Emmet B. Keeffe III is a Venture Partner at Insight Venture Partners and Founder of Insight IGNITE, a program that partners with global organizations to accelerate Digital transformation by delivering insights and technologies that are core to the Digital journey. Insight Venture Partners is the leading software growth equity firm with $18 billion raised since inception. In this blog, Emmet shares some guidance for spearheading a successful digital transformation at a legacy company.
In this blog, Emmet shares some guidance for spearheading a successful digital transformation at a legacy company.
During the last decade, we watched Amazon transition from an online bookseller to a marketplace for, well, everything. We saw Netflix shift from a DVD-delivery service to a streaming network that also produces original content.
Amazon has changed retailing forever. And while it remains to be seen how Netflix will fare, there’s no question that companies that are willing to embrace digital transformation are better positioned to succeed in the long term.
Every leader in just about every "legacy" industry should be committed to digital transformation; some are taking the challenge seriously and committing significant resources to their efforts. Others may appear to be serious, but their efforts amount to stagecraft—they’re using whiteboards and Sharpies, collaborative workspaces, daily scrum meetings and beer fountains, to create an illusion. The companies that are merely dressing up may be doing so to keep employees engaged and enthusiastic about their work, or it may be an effort to attract talent. But in either case, not taking digital transformation seriously may put the company in peril.
Disruption is the New Normal
You may have read John Chandler’s excellent post, “The Life Insurance Legacy Conundrum,” in which Chandler, the former CMO of MassMutual Financial Group, outlined how he led the charge for MassMutual to embrace digital in one of the most conservative sectors of all: life insurance.
During a recent conversation, John observed that 90% of businesses have stated publicly, and have assured their boards, that they have digital transformation efforts underway. Yet eighty percent of those efforts will fail, Chandler says. Why? He believes it’s because these CEOs, CIOs and CMOs are saying the right things, but they’re not taking the right steps.
Chandler thinks part of the problem for the floundering companies is the C-Suite doesn’t necessarily have the vision to disrupt that a startup founder might possess. “All of their instincts are about sustaining,” he says. He adds that leaders should take stock of whether they’re doing a digital transformation or merely a digital upgrade. An upgrade, he explains, might be building an app and adding a social media presence, but these sorts of upgrades are not creating a new value proposition. “They’re not doing what the disruptors are doing,” he adds. “They are looking for ways to reduce expenses because their consumers demand it, but is that disruptive?”
Chandler compares Barnes & Noble with Borders to illustrate his point. Barnes & Noble embraced digital and rolled out the Nook. The Barnes & Noble bookstores have become a place for socializing and browsing, but the company is focused on the Nook and digital sales. Conversely, Borders was too late to the digital party and closed its doors in 2011.
Digital Transformation Requires Old-Fashioned Discipline
It’s not easy, and it certainly wasn’t for Chandler. He had a $400 million budget and full support from his board, but he didn’t have total buy-in from his leadership team. “Their feeling was ‘the products still work, why do we need to make this investment?’” Eventually, his leadership came around because they recognized that the marketplace was peer to peer—“middle-aged white guys selling our product to middle-aged white guys”—and they were missing out on opportunities to target more diverse people. The way to get in front of a broader marketplace, Chandler recognized, was to completely revamp MassMutual’s platforms—decades’ worth—and build a new site that allowed all the feeds to connect, and create a customer portal. Once that common database was built, Chandler’s team was able to add more products and services.
Companies that are serious about digital transformation should look to Chandler and MassMutual as a model for how to do it right: have a mission statement; have performance indicators that you assess along the way; always be working toward stated goals.
There are many other examples of legacy businesses doing digital transformation right. A few that immediately come to mind: BMG (the music company), Commerzbank and Schindler. In fact, Schindler, the 144-year-old Swiss elevator and escalator company, is a terrific example of a legacy company facing digital transformation head-on. For starters, Schindler teamed up with GE and Apple to create products that collect the kinds of data that can help them keep track of how their products are working and even identify service issues—before they happen.
Above all else, leaders who want to spearhead successful digital transformations have to be willing to take the disruptive point of view in everything from how they interact with customers to how they approach revenue.
I’ll conclude with a quote from Robert Wolcott, a Clinical Professor of Innovation & Entrepreneurship in Executive Education at the Kellogg School of Management at Northwestern University: “Even well-designed transitional strategies fail if the businesses themselves don’t transition. Incumbents that succeed in the long run will be those that digitalize not just their products and services but how their businesses operate and engage,” he says. “The trap arises from the fact that compared to investing for the future, focusing entirely on the near-term wins—until it doesn’t. Longer-term investment always comes at the expense of some performance today,” he says.
Dr. Wolcott will be a featured guest at our March 2018 Insight Ignite Innovation Roundtable in Iceland. To learn more, please contact Emmet B. Keeffe III, Founder, Insight IGNITE at email@example.com.