Digital Transformation is Dead

When it comes to digital transformation, the risks of waiting to be perfect are far outweighed by missing the opportunity.

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I was recently listening to a segment from Freakonomics Radio in which Stephen Dubner and Steve Levitt discuss this question from a listener: “Why do people feel compelled to answer questions they don’t know the answer to?”

In response, he explains,

“I’ve been an academic my whole life. In academics we always start from the position that we don’t know the answer to a question. What I’ve found in business is that almost no one will ever admit to not knowing the answer to a question. Even if they absolutely have no idea what the answer is, if it’s within their realm of expertise, faking is an important part. I’ve found it’s one of the most destructive factors in business. No one will ever admit they don’t know the answer, and it makes it almost impossible to learn.”

Steve Levitt

I think most of us can relate to this reaction. In the business world, we don’t want to appear vulnerable by admitting we don’t know, so we fill in the blanks with made up data or worse, assumptions. It is a subconscious response but it also reflects that we live in a world of immediate answers. Saying I don’t know is frowned upon because it leads to “Why don’t you know?”

When I apply this logic to where my company Siteworx operates, digital marketing, it reveals why traditional, large-scale digital transformations with “big bang” launches inevitably veer off course, cost way more money than originally planned and result in an experience that is a far cry from the original vision.

This happens because traditional digital transformation is based on the concept that guessing is better than taking the time to learn.

So how do we fix the vicious cycle?

First, we need to get comfortable saying, “I don’t know.”

Always pick the flawed diamond

“Better a diamond with a flaw than a pebble.” ­­­Confucius

Confucius’ thinking can be directly applied to how we approach digital transformation. Confucius is saying that a good thing with a flaw is far better than waiting around for perfection that may never happen. In the context of digital transformation, why waste the time, effort and money to create a “perfect” experience when we don’t truly know what “perfect” entails, or if it is even attainable.

We need real data to make something great, let alone perfect. Guessing won’t cut it. And in order to get that data, companies need to be in market, learning, measuring and understanding their customers’ expectations. 

I’ve previously posted on subjects relating to the criticality of the customer experience. We are absolutely in the age of the customer where the customer controls the dialog. This is true for B2C and is also increasingly true for B2B. We are also seeing an accelerating trend where all products are sold as a service. Those services are defined by the experience wrapped around it. (check out the quintessential product company Apple) An experience is an individual and human response to some sort of stimuli. And this is where the problem comes in. Humans change their minds! Often.

When we embark on a transformation, we are transforming from one thing to something new. That implies we know what that something new is or should be. But when dealing with humans, we can’t possibly know. We can predict, create algorithms, guess, but we cannot know what the results should be without data. What’s worse is that transformations are lengthy processes. How many of you have been involved with 12 to 24 month transformation projects? How has that worked out?

We need a new model for digital transformation. One that has an overall vision but also accepts flaws, learns quickly and strives to be great by getting better over time.

The Cone of Uncertainty

For most digital transformation projects, we begin with a pretty detailed understanding of what is happening today, what the pain points are and what we can do to improve. But as time goes on, the reality is we know less and less which leads us to rely more on making guesses, hopefully educated, but guesses nonetheless. Furthermore, if we then take 12 months to act on the things we do know, by the time we do act, the things we thought we knew have already changed! This leads to a simple model I call the Cone of Uncertainty.

The Cone of Uncertainity

First, Time is on the x-axis and Risk is on the y-axis. If we start a major transformation project, the best data we have is short-term statements about what is required. These data represent the best return for our effort. Then over time, the quality of the data and the accuracy of our insights degrade because we cannot predict the future. We can make assumptions, create statistical models, throw darts, whatever, but we cannot know. This is compounded by the fact that we live in a digital world where competition is increasingly defined by an experience and an experience is emotional and emotions change. There are those damn emotions again screwing things up. Consequently, as time goes on and we move along the x-axis, our empirical knowledge decreases, our risk increases and the cone of uncertainty widens.

If Risk increases, then so does the probability of rework, which in turn can cause costs to increase. If you’ve ever been part of a transformation of any kind, how often did they go exactly as planned and cost exactly what was quoted and deliver exactly what was promised.

There are also three critical decision points in the model: 

  • Point of Maximum Known Impact: This is the point at which you have the highest probability of creating tangible value. In the model, it is calculated as a function of Time (t), Risk (r), Information (i) and Cost ($). Basically the available information and the time to risk profile are optimized.
  • Point of Equilibrium: This is the point where the functions of t, r, i and $ are roughly equal and the aperture of uncertainty starts to widen beyond reasonable risk levels.
  • Point of No Return: As the name indicates, if you reach this point you have a higher probability of not creating value mostly driven by the low Information and high Risk. It is also the point where you have to commit additional money just to get something done, but returns are most likely diminishing.

When looking at the model, it seems obvious that you would work toward the Point of Maximum Known Impact. But in order to do that, we must be willing to say “I don’t know.”

If you don’t know, go find out rather than guess. And when dealing with customers and emotions, the best way to know is to do, measure, learn and iterate…quickly.

Focus on value, not perfection

At my company Siteworx, our goal is to move entirely away from traditional digital transformation and the risk, time and money associated with it. Why not just focus on the Point of Maximum Impact and the information and value we can glean from it, and continuously iterate around that point? If I am choosing between a long, high-risk “big bang” transformation that may lead to the Point of No Return, or an iterative set of “good” things that deliver maximum impact with empirical data and insights over and over and over again, I will choose the latter every time. 

Now, I am not suggesting that we forgo a long term roadmap for the experience and outcomes we wish to deliver. We treat experiences like products in that there is absolutely a long term roadmap. What I am saying is that focusing on too long a time horizon is more likely to lead to missed market opportunities, wasted resources and failure to meet the customer’s immediate needs. Remember, customers can leave you in an instant and you may never get them back.

Confucius understood the difference between value and perfection, and why choosing the more valuable option is exponentially more beneficial than waiting for perfection. By capitalizing on the known quantities and creating a plan to learn about the unknown quantities, we can create immediate value by being honest about what we know and don’t know.

If you’re deciding what your customers will want when you don’t really know, you are taking risks that may not be necessary. Focus on what you do know and what they want now. But create an environment that allows learning, adaptation, scaling, exploitation and most importantly value creation. Value creation for your customers and for your business!

Accelerate time-to value, minimize risk

Siteworx is a Design, Build, Run agency. What that means is that we purposely built an agency that integrates design thinkers, strategic builders and growth enablers. Because we have the three critical functions necessary to craft, build, deploy and support digital experiences, we focus on accelerating time-to-value rather than digital transformation. We believe in getting to “great” for sure, but we also know that if you’re not in market, someone else is, and they may be capturing the hearts, minds and wallets of your customer!

We are working with clients to approach transformation as a series of releases, each with a clear and measurable outcome. At the same time, we are working to create an environment of ongoing optimization that is driven by data. This requires creating a digital infrastructure that is scalable and extensible. Today we focus on the two core platforms of content and commerce. We believe that while these are viewed somewhat as distinct platforms today, they will become one fully integrated platform for our clients in the near future. In fact, all platforms will be driven by customer experience and therefore must be designed, built and supported by customer insights.

We believe that you can be knowledgeable without knowing all of the answers. For fourteen years we have helped companies with their digital transformations, and we have learned that there is a better way. A way that achieves value faster, that mitigates risk and establishes the process for digital success. In today’s world, the goal is not just achieving transformation; it is about achieving it faster. The risks of waiting to be perfect are far outweighed by missing the opportunity. So design it, build it and run it now. Admit what you don’t know, and make a plan to find the answers. Make it good – really good – but don’t sacrifice time to make it perfect, because you may never know what that is.

Siteworx. Build Fast, Grow Smart.

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