Digital Negentropy FTW
Digital transformation is often used in the boardroom as a means to assuage the shareholder yearning for their portfolio’s operational efficiency and scale, but what does it really mean aside from blindly adopting new technologies or tools?
In order to avoid iatrogenics, or harm caused by the intervention itself, it is imperative that the process adopts the rethinking of the entire business model, processes, culture, and customer experience to leverage the power of digital. It is about creating new sources of competitive advantage, innovation, and growth by automating manual tasks, reducing errors, improving data quality, and enhancing security. In some cases, digital transformation has lowered the risk of harming customers, employees and the environment.
Through effective scaling, digital transformation enables a change in orders of magnitude in performance or outcomes. For example, by enabling new business models, products, services, or markets, digital transformation can increase revenues, profits, or market share by multiples; or by enhancing customer satisfaction, loyalty, or retention, digital transformation can improve customer lifetime value or net promoter score.
Digital transformation is not easy or risk-free: it requires a clear vision, strong leadership, agile execution, and constant learning alongside a culture of experimentation, collaboration, and empowerment.
When I was working at Greenoaks Global Holdings as a marketing and sales associate, we simultaneously turned around 3 emerging market insurers in 6 months. During that time we ran the gauntlet of problems associated with digital transformation:
- Lack of alignment or buy-in from stakeholders: whilst the initiative and support came from the PE firm, the leadership of each business needed to be informed about the changes that would occur due to the transformation. In many cases, a lack of knowledge of and experience with digital platforms led to us having to educate the leadership first, before implementing.
- Resistance to change or fear of failure: people think that the computers are coming for their jobs, so naturally they would be resistant to the change. In one extreme case, an employee tried to sabotage the transformation process by falsifying the data we were using. We countered this apprehension by showing how much time and effort these initiatives would save in the long run.
- Inadequate skills or resources: “going digital” in some cases, is like asking people to land themselves on the moon - whilst some of us can, most of us don’t have the skills or resources to do it.
- Poor governance or oversight: because we could only be on the ground for limited periods of time, it was difficult to keep an eye on the progress that our projects were making. In order to counter this, we implemented Asana as our task management software wherein we created meaningful, time-based, achievable tasks for the people we were managing.
- Siloed or fragmented systems or processes: marketing didn’t talk to sales; sales didn’t speak to ops; ops didn’t speak to finance; finance didn’t report properly to the leadership of the organisations. In some cases we had to break down the literal walls between different functions in order to get them to speak to each other, surface the issues and collaborate to come up with solutions.
- Unrealistic expectations or metrics: people often think that digital transformation is the silver bullet that will not only automagically turn their organisation around but make them a runaway, overnight success. True transformation happened incrementally, over time. In the businesses we turned around, the data we had to work with was often incomplete in the first place, so the expectations were warped by that. Often, we first had to right the data ship and then work out proper metrics from there.
To overcome these and achieve success, we also adopted a holistic and systematic approach that covered:
- Strategy: by defining the vision, goals, and value proposition of digital transformation;
- Assessment: by evaluating the current state of digital maturity and readiness;
- Roadmaps: by prioritising and planning the key initiatives and milestones; for each portfolio company
- Execution: by implementing and monitoring the progress and impact of each initiative;
- Optimization: by measuring and optimising the results and learnings of each initiative and then iterating as we went.
By following this approach, we ensured that digital transformation efforts were aligned with company objectives, and that they delivered tangible and sustainable value for their investors, portfolio companies, customers, and employees.
As with all business endeavours, we’re trying to build something sustainable and predictable that overcomes entropy by augmenting human existence with technology. This means that we need to understand the creation by the human as well as how technology can enhance it - we can’t do one without the other.
