I spoke to David Rogers, who is a member of the faculty at Columbia Business School, is a globally-recognized leader on digital business strategy, known for his pioneering model of customer networks and his work on digital transformation. He is author of four books, including “The Network Is Your Customer,” and his new book, “The Digital Transformation Playbook: Rethink Your Business for the Digital Age” (April 2016). In the following brief interview, Rogers talks about how businesses can adapt to the digital age, the types of experiments needed for digital transformation and what sets teams apart.
Dan Schawbel: How does a business started before the Internet adapt to thrive in the digital age?
David Rogers: What I’ve learned in my own work, and the research that went into this book, is that digital transformation is not about technology—it’s about upgrading your strategic thinking.
Transforming a pre-digital businesses is a very different challenge than building a new start-up from scratch. These companies have a lot of strengths (existing customers, products, distribution, reputation), but they also have a lot of established habits, processes, and organizational culture rooted in their pre-digital years.
For a traditional business to achieve its next stage of growth in the digital era, it needs to rethink its approach to strategy in five domains—customers, competition, data, innovation, and value.
Schawbel: Can you say a little more about experimentation? You talk in the book about two different kinds of experiments that are essential to digital transformation.
Rogers: Sure. I tried to make this book very practical, so there are nine step-by-step planning tools to show managers how to apply the different frameworks. Two of the tools relate to managing innovation through rapid experimentation.
One tool is for managing what I call “divergent experimentation.” This is when you don’t know what you don’t know. It’s relatively early in an innovation process, and your goal is to explore and uncover new opportunities or possible solutions to a problem. This is the kind of experimentation you see in design firms like IDEO, in software companies like Intuit, and in business model innovation at new firms like Rent The Runway. In this method, innovation is designed as a series of tests of your assumptions, to bring you closer to finding a product, or service, or experience that both works for the customer and delivers value to the firm.
The other tool is for what I call “convergent experimentation.” This is useful when you are trying to answer a specific question or set of questions. It is applied later in the innovation process, and is great for optimizing and improving a known strategy. A/B tests and randomized experimental trials all fall in this category. It’s what Amazon and Google and Facebook use every day, constantly running real-time experiments on every aspect of their customer experience to tweak, improve, and try out new features. But I found that even political campaigns and convenience store retailers like Wawa are using convergent experiments to innovate faster, better, and with real impact on their bottom line.
I found that a lot of great ideas for innovation have percolated out of Silicon Valley, but they need some translation in order to move from the model of a startup to the enterprise. We can’t all just “pivot or persevere” like a startup—eventually that can leave you broke and living in your mom’s basement. Which may work for a start-up, but not for the product manager in a bank! So, we need to adjust the means of experimentation to bring it into larger firms.
Schawbel: What sets teams apart where you have advised—such as GE, Google, Toyota and Visa—from other companies who are still struggling to digitally transform?
Rogers: On the team level, a few things seem to be critical to real digital innovation. 1) Small size. I’m a big believer in the two-pizza-rule: If your innovation team can’t be fed with two pizzas, it’s too big. 2) Diverse perspectives. This can be employees from different departments in your company, those with different backgrounds and industry experience, and of course demographic diversity. 3) Passion. You don’t want to force people to be at the leading edge of your digital transformation; they need to be inspired and self-motivated. Don’t worry if that’s not everyone today: change doesn’t require 100% buy-in across an organization; it just needs a critical mass.
It’s also critical that there is the right kind of leadership from above. That means a mandate for change from the C-Suite. It means a vision for how digital is going to transform the business (look at GE’s brilliantly articulated vision of becoming a “digital industrial company”). But it also means putting in place processes to answer three critical questions:
The key lesson of the book is that, contrary to the Silicon Valley myth, every pre-Internet business is not a dinosaur waiting to be disrupted! There are numerous examples of traditional businesses finding a profitable path forward in the digital era. Digital transformation is possible, and we have a playbook now to make it happen.