Dan Toma of OUTCOME On How To Use Digital Transformation To Take Your Company To The Next Level

Don’t lose touch with digital native customers. By pursuing a digital first approach a company will not lose touch with its younger, digital native, audience. For people that are not used to going to an office for example to ask for a certain document, get a document approved or pay for a service — companies that are stuck in those practices look dated and they will most likely not get any business from a digital native audience. Many utilities companies have invested a lot over the past years in making their services as digital as possible — removing the need for the customer to interact with the company at the company’s offices but rather online or in an app.

As part of our series about “How To Use Digital Transformation To Take Your Company To The Next Level”, I had the pleasure of interviewing Dan Toma.

Dan Toma is the author of Innovation Accounting: A Practical Guide for Measuring Your Innovation Ecosystem’s Performance and The Corporate Startup: How Established Companies Can Develop Successful Innovation Ecosystems. Together with his team at the consultancy company OUTCOME, he focuses on enterprise innovation transformation, specifically on the changes blue-chip organizations need to make to allow for new ventures to be built in a corporate setting. In this capacity he worked with companies like Deutsche Telekom, DNB, Jaguar Land Rover, Bayer, John Deere or Allianz.

Thank you so much for joining us in this interview series. Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I started my career in entrepreneurship — and this was a long time ago, when being an entrepreneur was synonymous with being unemployed :)

At one point — more by change than by design — I was offered a job with a large telecommunication company and that’s when I started on the path of corporate innovation. During that time, I co-authored my first book The Corporate Startup, a book that looks at the changes large organizations need to make to be able to innovate. Following my employment period I went back to entrepreneurship — I founded a consultancy company called OUTCOME. At OUTCOME we help large organizations transform for innovation while running their today’s core business.

In the years following the release of The Corporate Startup I turned my attention to the topic of measuring innovation. Recently released a second book called Innovation Accounting. This new title looks at helping innovation leaders measure their innovation investment.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?

There are many mistakes I made and to be honest I’m still doing — trying to learn something from each and everyone. I think a funny one was when — with my first startup — I was preparing for a startup event and we had to design and print business cards for everyone on the team. About 300 or 500 of them in total. And guess what, I misspelled our domain name so all our email addresses were wrong. And being a startup, you can imagine we did the business card the evening before the event so there was no change for redoing them.

At the event everyone had a Sharpie with them to write the right email address on the card when they were handing them out.

What I learned from this?!?! Two things: always tipple check before pressing ‘print’ and always carry a Sharpie with you :)

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?

There are many people who helped me along the way and there are many people currently helping me, but the one person I think I owe the most to is Tristan Kromer. We’ve been discussing innovation and helping each other out for more than 10 years now. If I’m not mistaken, we connected over the Lean Startup Meetup movement — Tristan was organizing the LSM in San Francisco when I was organizing it in Berlin.

Our relationship has expanded from LSM, we started co-writing articles and in general exchanging ideas about innovation management, entrepreneurship and entrepreneurial education.

At one point after quitting my corporate job I was looking for the next ‘adventure’. As I was reaching out to my network letting everyone know that I was finally ‘free’, Tristan was the only one that said he could help. Under his company, Kromatic we did a very interesting program in South East Asia, helping the Vietnamese government build a country wide innovation ecosystem. That program and my time in Vietnam had a massive impact on me personally but also professionally. And that project wouldn’t have been possible without Tristan.

Is there a particular book, podcast, or film that made a significant impact on you? Can you share a story or explain why it resonated with you so much?

There are some that come to mind but probably a movie I like rewatching is Moneyball. I think the movie is a great metaphor for the importance of taking data-informed decisions in business and obviously in innovation. For me at least, it’s very inspirational how — only through the use of data — a group was able to turn the world upside down and come up with a new model for doing things (essentially disrupting an industry).

Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started, what was its vision, what was its purpose?

When we founded OUTCOME we said we want to help companies reduce the cost of innovation while increasing outcomes. We believe that too much is being wasted on ‘innovation theater’ and something needs to be done about it — companies need to get pragmatic about their innovation investment.

Are you working on any new, exciting projects now? How do you think that might help people?

There are some really cool things we are working on now — but I think the one I’m most excited about is a new software product we are just launching. The software is called SATORI and is helping companies measure innovation investment — especially putting into proactive some concepts we’ve put out in our latest book, Innovation Accounting.

The concepts from Innovation Accounting are pretty easy to understand — I was told. However, putting them into practice is difficult in absence of software. It’s just going to take too much admin time. That’s why we decided to invest in building this solution.

Thank you for all that. Let’s now turn to the main focus of our discussion about Digital Transformation. For the benefit of our readers, can you help explain what exactly Digital Transformation means? On a practical level what does it look like to engage in a Digital Transformation?

I’m not sure if we need to be dogmatic about Digital Transformation and establish a single definition. I think we should discuss the principles and goals behind digital transformation and let every company create its own definition.

In my opinion the role of digital transformation is to keep the core business of the company still relevant in a digital-first world. Business models have expiration dates — these expiration dates are influenced by the desirability of the business in the market but also consumption trends and macroeconomic conditions. Digital transformation is prolonging the expiration date of the core business in the face of changes in consumption patterns.

For example, customers expect an increased level of transparency or a decreased waiting time — otherwise they will find alternative options in challenger companies. Digital transformation is helping industry incumbents keep up with the digital-first competitors. You can observe this in industries like banking or logistics.

Therefore, digital transformation is becoming a must for legacy companies as it protects their core business and buys them time to innovate to create the offerings of the future.

Which companies can most benefit from a Digital Transformation?

I believe that every company can benefit from a digital transformation — I think this question is like asking in the early 90’s ‘which companies can benefit from an Internet presence?’. Obviously, some companies will benefit more than others and these companies are the ones currently having low efficiency as a result of dated processes or the use of a fully analog value creation system.

Furthermore, companies that are active in industries that were historically highly regulated or had high barriers of entry due to regulations, and are now experience deregulation (e.g., banking, financial services, telecommunications etc.) will benefit from digital transformation a lot as they will be the ones facing most competition from challengers over the coming years.

Another group of companies that will benefit from digital transformation is made up of companies that have benefited for years from the lack of transparency towards customers and were able to forward integrate the cost of their low efficiency to the end consumers (e.g., energy suppliers). These companies will benefit from digital transformation as their industry is a prime target for disruption by startups and challengers set out to drive end-consumers’ cost down by simply delivering the same value in a more efficient and transparent way.

We’d love to hear about your experiences helping others with Digital Transformation. In your experience, how has Digital Transformation helped improve operations, processes and customer experiences? We’d love to hear some stories if possible.

I think this question is very similar to: “Ok. Thank you. Here is the primary question of our discussion. Based on your experience and success, what are “Five Ways a Company Can Use Digital Transformation to Take It to The Next Level”? Please share a story or an example for each.” Please refer to that question for the answers.

Has integrating Digital Transformation been a challenging process for some companies? What are the challenges? How do you help resolve them?

Every company is different. From their internal context to their external one, things vary and so do the challenges for adopting digital transformation. However, from experience I’ve seen some ‘recurring themes’ if you want:

• The pull of the core business. Some companies find it really hard to say goodbye to the old ways and adopt new ways of doing business. And in most cases, this is due to the current success of the core business — it’s like a curse for them. They are really successful today therefore they don’t have the incentive to go down the path of digital transformation. However, this can be very dangerous, for when they will need a digital way of working it would already be too late to start the transformation.
• Politics. Like with so many other corporate initiatives, a digital transformation can be affected by politics, personal agendas and turf wars. Politics are a given when it comes to any corporate environment but if you also add the potential uncertainty that comes with digital transformation to the mix, things can be very volatile very quickly.
• Lack of planning and/or tangible roadmap. Transformations are complex endeavors; therefore, planning is crucial. But in some cases, there is not enough effort put into planning the transformation and half way through the company develops transformation fatigue. At that point the transformation not only stops but it goes in reverse — people start going back to the old ways and they start opposing everything that has to do with the initiative. Hence, it’s important to have a clear plan with achievable and tangible milestones that people understand and that will have a clear and tangible impact.
• Lack of measures to help people get behind the transformation. Connected to the point made above, it’s important to put some measures in place that tell the story of the status of the effort. Every company embarking on a transformation journey should have two sets of measures to follow: one tracking the progress of the transformation, the other one tracking the impact of the transformation. If these are properly communicated, more and more people will get behind the effort as they see progress and impact.

Ok. Thank you. Here is the primary question of our discussion. Based on your experience and success, what are “Five Ways a Company Can Use Digital Transformation to Take It to The Next Level”? Please share a story or an example for each.

Depending on its context and strategic ambitions a company can pursue a digital transformation in order to achieve one or more of the following:

• Improve efficiency and drive the cost of doing business down. Through digital technologies and a new way of working which puts digital technologies in the core of the operations companies can drive the cost of doing business down. At one point I was working with my team helping transform a financial institution. One of the first beneficiaries of the digital transformation was the credit approval unit where instead of calculating the risk for every credit manually or with a complex Excel sheet the company decided to invest in AI. The new AI tool that was developed and deployed was able to compute the risk of a credit applicant in less than 5 minutes, compared to the old way of doing this operation that took hours if not a couple of days to complete. By deploying the AI analysis tool, the cost of giving a credit to a client was drastically reduced.
• Don’t lose touch with digital native customers. By pursuing a digital first approach a company will not lose touch with its younger, digital native, audience. For people that are not used to going to an office for example to ask for a certain document, get a document approved or pay for a service — companies that are stuck in those practices look dated and they will most likely not get any business from a digital native audience. Many utilities companies have invested a lot over the past years in making their services as digital as possible — removing the need for the customer to interact with the company at the company’s offices but rather online or in an app.
• Improve customer experience. Connected with the point above, digital transformation, (if done right) will have a serious impact on the customer experience (CX). For example, instead of going in person to a company’s office or sending emails I can find the status of my application for a certain service is a well-designed and intuitive app. Banks have improved their CX a lot when it comes to the relationship they have with vendors or small businesses offering the entire ‘in office’ experience in an app or in the online bank.
• Build new business models or enhance existing ones. Digital technologies allow for the development of business models or can help renew old business models. The best example that comes to mind here is Hewlett Packard Enterprise. If HPE was known the past a manufacturer of IT devices such as servers, laptops and even some components, though digital technologies they have expanded their portfolio to include software as a service solution. Another example of a company expanding beyond its traditional core through the use of digital technologies is Roche. If the Swiss headquartered company was well known for their drugs, for the past years they have been expanding into software solutions for labs, clinics and researchers.
• Enable a new mindset in the employees. The benefits of a digital transformation don’t have to be all financially quantifiable. Companies embarking on this journey might see benefits that have to do with the employee’s mindset. By putting digital first, companies force employees to approach problem solving in a completely different way, making a change in how employees relate with problem solving. Digital technologies allow for faster experimentation which transformers problem solving in a scientific exercise from a planning one. With the use of digital technologies, it is far easier to A/B test solutions than it is to make a very detailed plan. This in term has an impact on the mindset needed from the employees and/or the mindset employees will develop.

In your opinion, how can companies best create a “culture of innovation” in order to create new competitive advantages?

I believe that culture follows process and incentives. We can’t talk about a radical culture shift or building a certain culture without talking about process and incentives’ change. If a company wants to build a culture of innovation, it needs to look at the process that enables that culture to form and how they differ from the one currently in use. Same goes for the incentives. Look at what is currently incentives and see if this is in-line with the culture you are trying to build.

This said, I’m not downplaying the role culture development activities such as training programs have in building a culture of innovation. But trainings without a change in process and incentives won’t have the desired outcomes. What’s the point of teaching a person how to behave in a certain way when the process she needs to follow encourages a different behavior than the one in the training?!?!

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“Logic can take you from A to B. But imagination can take you anywhere” — Albert Einstein. I can’t say this is my favorite but is definitely the one I come back to the most as it stresses the importance of imagining how things work beyond what’s given today or how things are done today.

How can our readers further follow your work?

The easiest way would be to follow me on LinkedIn and/or Twitter. But also checking out the blogs I’m writing for: the OUTCOME blog, the Innovation Accounting Book blog and The Corporate Startup book blog.

Thank you so much for sharing these important insights. We wish you continued success and good health!