On this week's episode of Inside Outside Innovation, we sit down with David Rogers, Columbia University professor and author of the new book, The Digital Transformation Roadmap. David and I talk about why corporate innovation is so hard. And we unpack the iterative steps needed to navigate a path to digital transformation success. Let's get started. 

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Interview Transcript with David Rogers, Columbia University professor and author of the new book, the Digital Transformation Roadmap. 

Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host Brian Ardinger, and as always, we have another amazing guest. Today we have David Rogers. He's a Columbia University professor and author of the new book The Digital Transformation Roadmap, rebuild your organization for continuous change. Welcome David. 

David Rogers: Thank you, Brian. It's great to be here. Really appreciate it.

Brian Ardinger: I'm excited to have you here because your book couldn't have come out at a better time. We are in the midst of a lot of accelerating change as everybody is going through, whether it's covid or inflation or, or technology changes like AI. Your book, I wanted to delve into a lot of the details around it. One of the things that stood out is you outlined in your book several studies that have come out, basically say that 70% or more of digital transformation efforts fail. Why is that the case and why is it so hard for people to do this? 

David Rogers: Yeah, it's really sobering. So, I wrote, what was the first major book on the subject of digital transformation a few years back.

So, I've been looking at the subject for some time, and what I was sort of shocked to see was at that point I was really sort of evangelizing, Hey, if you're an established business and you really want to grow for the long term and survive even, let alone thrive, you're going to have to embrace new digital business models.

Really set aside a lot of the old assumptions of the corporate playbook of strategy. How do we think about competition? How do we think about customer strategy, use of data, et cetera. Really embrace new business models. And so that was really my approach was to help companies who had sort of been in business for decades, maybe a century or more, to say, hey, it's great that your core business is there and you have customers.

But the sort of strategic landscape is really changing, and you need to sort of master this and, and really sort of open up your thinking. But what I found in the years since was people really embrace this idea of, okay, at least sort of, at least I would say, people give lip service to digital transformation.

Oh yeah. We're going to do this. We're, we're going to hire somebody, a Chief Digital Officer, we'll put it on the agenda. Transformation digital. Very common now and yet, including companies where there's support from the very top. Real resources put into this, not just sort of some PowerPoints and emails sent around.

And yet years go by, and they come to me and say, I don't know why we're not changing, you know, or not changing fast enough. What's going on? Why are we like stuck in slow motion? So, I started looking at the broader, you know, research and as you said, I found this pattern that, you know, by and large, all the major studies are reporting about 70% or higher of failure.

That's self-reported, right? The people with don't like to admit, companies admitting by our own standards, we are not achieving what we set out here. So, what that opened my eyes to a whole, you know, second wave of research on my part was to try to understand why. What is the barrier or barriers here? You see, you know, a litany of symptoms.

Well, our people are afraid, or they don't want to change their jobs or the technologies too expensive. Or we come up with lots of ideas, but none of them scale or, and we just can't move as fast as all these startups. You know, there's lots of sort of symptoms. What I found looking across, many different industries, many different organizations, was a pattern. 

Really there were sort of five organizational barriers, and that's the key. They're all barriers, actually, not in the technology. The barriers, not usually, it's not really about finances and things like that. It's about organizations themselves. And unless you can address those and get past them, and there are ways to get past them, but unless you do that, your efforts are just never going to have the impact that you, that you really need out of them.

Brian Ardinger: You know, one of the things that I see when talking to other corporations out there is they don't struggle with execution because they have business models. They have customers. They know how to execute that particular model. They know how to budget for it. They know how to build for it. They know how to hire for that.

But where they struggle is that exploration phase. Where they don't know exactly what to do. They haven't figured out the next new business model. They haven't figured out exactly what they should be building or the new pricing and that. And it's that realm of uncertainty where they haven't seemed to build an execution model to execute in the uncertain environment. Is that what you're seeing as well? 

David Rogers: Absolutely, and the problem is you can't use the same model. I have nothing against companies say, look, we've got a really well owned machine. We know how to operate our core business. We've been in it for a long time. We've got a functional system of, you know, you could call them silos, but we've got a functional organizational structure, really knows how to operate and deliver against this core business.

I have no idea, no feeling that, oh, I'm going to come in and say, oh, you should turn yourselves into a startup and blow that all up. No. What companies need is what I call flexibility in governance. That's one of the core, one of these five barriers. There's a lack of flexibility in governance, so they're applying the same BAU, as we call it, business as usual operating model to that core business that they know really well is operates under low uncertainty and is sort of what they're organized around currently. And they know the metrics, et cetera. 

And then they try to apply that same operating model, that same governance I would call it, to pursuing new opportunities which have first of all, simply by bringing virtual, new and fast-moving digital error likely to have much higher uncertainty. And so that operating model execution model is not going to work in a highly uncertain context. We've got a lot of theory and a lot of experience to show why. But they also don't know how to operate outside of their core business.

So, you've got these sort of twin challenges, as I call them, really for corporate innovation and, and growth, which is the challenge of uncertainty, not being used to the methods which allow you to tackle an iterative experiment, kind of driven kind of fashion. Opportunities that are exciting but are at this point still very uncertain until you get further along.

And the second is they don't know how to deal with or how to organize around it and sort of allocate resources to things that are simply far from their core. Regardless of anything else. So, they have an established business where they, they know the customers, they know the distribution channels. All those things are kind of in place.

And then if you've got an opportunity, it's exciting, but guess what? Maybe goes after a different customer market. Maybe it has a different distribution channel. Maybe the revenue model is different. It's the same customers, but the revenue is totally different than how you charge, or the cost structure is totally different.

All these things just organizationally make it very hard to just sort of apply your standard BAU processes and moving forward. So that's why you need to have this built-in flexibility. 

Brian Ardinger: Let's unpack the book a little bit. You talked briefly about five core steps in this roadmap. Can you talk about the five steps and you, you mentioned governance, but it starts I think, with vision.

David Rogers: Sure, exactly. So, it's vision is the first, and that's really about defining what I call a shared vision. Really two things. You need to have a vision that is unique to your organization. So, some clear vision of where do you see your world, not the world in general, not you know, the latest headlines on a hot new technology or some other company that is in trouble, but your particular industry.

Are you a mid-sized advertising firm in Indonesia? Are you an industrial waste management firm in Tuscany? You know, your sector, your industry, your world. What's going on in that context? Where do you see that world heading? And what future position do you aim to occupy in that? Right. And you have to have some unique right to win with that particular approach, that place you want to occupy.

So, you've got to have a much more unique vision than this kind of generic, oh, we're going to be a digital first company kind of language you hear in a lot of boardrooms these days. So that's the first. 

Brian Ardinger: On the vision side, is it important to look with, you mentioned looking within your industry in that, but how important is it to look outside your industry for either other business models or other opportunities?

David Rogers: Couple points here. First of all, yes, when you are defining what I call your future landscape, you are going to look at both what is close to you in your current industry, but you're also looking at how trends, technology around competitors that are both what I would call symmetric competitors currently in your industry and asymmetric competitors, those not necessarily with the same business structure, same industry characteristics as you. 

Customers, you're not just looking at your current customers, you're looking at emerging customer groups. You're also looking at how maybe the expectations very often of your current customers are being shaped by their experiences in other industries. Other categories. 

So, there's both, an inside strategy has to come from two directions. Internal knowledge. Know who you are, know your organization, what is unique about it, what is your history, what are your unique capabilities and advantages. And external knowledge. Constantly soaking in studying, learning what's going on out in the world of customers and competitors.

So, both of those go into that process of defining that future facing vision that has to be shared. That's the other part about it. It can't be something that's just in the head of a few people, you know, in the C-suite or at the top of the organization. Everybody in the organization has to have an understanding of sort of, where are we going? Why are we doing it? How are we going to make this, how are we going to succeed? 

Brian Ardinger: So, the first part is vision. So, the second part of the roadmap is prioritizing what that vision is and, and the steps around that. Can you talk more about that? 

David Rogers: Sure. So that's defining specific priorities for growth. What I sometimes call picking the problems that matter most to your business, right?

A lot of companies stumble here. They either really write off growth entirely. I see companies with a digital agenda that is nothing but optimization and efficiency measures on their current business. You should do that. I want to be clear, there's almost always going to be value to be found in improving the operations of your current business, but they have no growth agenda, right?

So, opening up, looking not just to the current business, but beyond that to growth, but secondarily, really having that discipline to pick what matters most. What are the key priorities? What are the strategic problems that you're going to solve for your customers, for your business in the short term? 

And so, I have tools and, and, and processes in that chapter focusing on how do you really define and pick those problems in a fashion that is going to give focus so that you can say no to many, many, many interesting ideas for things you might do with digital technology in your company. In order to then say yes to the ones that are most important. 

Brian Ardinger: So then talk a little bit about the third step is experimentation. I think this is where a lot of corporations fall down because they're not used to experimenting. A lot of times they're experimenting. Experimenting generally means there's probably going to be things that you are wrong about or, fail at because it's an experiment. Yeah. So, talk a little bit about that particular challenge. 

David Rogers: Sure. A lot of businesses that are really well run do have a clear, well-defined vision and a sort of strategic set of priorities. But larger organizations where they probably most commonly struggle, particularly around innovation, is exactly this step of experimentation and the step of governance, which follows it.

So, experimentation means you see a new opportunity. Rather than following that instinct, which we've taught for decades in business schools. Two, how do you address a new opportunity through planning plan, plan, plan. Everything is about, you know, looking, studying it, gathering as much third-party data as possible, hiring the consultants to bring in lots of benchmarks. Developing these de detailed planning and case studies and analysis and scenario planning.

And then what do you do? You make an expert decision. You've done all this sort of long, laborious pre-work and analysis. Still haven't done anything. Still haven't gotten any direct actual market feedback. And now you make a big decision and probably it's a senior level committee and somebody at the top makes the call. And then you just execute, and you plow a whole lot of resources into this because you say, well we've picked this path, we've got to make sure we do it right.

And so, everybody just focuses and you're sort of locked into this plan and you're locked into a particular solution. Whereas instead, if you look at the methods that have arisen in the digital era, in this era of ferment and change, with new businesses growing. I'm talking about lean startup. I'm talking about agile software development, design thinking, product, and management.

All of these are based on this process of iterative learning and experimentation. So, it's about having an idea, recognizing it's just a hypothesis, and then saying, what is a small step I could do right now, which would test and validate one particular question such as, who's the right customer for this?

Or do I actually understand what the customer's problem is that I'm solving? Do they see their problem the same as I see their problem? Do they have an alternative solution to that problem or not? If they do, you know, what's the gap? What's it still not doing for them? What's that need? Are they interested in the solution that I'm thinking about developing before you build it? Right? 

Would they actually want it? Would they actually pay for it? You know if you. Give them a sort of a sketch, an illustration, will they clamor to be your first pilot test case. So, there's all these steps which you can do, and each step helps you test, learn, validate, reduce the uncertainty before you lock yourself into a particular path.

So, there's a lot of, there's a lot of learning, there's a lot of methods out there. I brought in a tool, in this chapter that's based on a lot of work I've done in coaching. Both startups and corporate entrepreneurship teams. That's just about sequencing and organizing this validation because frankly, you have a new idea. There are probably 50 different things you don't know about it. 

And once you have the humility to recognize that, it can be a little overwhelming. Well, where do I start with. Do I test the pricing? Do I test the tam, the total addressable market? Do I want to validate, you know, the delivery model? There are so many things.

So, I have a, a system called the Four Stages of Validation just to sort of sequence all those metrics and all those stages. But that's what you need. You need a process that people inside the business, teams inside the business are experienced in, comfortable trained in, so that they know how to do this.

You know, don't bring over those processes. Look, if you're adding your 112th warehouse to your existing, a core business, use the traditional planning process. Absolutely. But when you're trying something totally new, you've got to shift gears. You've got to say, okay, this is where we apply an experimentation process.

Brian Ardinger: And then you end with the last part capabilities. Can you talk about that? 

David Rogers: Sure. Two of those kind of go together. You've got to have, in particular for governance, the iterative funding. You cannot do that in a large organization because they're not set up like startups. You know, startups is very easy.

That's the whole model of venture capital. So, you have to establish different governance models to allocate resources, to allocate people, to apply the right metrics at different stages of these teams. Because you need to have some oversight. You can't just let them run wild and spend as much money. You need to shut them down ruthlessly at the right points.

And you also need to be ready to exponentially grow their investment at the right points and not be waiting for next year's annual budgeting cycle. This is where corporate innovation actually most often fails. I've even seen companies like they actually manage to hire in or bring in good teams who can experiment, but they don't know how to take those teams from that early testing to market scale.

And then, as you say, capabilities, capabilities is the fifth essential step. And that really brings together a few important things. You need to have digital ready technology, and that's everything from modular, you know, microservices architecture. Typically, in the cloud. It's about your data assets. It's about having governance to manage access and control around technology and data and, and security and so forth.

Second thing is you need to have digital ready talent. And this is a real challenge I've seen in a lot of organizations, particularly right now at this moment, because the talent pipeline is so tight. I mean, it's a blessing if you're not in a big tech firm right now, that several of them have been shedding employees, because you do have this great little window to pick up some great people.

The challenge is the hardest part is actually not hiring. As hard as it is to hire great talent, the harder part is retaining it. So, you really have to manage this whole, what I would call talent life cycle. And organizations seem to get much better at not just sort of figuring out what are the gaps and specific skills they need for digital growth, but how do you find those people?

How do you attract them? And then how do you make sure they actually have the context to do their best work in your organization? That's why they're going to stay. And then the third part, which ties into that as well, is culture. Do you have a digital ready culture? So many organizations I see, if you really understand what the culture, that's sort of the behavioral norms, the mindset that people have.

Some of it unspoken, but that shapes how we just do our job. Who do you call on a given day? Who do you need sign off from? You know, what decisions can you make on your own? Do you spend more time, you know, with engineering or do you spend more time with the customer? All these kinds of just sort of behavioral norms in the organization.

If you don't take a close look at that, those can be a real drag on change on, the people who do want to make a difference in your organization and frankly, on your ability to attract and retain those people who you most need. 

Brian Ardinger: To be successful. Obviously, there's a lot of things you have to get in place, right and in that. How do you know if you're making progress? How do you start measuring success on these particular pasts given that there are so many things you have to manage to actually make transformation work? 

David Rogers: So, measurement and sort of progress as assessment has to happen on multiple levels. And in fact, that's kind of a key message of the book, is that change in general has to happen at every level of the organization. And it has to be driven by every level of the organization.

You know, transformation cannot happen top down. It may start with a CEO's vision and appointing someone, a chief digital officer to help sort of assess what's holding us back. Where do we need to change from the organizational structure and so forth. And maybe kind of oversee some of these changes.

But it cannot be a small group of people in a room deciding strategy for the company and then dribbling it down through cascading the little waterfall down throughout the organization. That's not how real change works. So, you need to have, whether it's an approach like OKRs, which if done properly, is really everyone at every level is defining their own metrics, but you need a process where you are defining both the vision of where you're going and those key priorities. As I said, picking those problems that matter most at every level of the organization. 

From the senior leadership looking at the whole enterprise to the business unit, to a function, like what's the top agenda for what are we trying to drive? What's the three things we're trying to do right now with digital transformation of our HR function, for example, maybe, or our marketing function to an individual team.

At each level, you need to be setting a clear understanding of what are you strategically trying to achieve? How do you think you're going to get there? What are your measures that are going to show if you are making progress? 

Brian Ardinger: So the last topic I want to talk about is who's doing this well? What are some examples or companies that you've seen out there that seem to be getting closer to not having that 70% failure rate?

David Rogers: Oh yeah, there's, the great news is, you know, I'm kind of a glass half full kind of guy. So, when I see those studies, 70% failure, it's sobering, but I think, wow, 30%, that's a lot of good companies to learn from. So that's fed a lot of my research. 

We see great examples, many well-known. We can see what's going on with Disney in terms of their whole really aggressive push into streaming media and reinventing themselves as much more of a direct-to-consumer business, which changes everything about your operations, your metrics, your financials, et cetera.

We see companies like MasterCard. Not everybody who's not in financial services realizes how much they've been transforming that company and that almost all their growth, the majority of their growth now is coming not from the core business, which is of course credit card network, but through really creating, they have an internal lab.

Building new business models as a sort of a giant FinTech startup, as well as really being very closely aligned and working with and accelerated with a lot of other FinTech startups on the outside. But moving areas around cybersecurity has been a huge growth for them. Digital identity, others, industrial companies.

John Deere's transformed itself from a hardware company of course. We know them from making tractors and combines and things like that. They still make those, but they actually have more, they employ more software engineers than hardware engineers today. That's because the whole thing has become so totally data driven.

It's all about precision agriculture. Every machine is gathering. It's like an internet of things device. Gathering data at the, you know, per square foot level of a giant field of what you know, the soil conditions are, feeding it into a system, optimizing what happens next. You know, Ir La Keyed is a great French industrial company also taking a very similar approach in their own and area of industrial gases.

Walmart has really done a very impressive job of reorganizing around small, multifunctional teams. Focusing on problems, you know, very aggressively like the home delivery experience, particularly around groceries as a, as a real strategic opportunity for them and being really agnostic and saying, look. We're going to try a lot of different things. 

We're not going to like dream up the right approach here. We're going to think of lots of ways we might solve this problem, test them relentlessly, rapidly, keep doing different versions, variations, and then find out they've actually done multiple solutions that have been very successful at scale.

And lastly, I love the example of the New York Times, because that's the example I always encourage folks who say, you know, we are just so far behind, or we've been struggling, or I've read your book, or I took a class and I see we've been doing this all wrong. I say, look, the New York Times did it all wrong.

For years they were, you know, kudos to them early to the game of digital transformation. But they made every mistake possible in their first decade. And they finally got to a crisis point where they recognized they had to really change everything about the organization and the business model. And then everything started to come together.

And today they're seen as, certainly in the media world, one of the most leading examples of a, of traditional organization that's really innovating, transforming the organization, driving real growth, great results, very impressive.

For More Information

Brian Ardinger: Those are great examples and it's a fantastic book. It really does provide a lot of tactical insights of what you can do to start making that transformational process. If people want to find out more about yourself or more about the book, what's the best way to do that, David? 

David Rogers: Well, they can find the book. It's already available to order on amazon.com, and the book again is called The Digital Transformation Roadmap. You can also just to learn more, get maybe a taste of it, you go to my website, digitaltransformationroadmap.com or Davidrogers.digital, and if you click there for my newsletter, the subscribe buttons on the site, you'll get an advanced chapter of the book as well as a lot of other sort of insights that'll be rolling out through my new sub stack newsletter over the year ahead.

Brian Ardinger: That's awesome David, I really appreciate you coming on Inside, Outside, Innovation, and look forward to having future conversations with you as well. So, thank you very much. 

David Rogers: Absolutely. Thanks so much for having me, Brian. 

Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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