It’s Time To Get Real About Digital Transformation.

Digital transformation, ugh! It hurts just to say it.

I’ve just returned from an amazing conference, hosted by Insight Venture Partners, where C-level leaders and board members discussed the opportunities and frustrations of digital transformation. By all accounts, getting this stuff right is really hard. Really hard.

Even for the smartest and most experienced leaders.

For these leaders, and others like them, the challenge has been to use digital transformation to establish or maintain product leadership. The results have not been encouraging. Change is always hard, but add the concerns of cybersecurity, cryptocurrencies, AI/ML, IoT and whatever the next startup is doing, and this change has a whole new layer of complexity.

So, how do you build a product leadership organization?

(Hint: Digital transformation isn’t about going paperless)

Even Harvard professors, Thomas H. Davenport & George Westerman, don’t seem to really know why digital transformation efforts fail more frequently than not. Their attempts to explain the frequent failures are noble, but ultimately somewhat useless because they only describe macro-economic factors, not the product level challenges and solutions.

Leaders don’t get any insight from rear-view mirror commentating. Declarations like, “many factors, such as the economy or the desirability of your products, that can affect a company’s success as much or more than its digital capabilities” or “it is multi-faceted and diffuse, and doesn’t just involve technology” don’t tell us how to do things differently.

They just confirm the obvious.

“[transformation happens]…not around process, but rather organizing humans in a way that allows us the opportunity to remain agile in a changing environment.”

-Nate Walkingshaw, CXO of Pluralsight

The Insights So Far

Throughout 2016 and 2018, together with my coauthors of Product Leadership, and driven by the curiosity of what was working, we interviewed dozens of companies like this…

Our goal was to understand what product leadership businesses were doing differently from the rest.

The key insight from interviewing hundreds of companies:

You can’t create product leadership from the bottom up.

Since the publication of that book I’ve had the pleasure to talk to several dozen more leaders about what makes them leaders in their markets. this time my attention has been on enterprises navigating the muddy waters of digital transformation.

The challenge I’m most interested in learning about is, what are the successful companies doing at the product level that’s giving them an advantage?

Here’s a sample of the companies I’m interviewing or working with directly via my product design company Fresh Tilled Soil…

I’m about 40 interviews into my research and I’d like to share with you what I’ve learned so far.

We’re using the wrong mindset for an entirely new set of problems.

Or as Rob Wolcott, Professor of Innovation & Entrepreneurship at Kellogg likes to say about companies dealing with a changing environment, “You take the new thing and shove it into the old paradigm”.

It’s my strong opinion, backed by dozens of interviews, that companies embarking on a digital transformation are trying to apply company level strategies to a product level problem. As my friends over at Radical Product have eloquently said about this situation, “These are completely different classes of problem. It makes perfect sense that the same framework would not apply to both”.

Let’s break this down and talk about the specifics.

Who Leads Digital Transformation?

The first paradigm that needs to be questioned is the one that digital transformation is an executive level initiative. While this is true in terms of aligning the company and the resource allocation, it’s implementation happens at the product level.

Once the product organization has established it’s own Product Vision and Product Strategy (I’ve written in detail how to do that here and here), the executive leadership needs to support that with the company-level capabilities and resources. For enterprises, the CEO needs to drive digital transformation in two ways:

1. By creating alignment across each of the product visions under the org.
2. Support the product visions with company-level resources.

Enterprises are very different from startups, but we keep treating them similarly when it comes to adapting to changing environments. In the first year or two of a companies life, it’s very common for the CEO to also have the original product vision and to lead the day-to-day product conversation.

The problem is when this is still happening well after the company has some traction. After a few years the CEO is not close enough to the details to really be useful and they are also not using their time wisely by doing this work.

With the support of the CEO the company needs to focus it’s transformation efforts on the product level. The big question is, who is where on the learning continuum?

What’s The Learning Continuum Got To Do With This?

Borrowing from the work of Noel Burch, and more recently from my friend Jared M. Spool, every individual, team and product org within the larger company structure sits somewhere on this leaning continuum.

To be clear, the entire organization can’t be evaluated on this continuum because there are way too many variables. However, you can evaluate a product-level org inside the company using this method. Take a look through the learning stages and honestly assess where your product org sits.

Seriously, it’s better to be honest than optimistic.

Now take a deeper look and see what stage describes where your product org lives right now. Stay focused on the product level only.

Now, identify what behavior is common in your product org.

It’s critical to understand that a product vision is different from a company mission. If your enterprise has a mission but no product level vision then you’re at either stage 1 or 2. This is pretty common. Most companies are relying on the company mission for getting their highest level alignment. That’s a mistake.

Agile-ish and Scrum-Theater

Most companies embarking on ‘digital transformation’ are still at stage 2. They know what’s not working but are under the illusion that process will save them from ignorance. These companies are using an Agile or Lean process in name but not in practice. This is what’s sometimes referred to as scrum-theater.

If your software team is the only Agile part of the product team, that’s scrum-theater. At this stage you’re gathering little or no market feedback. Product backlogs are prioritized around dev and engineering and not for customer value. Product teams are rushing to build solutions first before validating market value.

In stage 2, there is no product vision, no cross-functional teams, and no way of measuring the value what the team produces relative to the customer’s experience.

Everyone Is Different, But That’s Okay

It is highly unlikely that an entire product org will have equal skills and maturity. Product teams and functional departments will be spread across the continuum. There’s nothing inherently bad about having a spread of skills, unless you don’t have a plan to level up people and teams.

The job of the product leader is to consistently move their people up the continuum, or if people are unwilling to learn, out of the organization.

So where do your teams sit?

By identifying who sits where you can determine who can support the transformation and who might need training or be moved out of the org.

So where do the individuals in the product org sit on the continuum?

In any organization, big or small, the influencers are the people that drive change. If your highest paid people are driving opinion then consider the impact on your transformation. If they lack the fluency and literacy required to guide the business through change then you’re not going to get far.

For each of the product level leaders, remember that the CEO may not be a “product-leader CEO”, especially in larger companies.

The product vision and strategy must be owned by the person who is responsible for the product itself, not someone who sits at a higher level in the org chart.

The Self-Actualized Corporation

As individuals we’re always told that self-actualization happens when you recognize your strengths and weaknesses, both real and imagined. The same is true of self-aware product organizations: There’s a recognition of what the organization is capable of and what still needs to be worked on.

First learn how to be successful in the stage you’re in, then learn how to move to the next stage. Making these transitions successful means building on the previous stage. This doesn’t mean always starting at Stage 1, it just means you must build on what you have already started.

Don’t pretend you’re better than you are. That doesn’t help anyone. Acknowledge were you are struggling or simply still learning, and own that. Forcing change before you’ve figured out where you are can be traumatic.

It All Starts With A Product Vision

Why do you need a product vision? Because it simultaneously aligns your product with a customer pain point or need, while filtering out who on your team will stay and who will go.

Here’s how that works. A product vision inspires some and scares others. While a company mission sets the purpose for why a company should exist, a product vision suggests a future state in all it’s glory. It’s a great filter to motivate and activate the best in your supporters.

It’s also a great way to get fence-sitters to decide where their loyalty lies and possibly ‘get them off the bus’.

Getting To Stage 4

Although my interviews have revealed that very few companies are at stage 4, there are several that have either achieved this or are showing promise. Pluralsight is one company that has moved it’s product level organizations to stage 5. They deliver customer-centric value at a mind-blowing pace.

How are they doing this? Once you have developed a product vision and strategy you need to organize and measure the best of the teams energy. Structuring teams to succeed is a longer-term effort that follows the above work.

This is done by creating autonomous cross-functional, and very often, co-located teams.

I invite you to dig into this a little more if you’re a team leader. Martin Eriksson has done us the favor of describing these team dynamics in much more detail than we’ll cover here.

These are called Product Experience Teams, a term developed by Nate Walkingshaw and his team at Pluralsight.

Their structure enables them to develop an environment where the team have power over their actions as they stepped towards the vision. It also allows the company to stay relevant and ensure product-market fit.

In short they are aligned around a customer-driven Product Vision, not features. As Walkingshaw says, “There needs to be a day where we stop aligning teams and organizations around features. Customers have experiences. Sometimes they use features while passing through your experience. It is more important to begin aligning teams around these experiences to fully understand what customers are doing along their journey.”

I’ll write about the various product team structures in another article because it’s a longer topic. However, I feel it’s necessary to show what a high-performing PXT looks like at it’s highest level. This will give you future state to work towards, even if that is some way off.

For it to be successful, each PXT needs a high degree of diversity in skills, background and experience. Why is diversity so important? It generates positive creative tension, adds new perspectives to discussion and reduces bias. Cognitive bias is at the root of many of the poor product decisions that get made by product companies. Reducing bias not only produces a better product but increases design speed and thus velocity.

Warning: Product Experience Teams (PXT) will only work if you have a clear Product Vision, a Product Strategy, Priorities and Metrics to measure outcomes. Building a team without those foundations is a recipe for disaster.

Creating A Psychological Safe Place

The PXT’s also have to create psychological safe place to have difficult conversations. Simply put, team members need to be able to disagree without fear of repercussions from others on the team.

This shared language is a collection of agreements values and language. Ideally, the team would be given the freedom to develop these shared values provided they are aligned with the product vision and company mission. They also need to be reinforced every day in meetings, terminology and process.

Speed Over Value Never Works

Digital transformation initiatives often feel like they are urgently chasing some arbitrary deadline. This often means customer experience is stepped on in the dash to be first to the digital finish line.

There is no finish line. Digital isn’t something to be achieved. It’s state of being that’s always evolving.

Ignoring the customer gets more done, but the customer is now out of the loop and they stop seeing value in what you’re shipping. They stop buying your stuff. You stop making money. It happens quicker than you think.

Ask Facebook how quickly this can happen.

Digital transformation often overlooks the role of the customer, and maybe more importantly, their user experience. That might not be groundbreaking news, but what’s interesting is that even today, transformation efforts still prioritize technology over UX.

As Paul Boag said a while ago, “Digital doesn’t differentiate in the market place. Providing an outstanding customer experience does. Digital just provides us with new opportunities to do things better. Things like doing a better job of customer service. That is where the value of digital transformation really lies.”

Thank you to Geordie Kaytes for his insights and help editing this monster.

Without the hard work of Nate Walkingshaw and Martin Eriksson none of these words would have made it to this page. Thanks!

I’m also very grateful to Radhika Dutt for her perspectives on product leadership and her work on Radical Product, which continues to be an inspiration for fresh ideas.