A manufacturing CEO recently told me his company had dramatically accelerated progress with its digital investments and had seen a drastic improvement in these investments’ material contributions. This was remarkable — but not just because of the progress and improvements.
This CEO had done what most other executives I speak with fail to do: He’d set up a disciplined process to face head-on the potential challenges that could emanate from the digital program. Plenty of executives acknowledge or admire digital challenges, but they don’t take the time to fully understand them with the intent of specifically figuring out how to deal with them.
In contrast, this manufacturer had initiated a disciplined three-step process:
- Critically identify exactly the challenges each digital initiative is likely to encounter
- Profile the level of the challenge vs. the company’s ability to solve it
- Plan, execute, assess and adjust the resources and programs (beyond digital) to remediate those challenges
It sounds simple, but it works: By developing a well-thought-out list of the possible challenges to be encountered, and determining the likelihood and severity of those challenges, you’re better able to assess how well your enterprise — not some Silicon Valley startup — can deal with each specific challenge to be encountered and develop a remediation plan and ongoing program for dealing with that challenge.
After all, most companies spend days promoting the digital effort; a few days spent doing this type of “pre-mortem” should not be a showstopper.
Seven challenges you’re bound to face
Here are the seven challenges I typically hear about during my virtual visits with business and IT leaders. In an upcoming blog, I’ll cover the approaches to mediate these challenges.
- Misunderstanding the specific resources required. There are many types of digital efforts:
Depending on the specific one you’re pursuing, it will have its own distinct needs. Digital efforts, after all, are not fungible. The challenge is knowing which specific skills, experiences, processes, approaches, resources, partners, etc. will be needed for your particular digital effort.
- Enhancing customer experience
- Building smarter, more agile and/or more efficient internal operations
- Creating new customer/supplier/partner channels
- Setting up smarter and/or information-enabled/enhanced product offerings
- Establishing new business models or business lines
For example, one logistics company with whom I spoke hired a chief digital officer (CDO) who brought in a staff to create smartphone apps for interacting with potential small shippers. The CEO then asked the team to also apply artificial intelligence (AI) and robotic process automation (RPA) to accelerate credit checks and accounts receivables. They were also asked to address customer complaints about the internet order experience. While the team did a great job on the first, they were fired after failing to demonstrate they knew enough about business operations or customer experience design.
- The increased frequency of business disruption. As digital efforts get underway, the CEO, CIO, CDO and other business executives — as well as the business conditions themselves — can change, which can require a course redirection, pause or cancellation. Such disruption has always been a factor with any new IT effort, but the level of disruption (COVID aside) has gone through the roof. These disruptions are most challenging to digital efforts aimed at enabling new channels, smarter or data-enabled products and/or new business models.
The CEO of one company that I counsel departed amid the launch of an AI-based enhancement for field technicians of an engineered products company. The new CEO released the senior VP for field product support, who had been a project advocate. A private equity activist attack caused all new projects to be put on hold. The team that had been assembled for the new field tool all quit and went to a competitor.
- Inconsistent, weak or bad data. Almost every new digital effort eventually relies on internal or external legacy data. Naïve assumptions about data quality and usefulness often undermine the progress and success of any digital initiative.
An insurance company I often speak with commissioned a data analytics and AI tool to assist its agents (especially new agents) with customer relationships and sales as it reorganized sales territories. Confusing, inaccurate CRM data and outside data sources put the wrong information in the hands of the agents, who found themselves incorrectly prepared in discussions with clients.
- Legacy technology debt, including conflicting tool sets. When new or cloud technology or software is deployed, it often requires coordination with existing heritage infrastructure, inconsistent systems, devices, networks, software, tool sets or skill sets.
The radiologic treatment unit of a healthcare provider attempted deploying a set of AI-enabled systems to coordinate diagnosis and treatment across facilities. Many of these businesses (some acquired) had incompatible or unsupported systems and platforms. However, they resisted spending money to upgrade their environments to support the new AI-infused systems. Bandwidth in remote locations was also inadequate. Moreover, the systems in member physician practices could not handle the data, workloads or graphics.
- Resource and attention diversion to cloud migration. For many companies, cloud migration has become a major priority and proves more challenging than planned. As a result, critical resources and attention are often diverted away from digital efforts to bolster the migration effort.
A manufacturer of heavy equipment had several coordinated efforts to support enhanced sensors on the machinery tied to predictive maintenance and performance optimization diagnostic analytics. However, according to one business leader there, many of the key resources were constantly being pulled off the efforts to expedite the migration of legacy systems to the cloud provider. After two years, cost overruns and multiple pilots, the effort is still not deployed.
- Cultural resistance and acceptance. Historically, companies have mandated the use of all standard IT systems as a condition of employment. Many digital systems, apps and services are often elective for use by employees, customers or partners. Cultural, pragmatic and user diversion issues can challenge acceptance and adoption.
Take the company referenced in #2, above. Over two years late and well over cost estimates, the AI-based enhancement for the field technicians was deployed. Despite major training programs, the field technicians refused to use the new systems. They found it “impractical” and felt their traditional measures were superior. The unionized technicians demanded their jobs be reclassified at a pay scale 40% above current. Moreover, customers haggled over the sensor placements and network costs.
- Practical economics. It is assumed that a digital program will pay for itself with a healthy economic return. But, unlike startups, established enterprises can’t rely on other people’s money (OPM). Established players have quarterly financial targets and pressures. The challenge is to find funding and a financial return pathway that maintains credible relevance.
Take one regional grocery chain with whom I speak that was being challenged by a VC- funded greenfield shopper and delivery service that was diverting its business and customers. The initial cost and cash flow to launch a comparable mobile device and RPA-included service would take over five years to pay for itself, if successful. In the nearly 30 months it tried to find a viable financial pathway, the upstart took over 60% of its market. The company still has not found a way to move forward from a financially practical standpoint.
Treating what ails digital efforts
I have encountered tens of examples in each of these challenge categories. These are almost all external, contextual challenges. When I ask senior executives if they have a formal pre-mortem in place to assess these or other challenges that the digital effort may encounter, the typical answer is “sort of,” “kind of,” “we don’t have time for that sort of hypothetical navel gazing” or “those sorts of questions could sink this obviously spectacular endeavor or send it into decision purgatory.”
Executives and promoters of these digital efforts should start with a recognition that they’re asking their organization to do something it has likely never done or created before, and its success is dependent on an intended user to engage something they’ve never engaged before.
Again: What I’m proposing sounds obvious and simple, but few companies I visit have formal processes in place to consider and deal with these external, contextual challenges. In my next blog, I’ll share approaches enterprises have used to tackle these challenges rather than ignoring them or wishing they would go away.