Robert W. Gregory
Established organizations with legacy systems and people have now understood that the creation of new products, services, and business models through the innovative use of digital technology is essential to their long-term survival. The COVID-19 pandemic and resulting shifts in online behaviors and expectations among customers is yet the latest catalyst for dealing with organizational legacy and embracing digital innovation. Many of these firms experimented with and learned from digital innovation projects that involves advanced analytics, mobile and wearables, social media and IOTs. They learned how to use new tools such as agile methods and design thinking. They produced new apps featuring customer personas and journey maps.
Yet, for many established organizations, digital innovation activities and outcomes often do not go beyond the pilot stage, pointing to paralysis in digital transformation. Indications for pilot paralysis in digital transformation include behaviors such as following due process for process sake, keeping valuable data in siloed warehouses, funding units and projects rather than teams and outcomes, lack of top executive commitment to risk-taking, and killing innovation ideas on the basis of lacking ROI potential in the short-term. Indications of pilot paralysis also include outcomes such as decisions based on highest-paid persons’ opinions, novel products that don’t leverage and build upon existing resources and capabilities, and inconsistent customer experiences resulting from a lack of integration of diverse offerings by the legacy organization. The results. Successful cool digital projects, left on the shelf with no viable and scalable plan to grow into a “real” business.
Examples for pilot paralysis in digital transformation are manifold and can be found across a large range of industries and business fields. For example, GE famously piloted its Predix platform with the audacious goal to set a new industry standard for the Internet of Things, but the platform launched by GE digital didn’t meet the desired goals for digital transformation resulting in executive leadership change and the search for a new beginning. DBS Bank, even if portrayed in the media more favorably for its digital transformation progress, was also confronted with pilot paralysis after its first major hackathon when only 2 out of dozens of innovative prototypes received funding and approval for further development. The large Asian bank has since been working on a multiple-platform organizing model and ecosystem strategy to partner more effectively with fintech startups and drive digital transformation through continuous learning and innovation in the long term. Volkswagen, a large automotive firm from Germany, experimented with the creation of new digital labs to embrace digital innovation and break loose from its legacy systems and people, but similar to other legacy organizations struggling with inertia, the top executive team had to realize that a fundamentally different approach was needed that relied more on integration as opposed to separation. Prototypes launched by loosely coordinated units resulted in inconsistent customer experiences, lack of seamless integration, and market confusion, motivating Volkswagen to explore a new platform ecosystem approach to digital innovation that will eventually transform the role and relationship of the entire IT function to the rest of the organization.
As these and many other examples illustrate, there is an epidemic of pilot paralysis among established firms. The motivation to address this problem is strong and includes the need to combine digital innovation with business scalability, architectural integration, and end-to-end customer experience. This combination, however, requires legacy organizations to reconcile two fundamentally inconsistent and conflicting logics for the use of technology. On one hand, we have the traditional IT logic, emphasizing control, integration, security, reliability, efficiency, and further core requirements associated with running scalable operations with the help of established IT. On the other hand, we have the emerging digital logic, emphasizing new revenue generation, top-line growth, data-driven experimentation, agile design and development, seamless and enjoyable customer experiences, and further new requirements that oftentimes emerge from new startups in the digital world. Overcoming pilot paralysis in digital transformation requires successfully managing the tension between these two logics.
Robert Gregory, who recently joined the xLab team as a Research Affiliate, will be speaking at the xLab Quarterly Roundtable on June 8th. To learn more and register, visit the registration page.