Apr 7 2014, 1:07am CDT | by Forbes
Peter Drucker once famously said that a business has only two functions: marketing and innovation. What he meant that successful businesses create great products and sell them effectively. Everything else is secondary.
Yet today, both marketing and innovation are driven by digital technology. It’s tough to think of a product without a digital component and marketing has become so digitally focused that CMO’s will soon be spending more on technology than CTO’s.
In effect, every business today is a digital business and technology, no longer confined to the IT department, is everybody’s job. Sadly, few enterprises have adapted effectively and most corporate digital initiatives fail.
The problem isn’t a lack of investment or even a lack of commitment, but an unwillingness to adapt core business practices to the digital world.
Some time ago I had the chance to chat with James Manyika, a Director of the Mckinsey Global Institute and a leader in the firm’s tech practice. He told me that an alarming number of the companies he saw tried to muscle through technology transformation by embarking on a “five year death march.”
In order to signal their commitment, the management team would launch an all encompassing digital initiative. Invariably it resulted in putting an enormous amount of stress on the organization and the people in it, but usually failed to attain its objectives. Worse, by the time the project was complete, it was usually irrelevant.
Digital business is about preparing, not planning, realities not roadmaps. While creating a major initiative to transform your business may feel like the right thing to do, in the digital world it is more likely to rob you of the flexibility you need than get you the results that you want.
I used to run a leading digital business which commanded a 40%-50% share of its market. That allowed us to build up considerably greater engineering resources than our competitors, which we saw as a crucial competitive advantage. In order to capitalize on that advantage, we planned mega-projects that none of our rivals could match.
Unfortunately, what we found was that during the 6-12 month development process, needs in the marketplace would change and we would have to continually alter project specifications. The result was that our massive projects were full of bugs, they came in late and then we had to spend even more time fixing them.
Finally, we got smart and started developing minimally viable products, which were usually completed in six weeks. They didn’t set the world on fire, but they launched on time and we could gauge consumer reaction in the real world. We would then use that knowledge to improve the next phase.
What we found was that instead of planning big projects, we could get a lot more done and improve quality by starting small and iterating. Ironically, we actually got more big things accomplished this way.
Everybody wants to beat the competition. So product development is often a race to give customers more. You think up something you can add to your product and then see that your rivals have included something you didn’t consider. Then you race to add that too. One-upmanship is the bread and butter of the corporate world.
In the digital world we don’t have any pesky laws of physics to constrain us. So adding a new feature can be as easy as copying and pasting a few lines of code. Once written, code is essentially free so there never seems to be any good reason to take it out. In 1993, Microsoft Windows had 4.5 million lines of code. Ten years later, it had 50 million.
Anyone who’s ever used a TV remote control knows that complexity has a real cost. Extra features can be confusing and result in more glitches and bugs. Giving the consumer more isn’t always the answer. In fact, it’s often just a sign that you haven’t really thought about what people want or need.
In Rework the founders of Basecamp attribute much of their fabulous success to crafting an experience by stripping down their products to the bare essentials. Anybody can add features, it takes work to determine what’s really important. But if you’re going to be successful in digital business, that’s what you have to do.
In the last decade, we’ve seen a revolution in digital technology. Computers used to be designed for efficiency. They could do a massive amount of rote operations, extremely quickly with few errors. Yet now our machines can recognize patterns and learn from them. They’ve become intelligent, adaptive and scalable.
Unfortunately, our organizations haven’t kept pace. They are still organized into discrete, functional units, with strict technical specifications that determine their ability to perform specific operations. The individual elements of these functional units—sometimes called people—are expected to be uniform and replaceable.
So to truly compete in the digital age we need to rewire the software in our organizations. We can no longer think just in terms of efficiency, but how we can collaborate with machines to become more agile and ensure that our organizations can adapt and learn.
And that’s the irony of digital business. In order for it to succeed, organizations need to become not just more technological, but more human. You can’t plan for that, you can only prepare.
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