approach can disrupt the entire company in a way that could cause permanent damage. Instead, look at what needs to undergo a transformation, carefully plan it, pick a kick-off point, and then move forward from there.
5. Aim at outcomes
Once a business moves forward with digital transformation, it’s important to think about outcomes instead of the bottom line. This is permission to dream, to think like start-ups do, and to reach for an idealistic goal that’s not tied to money.
“An incumbent business is ultimately measuring itself by its bottom line. Ideally, though, at least in the earliest days of transformation, try your best to avoid looking at cost or revenue. Instead, try thinking in terms of outcomes,” says O’Brien.
Drive toward an outcome and use it as a goal and a measurement of success. For example, speed to market is a great marker of success throughout the process. Using this KPI as a goal is going to pay massive dividends along the way, in terms of competitive pressure, internal cost savings, and elongating the time any product put to market can be sold in the market.
“[Set] up your measurement devices so that they are [in line with] what you want with the performance goals [to be],” says Glasser.
Because it’s meaningful to do so, set up targets that will measure the organization effectively and, therefore, its success. And, if the KPIs need to change, then be willing to change them. Digital transformation demands change. Move with the spirit of change in order to see success.
6. Focus on people and culture, not systems
As digital transformation efforts get underway, it’s easy to focus on systems. But focusing solely on systems creates roadblocks later on in the transformation process.
Instead, businesses should home in on everything that surrounds the systems much like start-ups do — the organizational structure, the processes, the people, and the sociology of the company. Doing so allows systems to arise and ultimately serve the larger ecosystem of the company. If business owners can effectively navigate all of the built-in factors inherent to a business, they can successfully guide the business through the transformation process.
“If you’re going to go through a transformation effort, there will be blood,” says O’Brien.
The promise of digital transformation is achieving cost-benefit by virtue of automation. Not every part of the organization is going to be preserved or satisfied. Some are going to be dismantled and discarded. That’s the truth of transformation. And usually there are incumbent powers within the organization that will resist that truth.
It’s up to business owners to recognize this, be comfortable with it, and empower those who are in charge of the transformation to work through and around it to the extent possible.
7. Build for the unknown
Finally, when undergoing digital transformation, businesses must realize the importance of building for the unknown, much like a start-up.
“A successful start-up doesn’t presume that they know the answer to every question out of the gate,” says O’Brien. “What they presume often, at least the successful ones do, is that they don’t know. So, what they build for is often inherently future-proof by design.”
Instead of picking a specific business objective and feeling “done” once it’s achieved, a smart start-up includes it as a mile marker along the way but recognizes there’s an unknown goal that they’re likely to never achieve. Instead of building to sell X, build to sell N, since no one knows exactly what the future will hold. That thinking is one of the most important ingredients to overall success.
“Digital transformation is not, does not, should not yield an endpoint,” says O’Brien.
Digital transformation is ongoing, despite the initial hurdles that need to be overcome and goals that need to be reached. While it’s important to gather the information needed up front, remember a conduit for it moving forward is also required, forever. The proverbial suggestion box needs to always be open.
“What’s coming through, hopefully very clearly, is the need for flexibility in the organization, the need to call into question what’s there and the need to adapt the organization to the inputs that you’re getting that are meaningful,” says Glasser.
Change will continue to happen in the market. Once a company undergoes a digital transformation, they’re making a commitment to constantly grow and evolve to meet the needs of the ever-changing market.
Though these seven outlooks on digital transformation are not always simple or easy to put in place, they can guide businesses into a successful digital transformation. Thinking like a start-up does is one way for established businesses to get out of old patterns and create space for creativity, innovation and change.
Digital transformation is not only common, but often required in today’s market. But many successful businesses struggle with implementing a transformation strategy.
As Errol Glasser, Partner at Triangle Capital and Brendan O’Brien, Chief Innovation Officer and Co-Founder of Aria Systems point out, taking on a start-up mindset can support these businesses in effectively undergoing a digital transformation.
There are seven factors to a successful digital transformation:
- One person in charge
There must be a single person whose full-time job is to manage, oversee, and get buy-in from all of the stakeholders for the digital transformation. This person has the backing of the CEO and is empowered to effect organizational change.
- Full buy-in
In order for the transformation to work, there must be full buy-in from everyone in the organization. Their support will ensure its success.
- No fear of failure
When it comes time to start effecting the transformation throughout the organization, leaders must be empowered to make change and fail.
- Unencumbered by the past
Failing often and with impunity is important for undergoing meaningful change. Businesses should start with a small, net new area of the company where failing will not damage the rest of the organization. Success in this small area will establish proof of concept and create momentum for larger-scale changes throughout the rest of the organization.
- Aim at outcomes
Businesses should focus on non-financial goals, like time to market, instead of the bottom line. Doing so creates a more meaningful measure of success that can offer big dividends throughout the process.
- Focus on people and culture, not systems
People are naturally resistant to change. Focusing on only the systems within a business negates how people, processes and the sociology of the company contribute to the larger whole. By focusing on everything except the systems, business prevent the creation of larger roadblocks further into the transformation process.
- Build for the unknown
Successful start-ups understand they don’t know what the future holds. They set a goal to create something, but use it as a mile marker for success, rather than an end point. This mindset will help established businesses recognize that digital transformation is an on-going process.