A Perspective on Driving Digital Transformation

Marcelo De Santis, Former Group CIO Pirelli, Startup Advisor at 1871
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Marcelo De Santis, Former Group CIO Pirelli, Startup Advisor at 1871

Marcelo De Santis, Former Group CIO Pirelli, Startup Advisor at 1871

How do you see companies embracing digital transformation? What are the challenges?

I see two main challenges. The first one, defining ‘why’ and ‘what’ of digital transformation. Digital transformation is about transforming the business leveraging digital technologies; and it should be articulated simple as a  ‘business strategy’”. We need to reflect, is it about digitizing physical products, company processes or building a new business model? Are there any revenue, productivity, or SOM goals to be achieved? I found many times that companies have not defined this well nor did engage the rest of the organization. While this discussion starts with the C-suite, it’s imperative the whole organization understands what it means for them; digital transformation is a “team sport”.

The second challenge is aligning on “how” to execute the transformation. I have seen companies jumping right into setting up Innovation Labs on top of an organizational structure and a culture that is not fit for innovation. A real digital transformation targets not only the creation of “digital things” but also aims to enable “digital DNA”: a culture of innovation, agility and experimentation. This requires different organizational structures, behaviors, tolerance to risk and somehow permission to fail. An upfront assessment of the cultural shifts required is critical.

  A real “digital transformation” targets not only the creation of “digital things” but also aims to enable “digital DNA”: a culture of innovation, agility and experimentation​  

You mentioned “permission to fail” what do you practically do on this aspect?

This is definitely a conversation to have early on with the C-suite before starting the journey. If the company aims for “breakthrough innovation” you need to create the space for the teams to experiment and fail without being penalized. The reason is that you will basically be dealing with initiatives with ambiguous outcomes. On this point, you might want to borrow from VC firms the way they manage a portfolio of startups with different levels of risk. They actively evaluate the injection of funding based on the evolution of each venture and the learning obtained through gradual experimentation. They might allocate more funding or even withdraw it from ventures that are not validating the original hypothesis.

So, while the “permission to fail” is foundational to breakthrough innovation, a framework to guide the portfolio of experiments ensures we are properly enabling the “why” and “what”.

How do you know when to dismiss one experiment? And how do you deal with the teams that “fails”?

This is where methodologies like “lean startup” can help since traditional innovation processes are not fit to manage breakthrough innovation. Lean startup introduces the concept of “validated learnings”. Here you define a hypothesis for a business idea, a set of success metrics, develop a minimum viable product to rapid-test and finally – based on the success metrics - make the decision to continue, pivot or simply abandon the development of the solution. For instance, when you look at early stage startups besides looking at the metrics, you like to pressure test the “validated learning” to discard false alarms. A good question to ask is “how do you know you have actually learned [xyz]?” that will help to crystalize the quality of the learning.

To your second question, if you aim to build a “digital DNA” to encourage experimentation, you must celebrate successes and failures. The fact the team has quickly provided “validated learning” has already delivered cost avoidances while accelerating time to market. If you do not celebrate the value of the learnings you are tacitly “penalizing failure”. Culture is what you do, not what you say.

What are in your opinion, the technologies that are ready to contribute to “digital transformation”?

If we are talking about tech with a decent maturity to contribute to businesses today, I pick cloud, IoT and AI.

The first one – cloud – is to me a must, and at this point a no-brainer. There is no possible digital transformation that can be achieved without having a cloud first mentality. To me the future is about a “hybrid cloud approach” that recognizes the different types of computing workloads. I think some workloads better fit public cloud while others are better in private cloud, on-premise or at the “edge”.

The second one – IoT – is larger agenda than “sensors” in manufacturing plants. It is about thinking how many of our processes, products or customer touch points can be augmented to by “sensing” variables that drive efficiencies or build better experiences. Important to build a strong IoT & Analytics platform to manage the devices, data, cybersecurity and obtain actionable insights.

The third and last is AI, which is not a hype anymore and it is mature for businesses to generate results. Think about these facts: Investment in AI startups was up 56 percent in 2017, plus Google, Amazon, Microsoft and Ali Cloud are offering already MLaaS and lastly AI-specific processors are nowadays embedded in most consumer devices. So, do the math: Investment + As a Service + Mobility. Is not this a sort of formula for consumerization of a technology? Get your proof of concepts started, AI it is ready for enterprise adoption.

Finally, what would you say to companies that are still in the fence on whether or not to launch their digital transformation?

As Henry Ford said, “Whether you think you can, or you think you can't - you're right.” A future-proof business vision must have technology and data at the center. It’s all about vision and leadership; and its definitely time to lead boldly.