#106: Tim Bottke: „Transformacja cyfrowa- hype or fact?" Podcast by Wiesław Kotecki.

Gościem sto szóstego odcinka mojej audycji jest Tim Bottke- Senior Strategy Partner w Monitor Deloitte oraz profesor nadzwyczajny ds. strategii i transformacji cyfrowej w SDA Bocconi.

Transcript

SPEAKER_01 0:04

Cześć dzień dobry, nazywam się Wiesier Kotecki i od 20 lat szukam synergii między światem designu, biznesu i technologii. A ty słuchasz właśnie kolejnego odcinka podcastu Człowiek biznes i technologie. And today I decided to uncover one of the most hyped, probably sentences, hyped things in our business world, which is digital transformation. Probably you had as a CEO, as the owner of the company, such sentences like disrupt or being disrupted. You need to future-proof your company, you need to be agile, and all that stuff. And it's very popular. It's almost a buzzword, right? So today I decided to go to the core of the discussion. Therefore, I invited Tim Bodke, the author of the one of the best-selling business books called Digital Transformation Pay Day, Navigate the Hype, I already mentioned, lower the risk that we'll be discussing, and increase return on investments. Thanks for the invitation. Happy to be here. Hello, team. So, first of all, why you decided to spend last four years on writing a book about the most hype thing in business?

SPEAKER_02 1:29

You know, I'm a consultant, and uh for a consultant, things always start with a client question. So it was more of a journey to solve a client question and issue. And I was asked by a CEO, a good old friend of mine. I've worked with him together for a long time, so it was a private discussion. And he more or less said, Tim, look, you know, it will take half a billion investment to transform, really digitally transform the company. It will take years. Um, you know, I'm only staying in this job likely for two or three years, so I will likely never see what will happen with this program. So am I not better off by wearing jeans and trainers, um saying agile a few times, asking my investor relations team to print digital AI on every second page of the annual report, and maybe invest 30 million in a few startups and incubator and a few other buzzwords you mentioned. Tell me, do you have any proof that the value generation within the time frame I'm working here in this company will be better with the first option?

SPEAKER_01 2:34

Alright, so that's so in that moment you've been with the hat of like, as you said, 20 years old, tenure, senior partner at Monitor Deloitte. And probably your answer was like, I don't know.

SPEAKER_02 2:48

I don't know, yeah. And I hate saying I don't know. I think that's that's part of my gene. So then I then I thought, okay, it m there must be a quick fix. I will just try to find an answer. There must be an answer out there, and then I looked and I couldn't. And then yeah, I decided, okay, then I just do it myself, and that's how this research started, and it found the answer uh after quite some research, not just based on thinking and subjective information, but based on real data. So looking into annual reports, into financial data, etc. Because that was his question. His question was not tell me the 10 success factors for a successful digital transformation. The question was, will it pay back in a meaningful time frame?

SPEAKER_01 3:32

Yeah, and I understand that you said I was looking for the quick fix, right? And then it took you four years being like at the same time, like professor at SDA Bocconi School in Milan, right? So this quick fix was kind of like the proper, robust, academia-based exercise, right?

SPEAKER_02 3:53

Yeah, I don't I think the academia is here the wrong um uh word, I would say. I was not looking, I'm not looking for academic solutions, I was looking for a solution. And the solution required that it's not just religious saying, be digital because you must be digital. It was saying, look, if you become more digital, does it really reflect in the market value of your company, your PL at scale, so that it really makes a difference? Because we all know the journey is very painful.

SPEAKER_01 4:27

It is.

SPEAKER_02 4:27

Yeah, if you do it end-to-end, it's not just a single technology or being more agile, it's much more.

SPEAKER_01 4:34

And going back to the example of this CEO guy, right? So probably if he will be focusing only on this two, three years tenure and showing the like low-hanging fruits, we call it the results, as you said, it's making a lot of hype. Uh put some press releases, invest here and there, which broke which I think that's gonna bring those long-hanging fruits. But if you're looking for the transformation, it's probably a lot of hard work to be done and investment which won't be so visible within like two or three years.

SPEAKER_02 5:06

Yeah, and you know what? I've I've been asked many times in in discussions, so please define digital transformation for me. And that that's a very interesting question because my answer usually is forget about the digital. It's about transforming. Um, and digital is just a tool, and many new ways of working, many new technologies are out there which can help you transform, but it's not for the sake of transformation in the end, and it's not for the sake of digital, it's for the sake of making you as a company more valuable. That's what I strongly believe in. And that then leads you back to you also don't transform if you don't have a strategy for transformation.

SPEAKER_01 5:46

Yeah, that's what I like about the book and also a few interviews with your team. That in a way you're saying that we still need the old school strategy, right? Because digital transformation is this kind of like the fancy new kids on the block. But at the end of the day, it's about the business. It's about making, I wouldn't say only money, like the making results for the shareholders. It could be different stuff, right? But it's at some points about the valuation of the company. Yeah, that's all about.

SPEAKER_02 6:14

Let me tell you a story which is explaining that very nicely. So, uh, two companies in a market, the market I'm operating in, um, and both having the same vision. Let's be more customer-centric, favorite buzzwords of our time. It's not that it's bad, but everyone is customer-centric. Let's be digital first, because there are so many great examples of apps where you have a superior customer experience. So let's have this as a strategy.

SPEAKER_01 6:40

And you need to also set cloud-based.

SPEAKER_02 6:43

Cloud-based, yes, and using AI-enabled.

SPEAKER_01 6:45

Leveraging blockchain and deliver by agile approach.

SPEAKER_02 6:49

Yes. In new ways of working, and then yeah, we can make up so many. That's a funny game, actually, but let's let's go back to the topic. So um, so they both had this strategy. Then they both had a team selecting the best technology, helping them to go from their old legacy to the new technology. It was both the same vendor, it was great technology. I think if you would look into it, you would say it has ticks all the marks are ticked. So omnichannel capabilities, uh, digital first, uh, app integration, and all these tech buzzwords you can put cloud-based. And they both selected it. And they both said then the CFO, but we need to take most of the stuff out of the box of the features because otherwise customization will be too expensive. And guess what happened? They both implemented at the end. It took time, a lot of money, and they couldn't differentiate. So both had the same customer journeys, both had the same omni-channel structures, both had the same features more or less. And that that's a clear story that in the end you need to decide first where do you put your money to differentiate. Technology is just a tool to make you win against your competitors.

SPEAKER_01 8:02

Yeah, if if everybody would dig digital transformation in the same direction, and even Leapfrog, successful one, right? And everybody ticked like we are succeed. Yeah. And everybody with the same place at the marketplace. That nothing changed.

SPEAKER_02 8:17

And on the other hand, also at the speed that these vendors are improving, sometimes you could argue let someone else do the training and testing, etc., first, and then you can leverage the capabilities and functionalities which come up at a later stage. But it's very hard to pick the right point in time if you're late. A late comer is a risky thing to do.

SPEAKER_01 8:41

It's a funny story because when you're talking to the owners and C-level guys from different countries, this approach is pretty different, right? So, in in a way, in a growing market, everybody wants to be the first, right? Yes. But for example, you're from Germany, right? And I have a lot of conversations that mostly are saying that probably we are not in the position of innovation. We will be waiting, we'll see if it's like succeeding. But then if you go to Switzerland, they're saying we are waiting for German to succeed, and then we are inventing.

SPEAKER_02 9:11

That's actually a very interesting story. I was talking to an executive of an insurance company, and I was coming from the so why are you not more advanced digitally? So, look, in other markets, Poland is a great example. So the financial service industry is so advanced. Why are you not doing this? And he said, Look, why should I? I'm doing something different. What I'm doing is I try to sustain all the margins I'm making because of the intransparencies in my market. I try to protect this intransparency as long as I can. But I'm actually launching an insure tech in another market where I have a subsidiary. I'm training the people, I'm experimenting, so I'll make sure that this machine is running perfectly. And as soon as I see that someone else tries to disrupt me in my own market, I take all these capabilities to my market and I just kill him.

SPEAKER_00 10:06

Yeah.

SPEAKER_02 10:07

And that that was actually an eye-opener for me, saying, Look, like it doesn't help to say you are less mature than someone else if it's not built on a strategy where you say, Look, this is what I do for winning. It doesn't make sense to just catch up for the sake of catching up.

SPEAKER_01 10:24

The one of the the the the chapters that I like the most, it's about the strategy. Yes. And uh and there is this story about Hedgecock and her and their racing, right? It's exactly that that example, right? How to win the race against her when you're the Hedgecock. Yeah. You need to have a strategy. I don't want to spoil. You need to read the book, definitely. But this is a great example, right?

SPEAKER_02 10:50

Yeah, it it just doesn't help to do what everyone else is doing just because the whole ecosystem is preaching to do so. You need to pick your choices, and I think you need to integrate them in a way which are not easy, is not easy to copy. I'm not saying that it will last forever, but what certainly doesn't help is having an AI strategy. That's nonsense. You can you can have a strategy which takes AI as an element to win against your competition.

SPEAKER_01 11:19

So having said that, team, I mean let's go through the cover, right? We have like one of the easiest ways of doing podcasts is just taking a book, look at the cover, and asking those simple questions. It's not the way I'm prepared to be asking. Uh but digital transformation payday, right? We also we just said that there is no one definition of digital transformation. But how about this payday? What it's all about here.

SPEAKER_02 11:49

The whole idea behind it is that I I wanted to set a statement against all these voices saying, look, because it's digital, the basic rules of business are no longer relevant. You cannot measure it, um, you cannot manage it as you can manage other programs, all these kinds of statements. I wanted to set a statement against it because in the end, everything has to be done for a business purpose or bigger purpose in other organizations. But let's say, here in this case, for a business purpose, and then suddenly the basic rules still apply. You you have to make sure that the money you spend versus the upsides and revenues you generate are in the right balance, and that at some point in time you get your money back.

SPEAKER_00 12:35

Yeah.

SPEAKER_02 12:36

And that's what this is all about. And in the end, it's easy. You need to go into all this complexity and look at every element separately, saying, how does it accelerate the payday? So how quick do you get your money back, or not forget how what do you have to slow you down? That's often forgotten. I don't know, change management costs, cost of repeating failed projects, um, external cost in the running things in parallel. So all that needs to be taken into account.

SPEAKER_01 13:04

Like we also mentioned cybersecurity, GDPR things, and all that limitations, yeah.

SPEAKER_02 13:09

Yeah, and that uh it you just have to be true to yourself. And maybe the result is that it it's not paying back within two years. That was the question. For sure, this is the result.

SPEAKER_01 13:22

So the question because you actually have you did uh like really big research looking at the financial statements of the companies, using AI for that or machine learning in Aymet. So can you just do you see the the companies that already are at the payday? So which actually succeed and they said, okay, we are just cashing out from digital transformation.

SPEAKER_02 13:49

And look, the um funny enough, the key question and whether this would ever pay back that was very open when the research started. So actually, I wouldn't have been overall surprised if the outcome would have been there is no real provable link between how digital you are and what your market capitalization is. The good news is there is a positive link on average. And you know what on average means. It's like this favorite joke of in statistics that when your head is in the fridge and your feet are in the oven, that on average you are fine, but in reality you're dead. And it's the same here. So it exists, but you see a big spread. And the spread depends on what type of company you are, so in which sector or industry you're operating in, how strong your financials are. There are a lot of uh findings on that one. How you communicate what you do and how you prove that what you say will also happen. All these factors then influence whether you can increase your market value, yes or no.

SPEAKER_01 14:53

One of the like elephants in the rooms, and everybody's saying that the digital transformation usually fails, right? 70, 80 percent of the companies saying we are we fail with digital transformation, right? And you are just preaching that it's actually bullshit.

SPEAKER_02 15:11

Yes. I think the the funny thing is when you look into where these numbers come from, and I spent quite some time, you always end up with some subjective questionnaire-based executive being asked what share of your projects has been successful, and then some random number comes back. It's 70% in other sources, you find 75, 80, 85. In the end, it all just says the majority of projects from a subjective perspective seems to fail. And then usually, wherever you find these publications, they then say, do this to be not the 70%. But reality is we've forgotten our past. Technology implementation transformation projects have been there for decades, and the same rules still apply. It they have been researched, it's clear that technology can create value, it's clear that it doesn't necessarily create competitive advantage, it's clear the causality is hard to prove, all these things have been analyzed to death. And they're forgotten now because you say, but it's digital, it's different.

SPEAKER_01 16:21

Yeah, you just you are just doing that in an agile, non-planned way, and we shall see.

SPEAKER_02 16:28

Yeah, but that that that's like uh you you make a team run faster and faster, but you forget to tell them in which direction. Guess what happens?

SPEAKER_01 16:36

Yeah, yeah. And how to measure the success, right?

SPEAKER_02 16:38

Yes.

SPEAKER_01 16:39

I mean, you run really fast, so uh on the time basis you succeed, probably only the place that you want it to be, it's not the same that you are.

SPEAKER_02 16:48

Yes. And um we also have to face the fact that um the when you just go only in an agile cycle, that's not strategy. You will only find, you will ask your customers what they want, you will adjust accordingly, you pilot, you do your MVP, if it wins, then you try to scale, et cetera, et cetera. But that will never allow you to make the big bet, which will really, coming back to the strategy story, make you the hedgehog instead of the hare.

SPEAKER_01 17:15

Yeah, so going back to our cover, right? So we discussed the digital transformation, the payday, so it's more or less like return on investment. Yes. Not only financial investment, but then I think the whole of our discussion is how to navigate the hype, right? How to, as a CEO, right, how can I navigate all across the chaos? Like all the vendors coming to me and saying, you need to you need to change, you need to transform, right? You need to implement us, right? All the consultants, even us, just coming and saying 75% of digital transformation is failing. Work with us. Work with us. We're doing that differently, right? Uh your competitors is saying they are we are transforming, we are digital transforming. We have those incubators, those startups, right? And I'm confused, what should I do? So you are the 20 years consultants. Definitely do a kind of a framework.

SPEAKER_02 18:18

Yes, there's a framework, but I think the first key message is, and that's something I'm discussing with many of my clients on all different areas of the organization. I'm afraid that one thing which has to be done first is to really try to understand what's out there. Meaning there's no way around in executives to gain skills, understanding of what technology really does. You cannot outsource that to someone else. Um, to not even to your CIO. You need to really understand what these technologies can do because if you really believe that it's an enabler for a winning strategy, you need to understand what it can do for you. And often it's not just a single technology, it's a combination. And to understand this is not the job of an architect in the IT department, it's the job of the executives to understand how they can combine for winning. So, my key message is I'm afraid it's not like the I understand it on high buzzword level, you need to dig deep. The second part is once you've done that, it doesn't really matter which framework you use. Obviously, I'm a consultant, so there's one in the book. Um we'll go there in a minute. The idea is just that you have to make sure that you don't just think in a niche, but that you think from strategy towards the end and not forget any elements. Because always, I can tell you a few stories from my clients, always the element you forget is the one where it's failing. So if you pick the right technology and forget about your people, then for sure when you try to do it agile, it's not working. If you have the best agile coaches on this planet and um yet they're changing your team and they work in a different way, and you forget that you need a strategy, they're running running in the wrong direction. If you pick the wrong area to start, I don't know, often you see uh that companies start transforming at the frontier of their business.

SPEAKER_01 20:17

Something small, right?

SPEAKER_02 20:18

Yeah, something small, just a test bed, and then the case is designed in a way that for sure it has a great payback. But when you forget that if you don't bring that back to the core of your company, then the CFO will not even see it in the PL. Never ever. And usually the people who then innovate at the frontier, they are leaving the organization if they don't find a way back to where the real business, the big business is.

SPEAKER_01 20:42

Yeah, I think we've seen it so many times, right? I see it with the insurance companies, with automotive companies that you are, for example, doing this like the startup, the small company with the different culture, with the you know, white shoes, uh different offices, probably with the in the different city, maybe in Berlin, it would be in Germany, they're all in Berlin. Yeah, all in Berlin, for example, with the startup vibe, and they're even succeeding, right? Uh sometimes they're not really small, but then when I saw those failures, it's how you embed this new culture, these new products to the core.

SPEAKER_00 21:21

Yes.

SPEAKER_02 21:22

Yeah, and then there is the pushback from the core, from the core business, and sometimes it just like Yeah, and and you often forget that the source of funding is also a key element in the transformation because if that is stopping for whatever reason, then these adjacent businesses they just die, are closed, restructured, sold off, etc. And then you've gained nothing other than if it was just pure marketing. I'm sometimes joking as some of this stuff you can also put it in your marketing budget. Um, if you don't think from day one how to reintegrate this into your business.

SPEAKER_01 21:57

But at the same time, this is a good approach to test, right? Yes. It's a good approach to experiment.

SPEAKER_00 22:02

Yes.

SPEAKER_01 22:02

But as I understand also what you've written in the book, that you are starting from the frontier or at the edge, some somebody call sometimes we call it. But from the beginning, you need to think how to get back to the core business.

SPEAKER_02 22:16

I think the only reason that would be a sad reason when you don't have to think about that is if you anyway believe that your core business is dead.

SPEAKER_01 22:25

Yeah.

SPEAKER_02 22:26

This might also happen, but it that's a very strong assumption to make in a big corporate. So in the end, hopefully you are aiming at transforming your overall business model at the same scale. Because I'm it's always easy to be a very digital company. You just get rid of all the customers, processes, etc., which are not digital. You just end up being very small and very digital, which is obviously also nothing the shareholders would appreciate.

SPEAKER_01 22:54

Yeah. And tough enough, it's different when you are kind of like the old company which are investing into digital and you need to compete with the digital natives, companies who are digital from scratch, right? Like from the first day.

SPEAKER_02 23:09

And you can see that in the data of the research that that size at some point in time makes it tougher and tougher to really make digital transformation turn into market value. Yeah.

SPEAKER_01 23:21

So team, uh so if I want to lower the risk, right, using your framework, how can I do it as a CEO?

SPEAKER_02 23:31

I think number one, um and now I'm not selling you the simple recipes. I said that the beginning.

SPEAKER_01 23:38

You're just selling the book.

SPEAKER_02 23:39

Yeah, yeah. So the I think the number one thing is really be aware of all the ingredients of your transformation. I think that's the major risk is have not having a wide view and uh outsourcing the thinking and the strategy behind to some someone else and hoping that this will all fit together. The second thing is whatever you do, go back to what you learned at business school and at universities. I'm I'm also a professor, you know, so I'm I think going back to the simple fact that everything you do creates some revenue and some cost, and a good businessman or woman would always try that at some point in time the cost is not killing the revenue element, and that's very often forgotten. Um and that's actually the major risk. Forgetting all elements in your transformation, and second, not having a clear business sense, like accepting that there is has to be a fork which of intransparency in your program. No, it hasn't it doesn't have to be.

SPEAKER_01 24:43

And I also think you're also mentioning that in the book, that sometimes people are just not measuring that at all.

SPEAKER_02 24:50

Yes. And that's actually scary. It's very scary. And the and the argument usually is it's it's impossible to measure. But let's face it, I think since business has existed, no one I understand could foresee the future. And that doesn't mean that no business cases should have been made in all history. You can still make assumptions which can be wrong, but at least you need to understand how the basic economics of your program work. Because if you don't understand it, how should your shareholders appreciate what you're doing? And very often that that's something you can see in the data is shareholders have incomplete information. They don't know what the robotics process automation business case in the call center looks like. They probably don't care. They look into what is the company doing? If it's digital, yeah, maybe it's a good thing. Um, and then they assess whether this will create future cash flows for them in terms of payback, and that that's then driving your market value. Not I've done my AI pilot in the left corner of my call center, and I've saved the equivalent of five full-time equivalents. Having 10,000 people in the company. Yeah. Yeah. The story is different. You would say, I've done this pilot, and here is my plan to scale it up to 5,000 people.

SPEAKER_01 26:12

Yeah. I also think part of the story regarding communication to shareholders is that digital transformation is not paying off from the first day. Yes. Sometimes the efficiency of the company is going, it's dropping actually down, then to boost it, right? And the shareholders, but also external and internal, they need to be aware. Guys, we are transforming, it's gonna be tough. Probably it's gonna be a little bit slower at some point. We'll be failing with technology, with some kind of of the products. But there is the direction that we are going.

SPEAKER_02 26:44

Yeah, that that's what the data shows very clearly. You cannot you can you can show that when you transform and you do it the right way, then your market value goes up. But what you cannot show is that when you're transforming short term, your return on assets or your um all your these parameters improve. So you have to suffer, very likely. And even the ones who are not suffering, so when on average it's okay-ish, there's still a high spread.

SPEAKER_01 27:10

Yeah.

SPEAKER_02 27:11

So you you just cannot say, look, I'm transforming, so I'm expecting my margin to go up 10% next year.

SPEAKER_01 27:19

So when I'm at a CEO and I'm just discussing this business case, right, of the of the transformation. So looking at the you know, the top line and bottom line, what are the main levers in here?

SPEAKER_02 27:33

It's it's usually I think on the on the bottom line, so on the cost side, I think it you really need to spend some time understanding that you have covered all items. Um it's not just the license cost, it's not just the implementation cost, it's all the security cyber implications, it's the change management implications, changing the skills of your people, making them use the new technologies, um, getting new people because some of the old ones, exchanging part of the team, all these costs. And the book has for every element all these ideas of what cost elements you should take into account, and that looks like a lot. But the trick, I think, as a CEO is not to know every single line item, but to to get a feeling when you see a business case where something big is missing.

SPEAKER_01 28:18

All right. What I like about this book, and we go into the framework in a minute, that for everything that you are showing in this framework, there are those accelerators who can make this payback like closer, but also the accelerators who just, if you forgot, just going longer. I really like it because this is kind of like I wouldn't say a checklist because you're mentioning there's no magic checklist in the book, but it's kind of actually right. This is like the reality check. Did I did I think about everything or almost everything?

SPEAKER_02 28:50

Yeah, and and and I think that's what executives can and should do, and many do, but um many probably is in the 30%, and uh some is in the 70% that don't do it. Um because you would just get excited and you feel the pressure, and like every one of your competitors suddenly announces agile stuff and pilots, and and but it's still also just a matter of business sense. Because if you don't have this business sense, how should then your shareholders or the market understand what what you're doing?

SPEAKER_01 29:24

Or even your employees.

SPEAKER_02 29:26

That's that's another part of the story because the worst thing which can happen is that the gap between what you are saying, how digital you are, and what you're really doing is is too big. Usually then the best people leave because they say, Look.

SPEAKER_01 29:39

And they leave the first.

SPEAKER_02 29:40

Yeah, they leave the first and then they go to somewhere where the gap is smaller.

SPEAKER_01 29:44

Yeah. And everybody's saying, I mean, um I would say employee branding game, we are digital, we are transforming, come to us. Wouldn't be di we would be different than our actual employer.

SPEAKER_02 29:55

Yeah, and then you know what? I think the it it depends, it's different by geographies, but um in Germany and in many other countries, um, where there's not just a single center in the country where all the key skills and talent sit. What do you then do? If you are somewhere remote, some of the best German companies sit in areas where no one would want to live.

SPEAKER_00 30:16

Yeah.

SPEAKER_02 30:16

So, and what can they do? They can tell I'm now a digital leader, uh most mature, whatever kind of sector company, and uh that's not helping. And so the usual things of you need to have new people, that's not so easy. You need to reskill what you have.

SPEAKER_01 30:34

Exactly. And everybody's fighting for talent, right? Yes. It's a little bit easier now, in a way, with remote, but then you are competing for the people around the world, but also all the companies out there competing for your people. So it's just zero game, yeah.

SPEAKER_02 30:48

Yeah, in the end. And I think as as we said at the beginning, very often the element forgotten in your transformation is the breaking link.

SPEAKER_01 30:57

What do you mean?

SPEAKER_02 30:58

So it basically basically means when you have all the elements in place and forget, for example, about how to transform your people, that's that's where it's happening.

SPEAKER_01 31:06

So, Tim, I mean, we cannot avoid the moment that we go into the framework just for a minute. Yeah. And please, I mean, we need to find a way not to go into so many details because I do believe that it's all well structured in the book. So I really, guys, I really encourage you to buy the book. But if you what I like about the framework is that you think of that in a kind of like chemical experiment, right? So having this metaphor of the framework, uh digital transformation, having you know those catalysts of the stuff, right? Can you just elaborate a little bit?

SPEAKER_02 31:41

Yeah, when when designing the framework, I the message I wanted to bring across that it you have to design some something which leads to a result. You just don't do something without knowing what the outcome would be, and that's what the framework is about. So you need to need to design your experiment, so that's your strategy. As I said, do I do something for winning against competitors, or do I something just to play with them without really winning? Nothing we would want. Then you have the catalysts in the experiment. Um and in the digital transformation case, catalyst is not only technology. I think that's key.

SPEAKER_01 32:16

Yeah.

SPEAKER_02 32:16

It's technology, yes. It's about what your workforce can do, it's about the money, the funding. Um, it's about what customers need and want, or what they will want when you tell them something new. Um, it's about what your workforce expects from you to gain the skills, and all that in in in industries which are more and more converging. So these are the catalysts which really start the experiment. Then we have what I call the reactant. We already discussed that's the scope. Do you start at the frontier of your business? Do you do go into what I call the adjacencies, so something closer to you, related to your core business, but with new digital elements, or do you attack the core? Then you have to decide your reaction mechanism, which is the process.

SPEAKER_01 33:04

Yeah, which is water for agile hybrids. Yes.

SPEAKER_02 33:07

So and and reality is always hybrid, as we know. Like only agile only works at the adjacencies or frontiers for the core business, there has to be some element. And then what the product of the experiment always has to be some kind of measurable outcome. Either what I'm not so much in favor of in terms of maturity, um, because that's only subjective, or really in measurable things. So, what do you say and do you deliver indirect KPIs? I don't know, net promoter scores and all these kinds of or the real financial KPIs which will end up in the business case.

SPEAKER_01 33:40

Yeah, I mean, I really like the framework. It's kind of like simplifying uh and actually this is a helpful tool to navigate the hype, right? Yes, and also in a one kind of like the picture, you can as a as a CEO or person like responsible for the transformation, try to, you know, simplify that you can just show the whole scope of the transformation.

SPEAKER_02 34:05

Yeah, and you tick your boxes. Look, have I thought about this one? Yeah, um, or has someone else thought about it for me? I would never recommend how deep you then go. That's your choice. Um, but as always, um, if you don't go deep enough, there's also a risk that you don't leverage all the benefits or oversee some downsides.

SPEAKER_01 34:24

Yeah. So, Tim, I will just ask you a few questions, right? Yes. It's not about have you remember your your your book uh or the research, but if you want to kind of like navigate through the hype, a few questions, right, about those those subjects that you see or those areas, right? So, first of all, about uh the catalysts, right? And you said we have like the the supply side, which is like uh the technology, the workshops, the workforce, and the founding, but also the demand about the customer needs, employee needs, uh expectations, and spending patterns, right? So, first of all, uh about the tech. Yeah. Yeah. I like to when I'm talking to my clients, uh I like to say that in digital and in technology, it's even more important the stuff that you are not doing over the stuff that you are doing, because there are so many things that's so many dazzling technologies that everybody tries, you know, to pitch to you that you really need to focus on what is relevant and tangible. And you're just actually saying in here what are the low and the high maturity of the technology.

SPEAKER_02 35:35

Yeah, it I think the the my first message message always would be this is just at this point in time.

SPEAKER_01 35:41

Which is 2023 January.

SPEAKER_02 35:44

Yes. And uh I think the key uh the key thing one everyone should understand from my perspective is that you need to build the muscles to re- and the fitness to understand all these new technologies which are coming. So um there it it is never ending. So after the transformation is before the transformation, and no no one knows how marketing people will call the next one, but in the end, new technologies will keep coming. And there are some things which are obviously more mature, the the whole cloud discussion um uh you you probably know better than I do. Um and and uh AI as something which is now coming up but is never really implemented at scale, is kind of the opposite side of the story. So you really need to judge always is it something very early in the cycle and when does it scale? And then coming back to strategy, does it help me for winning against competition?

SPEAKER_01 36:40

Exactly. And then probably this is this Gartner hype cycle, yeah, one of the tools that can help you.

SPEAKER_02 36:48

Yeah, there's so many tools out there, but in the end, um the the only tool you have is spending time trying to understand by whatever channel, asking people who know, and reading, um experimenting.

SPEAKER_01 37:01

And I think for the for the biggest companies, probably at some point you need to experiment with everything. Yes. Yeah, with everything, just you know, to see if it's relevant for you, uh, if it's okay for for your if it's relevant for your company, for your customers, and are you able to make a tangible business case out of that? Yeah, so that's the one thing.

SPEAKER_02 37:20

And and I think the complexity, as we said, is it's not about the single technology in most cases. The winning recipes are usually by combining them with something else. Yeah. Because otherwise you could every competitor in the market could should could just go to the digital supermarket and buy one piece of technology from the shelf, and then they have every all the same in the fridge. Yeah. And that's not the idea. You need to cook something based on the ingredients you buy.

SPEAKER_01 37:48

About the cooking, uh, the other thing is that workforce skills. Yes. And what are the major skills now to cook the best dish? Digital transformation dish now? What is the most important thing?

SPEAKER_02 38:00

That's a very tough question. I I think uh some time ago I would have put all these buzzwords again: creativity, um, abling, being able to cope with chaos and dynamics, um, technology skills and saviness, customer centricity and understanding, and so on and so on. Um, but I think more and more, and that's why in the end the book is existing, I believe that the business sense has to come back into all these design thinking sessions, you know. I've been in so many sessions where everyone was coming out very happy with a great day, with a lot of post-its in on the factory floor and all over. And then you would ask the question, so what? So what? And then so many great features came out, you know, we should do this feature for the customer, and this little thing can be improved. It's all great stuff and great work, but it's not helping in terms of the big picture.

SPEAKER_01 39:00

Yeah. Okay, so going again with the other question, but it's about this big picture, right? Because uh, when I also work with my clients, I'm always saying that when we are working on the on the new stuff, like new services or new business models or implementations, we are saying that we are looking at the problem through three lenses. Yeah, so and one is like feasibility, so are we able to do it? So those post-its, right? So let's do that, let's do that, let's do that. And the other one is which I understand from my perspective, it's one of the most important stuff, it's desirability, right? Do our customers want this, right? And you also mentioned uh as one of the catalysts, the customer needs, yes, and they are changing, right?

SPEAKER_02 39:44

Yes, and the you wouldn't believe I've been in in sessions with executives where everyone was talking about the future of whatever then the sector is. Um, I'm not telling now too much, so you can cannot guess which clients they are. Um and then someone has to stand up and say, Look, we are now talking about what future customers want, and the age average in this room is 47. And actually, the most knowledgeable people in the room, and then I asked, so why do you know so much? Yeah, I have kids, which is a good thing, but you could argue that when you do investment decisions worth hundreds of millions, you shouldn't rely on what your daughter or son are doing on the mobile phone in the evening or over the your vacation. You should have that voice really in the discussions. So it's really changing. But on the other hand, there's also a risk that you tend to forget that numbers have to be looked into, meaning it's changing, but you still have this huge customer base of people who haven't changed.

SPEAKER_01 40:53

Yeah.

SPEAKER_02 40:53

And I'm always joking, there's a very easy way to become a fully digital transformed company. You just close all call centers, close all shops, uh only have an Apple app. Um, and then you have everyone digital, but everyone just is a tiny fraction of your former customer base. Exactly. And that's not the goal, I I hope.

SPEAKER_01 41:20

Yeah, I think that's the whole customer centricity. This is one of the key one of probably the key edges now, and everybody's talking about customer centricity. To be honest, probably not everybody's doing that at all. But I think engaging customers is one of the key things. Uh well, I like what you said about the easy solution, right? But it was like in practice, actually the story about where should I start, right? And that's the second part of the framework, which is the scope. Yes. So what you said is actually changing totally the core, cutting off the stuff, right? Uh but we actually already discussed it, right? So they have like three, there are three areas that you can transform. You can transform at the core. This is for your core customers with your core products. Then you can transform in adjacent services and products. So not maybe not the core, but already cross-by, already within the technology.

SPEAKER_02 42:16

Yeah, one example, one example. I don't know, if you you're in the mobile phone business, you add an insurance for the mobile phone to your product portfolio. Very obvious old idea, but that's a nice example of explaining this.

SPEAKER_01 42:27

And then you have the you have the frontier or the edge.

SPEAKER_02 42:31

Yeah.

SPEAKER_01 42:32

And with this example with phones, what would it be?

SPEAKER_02 42:35

For example, just to give the you know, I think the edge that would be then rather using the tech network technology which you have for uh, I don't know, internet of things related solutions. I don't know, embedding ZIMs or soft ZIMs. Now I now I'm tech geek. So the capability to access the network into other things, into skis, bicycles, cars, all these things which already started happening. And then you are really at the frontier, you just use part of your core capabilities, yeah. But it's a very different customer segment, very different use case compared to a mobile phone with an insurance.

SPEAKER_01 43:12

Yeah, and with cars, probably would be like the core is producing the car, yeah, and then it was probably, I don't know, like the electric cars, and at the and then at the frontier was like car sharing stuff, right?

SPEAKER_02 43:25

Yes, for example.

SPEAKER_01 43:26

But that also changed in time, right? Yes. That what was actually the frontier like 10 years ago, like those weed electric cars in BMW, for example, just to name a few of Volkswagen. And now, after many, many changes also in the law, it's gonna be a core business.

SPEAKER_02 43:43

Yes, and it when obviously when you look back into it, I think someone would likely say, Look, we planned this from the beginning. Like the first day we did this, we knew it would happen, but um, yeah, in some cases it might be true.

SPEAKER_01 43:57

I had this interesting discussion with the Friend of mine a couple years ago, and he's like the car geek. Yeah, not a business guy, yeah, a car gig guy. And he said, You know why those uh big producers making those electric cars so ugly? Because they were like kind of like really weird, right? If you think of those i3 BMWs, and he said, Because they are securing the the business, they like the best sellers' cars, right? Because if they did if they did actually those cars, electric cars beautiful from the first thing, people will just like buy it, right? Yeah, so they're doing that for the sake of like innovation with the technology to make it ready for scale, but they to make it such weird cars, just not to risk that everybody will buy it.

SPEAKER_02 44:44

Maybe, maybe. We we don't know. It's the same story as the insurance story I told before. Like you're experimenting at the frontier, um, make sure that it's not going back to your core business, but at least you're ready when the core business is shifting towards the frontier that you can just take back.

SPEAKER_01 45:00

Yeah. And you were actually disrupted, kind of like by the law, right? Yeah. Yeah. Okay. So so we had like those three parts of the framework, right? The first one was like catalyst, then we had reactants. Yes. And then the result. Yes. So what actually showed your data, those thousands and thousands of automated research?

SPEAKER_02 45:22

The um so there are two there are two messages. So number one is um you can and should measure. And uh if you don't measure it in pure financial terms, there are many other ways. And I'm using the example of indirect KPIs like net promoter score, digital first ratios, etc. But you can also just measure what people say about the digital transformation. That's what the machine learning, natural language processing uh in this research is doing. Looking into reports and into statements, what do people say how digital they are as a company? That's one part of the story. So you can and should measure, and then there's this gray area between all this and what happens on the market side, market value side. And the research is showing number one, as I said, good luck, we've had luck. Actually, it it can increase on average your market value if you digitally transform. The bad luck is it's only on average, so depending on what kind of company you are, which sector you operate in, and for example, and what strength of financials you have as another example, and how you can communicate it, the impact will be different. Just to give you one very interesting example, and and I discussed already with a few clients who pay high dividends. Okay, so and they are often frustrated saying, Look, I'm doing all the stuff, look, um, everything is digital, I'm transforming, I have all these things. Um, but my shareholders do not seem to appreciate. And now, based on the data we can say, which is logical, it's no surprise, as long as your shareholders believe that the dividends are not disrupted because you are killing your business by not catching up or doing wrong things, the valuation is driven by the dividends.

SPEAKER_01 47:14

Okay.

SPEAKER_02 47:15

And the impact that the fantasy part of AI, agile, all this together can make on your valuation is lower compared to someone as another example who doesn't pay any dividends, has almost zero net income. So is a company at the edge of becoming a unicorns or failing terribly. The other fantasy plays a much bigger role into the digital fantasy, into how the market capitalization is evolving. The only downside is then the spread is bigger.

SPEAKER_00 47:52

Yeah.

SPEAKER_02 47:52

So on average, you can say, wow, it has an impact, but also there are many more losers than in other cases where it's the upside is not so high, but it's it's a bit more stable. And that that's what the data is showing. And you can look into it, you can and then you suddenly it opens your eyes. Why maybe what you do is not always having the impact you expect it to be. And certainly just putting a few words coming back to our starting discussion with my client. The times are over where you where you can just digital wash.

SPEAKER_01 48:27

Exactly. I mean this is something that is probably worth completely the different discussion. But when I was actually listening to a few podcasts with you, you mentioned this phrase digital washing, right? And we see it in so many ways in like ESG stuff-related stuff, like greenwashing. We see it even in sports with Olympic games, about the sport washing. And I was really surprised when I was when you actually introduced this digital washing thing.

SPEAKER_02 48:57

Yeah, but it but it's happening. It's the the original story which I told, and I think it there's nothing like if you uh look at it from a pure business perspective. I think it's different with sustainability and ESG. There you can always argue it's for a bigger purpose. Yeah, you need to do it. And if you don't do it, it's greenwashing and that's not a good thing. So that's what the new generations could always argue, and they do. With digital washing, it's different because sometimes it might make sense to digital wash for some time until the technologies are proven, until you have a strategy to win against competition, until you found the formula where a combination will really make a difference for you, rather than just going for it because everyone does. Um and then the difference is the 50 million I talked about for washing and the 500 million for the real thing. And the timing is important then. So you cannot judge executives negatively if they digital wash, if they do it on purpose.

SPEAKER_01 50:02

I think externally judgment of CEOs, it's not the game that we would like to play. No. I mean it's a choice. Yeah, exactly. So Tim, so first of all, I need to say that I'm impressed about about the book. I'm also impressed that you decided uh actually to include in the book the old data. So anybody who's really interested in the data, you can see the appendixes with all the really complicated stuff, which I do not understand, to be honest. But I think that's also uh a great potential to later discussion on the market, right? And also for the readers. So congrats on that. Uh, and two questions.

SPEAKER_02 50:45

Yes.

SPEAKER_01 50:45

Do you have the idea for the next book? And where is the best place to buy this book and also follow you?

SPEAKER_02 50:53

For your question, first question. I'm actually hoping that the and it's already starting that there are so many interesting discussions that for some time it's about making sure that the payday happens rather than writing about how to make the payday happen.

SPEAKER_01 51:08

Okay.

SPEAKER_02 51:08

So so um I think that that's that's the key message on your first question.

SPEAKER_01 51:14

And about the place to follow you and where should we buy the book?

SPEAKER_02 51:19

You can get the book every in every single channel. Um in the digital ones, in the traditional book retailers, you can you can get them. We have we have a web page which is digital transformationpayday.com. No surprise. Um you find more information there. You can also find ways to reach out to me in case of any questions.

SPEAKER_01 51:39

Thank you, team. Thank you for the conversation. Thank you very much. Thanks for inviting me. And for everybody, I really encourage you to buy a digital transformation payday book. Uh, it's already a bestseller in the US, in Wall Street Journal. We see in the e-commerce sites in Poland that it's getting traction. And I think let's make this book really successful in Poland. As Tim said, you can reach out to him on digitaltransformationpayday.com. You can reach out to me, and I'm really interested in the comments of this conversation. And for those, you can just put it on YouTube or on LinkedIn, and together with team, we are happy to answer them. Thank you.

SPEAKER_02 52:17

Thank you very much. Happy to be here.

SPEAKER_01 52:22

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