Executives learn how to lead digital disruption
Over the past decade, Caterpillar has placed remote monitoring sensors on 700,000 of its Big Yellow construction machines. The sensors capture information such as how often equipment is used and for how long, which can help customers improve efficiency and save money — but it was hard for them to turn the data deluge into useful insight.
“A chief financial officer doesn’t need access to the same data as an engineer, but our dashboard displayed the lot, slowing customers down,” says Kjeld Jespersen, Caterpillar’s Switzerland-based global product manager for digital services.
So, the 49-year-old Dane introduced a user interface (UI) that lets people search for data most relevant to their role, which increased the number of subscriptions to Caterpillar’s remote monitoring service. The project is one example of digital transformation — using technology to transform a business.
Many companies are trying to transform their businesses — often radically — to keep abreast of rapid technological advances. However, poor leadership is cited by McKinsey, the consultancy, as one of the reasons such complex projects often fail. This might explain a rise in the number of people seeking executive education courses that can help them manage digital transformation.
Jespersen is one such example. He began his UI project before enrolling in the Leading Digital Transformation course at Switzerland’s IMD, in 2016. He says the programme gave him the idea of testing UI designs with customers.
“Previously, we used internal engineers who speculated on what customers wanted,” says Jespersen. “Now we understand what customers need. That is important, as they expect to access data with a single mouse click, like they are buying products on Amazon.”
Participant numbers for the $13,000 Driving Digital Strategy course at Harvard Business School in Boston have risen from about 60 in 2013 to 100 today, says faculty co-chair Sunil Gupta. “Part of the reason for the increase is that legacy companies are trying to manage potential disruption from new digital entrants like Uber and Airbnb and avoid becoming the Kodak or the BlackBerry of the world,” he says, referring to companies which failed to adapt.
The threat of disruption spurred German telecoms company Deutsche Telekom to last year create levelUP! — a custom digital transformation course — with Duke Corporate Education, part of Duke University in the US. “Competition is coming not just from traditional telcos but also digital providers, like Facebook and WhatsApp, who are offering telephone calls and broadband,” says Oliver Knipping, Deutsche Telekom’s vice-president for product, innovation strategy and regulation.
Christina Schulte-Kutsch, vice-president of leadership development and culture, adds: “[Increased competition] could put our whole business model at risk.”
The 39-year-old German says the Duke course has helped to create a culture that can enable transformation. “The programme has laid the groundwork for change by bringing 700 executives from across departments together, helping to break down silos that can prevent innovation,” she says.
Digital transformation can lead to friction, Schulte-Kutsch adds. The company has traditionally been a conventional hierarchy, focused on keeping risk low and maintaining reliable service delivery, she says. “But we have to have the ability to react to the market and that starts with getting the right company culture in place.”
Some executives enrol in digital transformation courses to become technically proficient. “They don’t need to develop a machine learning algorithm, but they need technical fluency — including data analysis skills — to form and lead a digital strategy,” says Andrew Stephen, at the University of Oxford’s Saïd Business School, who heads a digital marketing and analytics course taught in the UK and Melbourne.
The supply of executives with those skills is limited. “There’s a constant onslaught of new technology, so it is hard even for seasoned executives to get to grips with everything.”
Arguably the best way to lead digital transformation is through hands-on experimentation with technology, according to Annie Faulkner, director of the Leading Digital Transformation programme at ESMT Berlin.
Participants — 25 per course — come from several industries including finance, and use technology such as virtual reality to come up with a solution to a company problem or opportunity. “We help executives to look outside their industries to come up with a new technology product or service,” Faulkner says.
One course alumnus, who works for an engineering equipment maker, is using virtual reality to help engineers pinpoint problems in faulty machines. The technology has sped up repairs, reducing downtime and maintenance costs, says Faulkner.
The challenge for business schools is to support participants as they implement complex transformation projects in the workplace. “There is huge student demand for that,” says Evgeny Káganer of Spain’s Iese, who teaches a three-day digital transformation course in Madrid, Munich and New York. “But it’s hard to do that because the diversity of projects would require advice tailored to each participant. We do not have the time.”
Prof Káganer says that Iese is considering using Circles, a videoconferencing application, to help alumni seek advice and exchange ideas. “But we are not a consulting firm,” he adds. “We help executives to develop a transformation blueprint, and they implement it.”
The fast track to transformation
Digital transformation requires a fast change in business model, according to Michael Wade, IMD professor of innovation, strategy and director of the Leading Digital Transformation programme.
“Innovation is not new, but the pace of change is accelerating and the environment is less predictable than it has been in the past, so adapting is vital to success,” he says.
To develop agility, companies must monitor new competitors, technology, regulation and markets that could impact their business, Prof Wade says. “You need to trust the data and use it to make better, evidence-based decisions on whether and how to react to emerging trends,” he adds.
“To execute a transformation plan, you need to tear down bureaucracy and empower employees across the organisation to try new things,” adds Prof Wade. “If you have a long decision-making process, you will not be able to move quickly enough to capitalise on fast-changing technology.”
If a project is not working, managers must quickly deploy resources to new ideas, he says. “You cannot be afraid of failure, as it’s a learning opportunity that will help you improve your strategy. The road to digital transformation is long and arduous.”