Digital Transformation Implementation and Measurement Challenges with Tim Bottke, Senior Strategy Partner at Monitor Deloitte & Author of Digital Transformation Payday의 전체 녹취록

been more digital. At least that's what we believe than many other industries. And that's why with all these companies going up, down, growing, being restructured, transformation has always been there. So it has always been a key interest area I've had. And that's why when the digital transformation hype and I'll call it came up, it has come up several times. It just became the core of my work because there was no transformation where there was no digital inside. And then I had, I still remember this meeting with a dear, really dear client of mine, a CEO who basically said, look Tim, two more years as a CEO in this company. Maybe three. I want to do bigger things. We both know I need to transform this company. Digital transformation is the term. It costs half a billion, and I'm sure I would not see any single benefit while I'm still the CEO. Is it not a better idea if I start wearing jeans and trainers? As of next week, I make my investor relations team paint our annual report with a lot of digital AI, whatever the term is. I invest 50 million in this case, in major startup city of the country, put an incubator and then have some innovation speeches written for me, et cetera. Is that not better and safer for my career? Tell me if I go the other route, what will shareholders benefit really? Please tell me and had no answer. And you know how frustrating that is. At least to me. It was when I couldn't really give a good answer. And it was also clear that mumbling along, throwing a few buzz words wouldn't solve it. So, I went on a quest to solve it. I first started internally. Then no one had the patience to really dig into it because it was, you know, everyone was running high speed digital transformation project after project. No one wanted to question the bigger theme of value, et cetera. But I still got the go from our leadership to work on it by myself. So, I went back to academia. I found out no one has solved it there either, even though IT transformation, you know, has been a trend for long time. IT value has been assessed in hundreds of articles and books, but it didn't ever jump over to digital. It was rather the claim people saying, no, these rules do no longer apply. Now it's digital. We don't need KPIs. It's all about scale. It's all about different KPIs. It's let's be Agile. Look, all these things. And then I started saying look, there needs to be a data driven answer. And that took me some time because I also had a job to do in parallel. I'm still a consultant after all, but I fixed it. I solved it. And that's where this book came from. Brian Ardinger: Yeah. My understanding, you spent about four years researching it, and looking at different ways companies are approaching digital innovation and that. So maybe we'll start with the question, you know, where do companies get digital transformation wrong? You know, what does the research show? What are some of the pitfalls that people are encountering? Tim Bottke: The good thing is I think there is just one single pitfall everyone needs to be aware of. That digital transformation is an end-to-end journey. And no matter what you do. And I have a framework in my book, which is explaining a bit what end-to-end means. But wherever you start, you need to be sure that you know where you want to get. So very often the key thing that companies get wrong is they believe they need a digital strategy, but they don't from my perspective. What they need is a strategy, a strategy to win in the marketplace. And very often in current times, digital can play a key role in it. But they often think if they implement the coolest new CRM system cloud-based with AI supported analysis engines inside. I think the two of us could throw buzzwords now for the next 10 minutes. That this will change anything in terms of success for them in the marketplace. But it doesn't because very often all competitors work on similar things. They very often even use the same software. So, they have the same systems. Often in a few cases, even the same consultants with Chinese walls or whatever. But so they will never end up in a place where when they finish and they never do, they will be better off compared to where they were before, vis-a-vis competition. They might be a better company, more efficient, leaner, faster, but what if all your competitors do the same faster at the same speed? Then you end up in the same market position and you really have to know what you do all this for. So, to answer your question, there's one single thing which is lack of strategy. Lack of end-to-end view. Brian Ardinger: Are you seeing that happen primarily because digital transformation seems to be driven by different parts of their organizations? Or maybe what are you seeing when it comes to how companies are approaching this? Is it from the standpoint of, well, we need a cloud strategy, or we need blockchain, or marketing's driving it because of whatever. What are you seeing in that space? Tim Bottke: That's exactly true. We, as Deloitte, and I strongly believe that this is the reason why it's a CEO topic. And it should be CEO topic. And the CEOs these days, they don't need to understand everything in deep detail in terms of what digital is and what technology's behind. But their task is to get all this complexity under control and have one shared picture of where they're heading. And I've had discussions with clients very often. They say, Tim, I don't want to know what this software can do. Or yeah, I can talk about AI for a minute, but I don't want to know really how natural language processing works and what does it do and machine learning. Yes, I can, I don't know. Then I usually would say, yes, you don't have to know, but you have to know enough that you can get things together in a way that they make your company move. Because very often, as you said, there are silos, there are pilots. Then, I don't know, for robotics process automation, I've seen

that there is a pilot. Everyone is excited, and then after a few months they find out that actually the pilot was so great because it was selecting a process in the company, which doesn't scale. But one where it worked nicely. And then they save, I don't know, the equivalent of 10 FTEs. They can put that capacity somewhere else, and then they find out that they have 30,000 employees and that these 10 really don't make any difference for anyone at any point in time. Brian Ardinger: So where do you think companies should start? Maybe even to the standpoint of maybe the CEO's not even convinced yet. Are there things that the average user within a company can start thinking about talking about or, or moving the needle towards, when it comes to digital transformation? Tim Bottke: It's very hard to say. There's no one common theme where you say you should start there. So, these days, very often we see that people believe that the people side of things is crucial. So, you have all these Agile coaching. You start learning how to work Agile. You do agile workshops, and yes, that's a good starting point. But as I said before, it's all about the end-to-end picture. It won't help if you're not able to select the right technologies. If you are not able to find the right vendor. If you don't know how the benefits were really materialized. If you do not simplify your business model, but just replicate what you have. As the framework in the book shows, you can start somewhere at the frontier, as I call it. So, in easy place of the company where everyone is just by definition, wearing jeans and trainers and it's all cool and Agile and design thinking, you know. It's, it's all very, very helpful tools. But I've seen many times that this is working very nicely in this little remote outpost, and it never gets back into the core of the real business. So, if you start somewhere in a certain pocket, then there needs to be a plan, how to make that work at scale and at impact in the core business. If you believe your core business has a reason to exist. There are also some companies where that needs to be restructured and dismantled at some point in time. But even though many books and articles say so that happens less often than you think. There's always a core in the company, which is worth protecting, at least in many businesses. And it's not really like you can just, it's a great idea, that's my favorite quote, disrupt before you are disrupted. Yeah. It's easy to say what does it really mean? You close your company and do something new and that cannot be the answer. Certainly, your shareholders wouldn't allow this because they would wait for the large cash flows, which hopefully were there before to be back before you dismantle the old stuff. Brian Ardinger: So, in your book you talk about how different industries should be looking at maybe different levers to achieve better return and that. Can you talk about the differences in how industries should be

approaching digital transformation and which ones are maybe on the leading age versus the lagging edge? Tim Bottke: There was a very interesting learning. So, what the book does, or what your research did was looking into more than 20,000 reports from companies. Then using natural language processing to understand what they're really doing in digital. So, something, it's, there are millions of pages, no human could have done that. We needed some digital transformation in the research to understand what they do. And obviously you can then look into how do different industries behave differently? And the assumption based on experience was they have huge differences, and they are. Obviously, some companies and some industries and sectors are more on the forefront. So, they talk more. They do more digital than others. And others do less. And I think the, you will find more in the book, but the key learning for me was that it's not like you could easily say, look, you are a industry which is lagging. You should speed up. That might be true in some cases, but I have this interesting example where I had a discussion with the executive of an insurance company. And I was saying, look, I look into my data, and you really are nowhere compared to the others. They said, Tim, yeah, we know you're a consultant. You're great in analysis, but partially it's on purpose because we make a lot of money based on in-transparency in our market. And in our home market we still have the beauty of lack of transparency because there's no Insurtech making transparent everything. Putting everything in the open, et cetera. So, we believe we shouldn't disrupt ourselves before we are disrupted. Because we would make good money at this point. But what we did is in a different country, which is not our core market, we've launched an Insurtech. We are learning how to do it, we are training. We are taking the incumbents there. And as soon as we feel that in our home market, there is some disruption coming. We take the people which are ours, we bring them to our market. We use the platforms, and we can be there. But until then, we are actually happy that we are lagging. And you cannot generalize this story, but I think it was very interesting because I think it's arrogant and many other things at the same time to tell someone that in general as a sector, they are lagging because we come back to strategy. There might be some where the lagging is due to a terrible, wrong strategy. But it might also be good strategy, not always to be the first in everything. And you see that for some big IT digital transformations that some companies in my client portfolio, they were better off waiting a bit until the, as we say in German, the children problems of some technologies are taken care. And then start. And they saved a lot of money in the process. Brian Ardinger: A lot of the book you talk about how do you actually measure success and how people are currently measuring digital

transformation is not getting the results they want. So, talk through a little bit about either the levers or the ways that you can actually measure if you're making progress. Tim Bottke: So first, I think one thing which was very interesting when researching the topic was that, as I said before, there seems to be a trend that it's not measurable. And you find many quotes saying, no, it cannot be measured. It requires different KPIs, and I strongly believe that that's not true because we do all these things. We still do them for business. Business has some certain rules which end up that at some point in time, It needs to make some profit. At least that's my belief. Maybe I'm old fashioned, but I still believe it's all done for some profit. And that basically means whatever you do, if it has a cost and digital transformation has huge costs, okay? It's not like when you really take things seriously, it's not about just saying agile 10 times and then you're done. You need to invest, revamp your whole systems, find or reeducate new people, or reeducate your current ones. Many things. So, it's a heavy investment for every investment a business case can be done. The only difference is that in digital transformation, sometimes there is less certainty about what the KPIs will lead to, but very often people have shied away from doing that at all. In the book, you will see what I've defined as accelerators. So, it's all about the payday. That's what the book title is all about. So, when do you get your money back? And it's not so difficult to, for everything you do into transformation, find the accelerators, which will lead you quicker to your payday. And the often-underestimated accelerators, so the investments in whatever technology, people, consultants, lawyers, cyber, all these things which people tend to forget. And then you can do a business case for yourself, which will never be correct. We'll always be wrong. But I've learned that it's still better compared to just saying digital cannot be measured because at some point in time when such a high share of transformations fails as you probably, there is this number 70% fail. Funny enough, when you research where this number's coming from, it's very often self-referencing. So, someone at some point in time, some researcher asked, and now it's always 70, 75, 80, 85. But anyway, even if it would be 50, it's too much. So, there will always be a point in time when someone will ask, where's all the money gone? That's what the case is needed for. So that's the first part. The business case. Did they need to be measured? The second part is, what value does it generate for your shareholders? And that's what the book is also about. That the internal business case is not directly correlated to the value the shareholders see in how you digitally transform. It's what you say and what you do. And then in some sectors, for some companies it's appreciated. Depending on their profiles and others it's less.

And that's the context every company needs to understand when they work on digital transformation. Brian Ardinger: So last topic I want to talk about is, you know, what are some of the maybe technology trends or that you're seeing that will make it easier for companies to maybe adopt digital transformations in the future? Tim Bottke: I think it will be tougher, quite the opposite. Because the, the one thing which really changed compared to IT transformation is that you almost cannot foresee the upcoming technologies fast enough to understand what really will make the difference. And I think a key capability, which should come out of any digital transformation is the capability of the company to whatever you call it, being able to understand it quickly, understand whether it helps to transform. What the accelerators are. We discussed before what the accelerators are. How does it impact the end-to-end journey? And that's a very rare skill because often you see that then companies, and we come back to CEOs and boards who say, I don't care about all this technology. They should, or at least they should establish a capability in their firm, which very quickly understands what is important, what not. Because you could argue that naming a book, digital transformation today is already old fashioned, because in the end its, but even tech transformation, it's, I don't know, innovation based transformation of whatever form it can be biotech, it can be whatever, and companies need to be ready. So no, it's not going to be easier. And whoever is promising I think either have found the holy grail, then we should congregate them or tries to oversimplify. For More Information Brian Ardinger: Well, Tim, I want to thank you for being on Inside Outside Innovation. It's a fascinating topic and fascinating book. I'd encourage people to pick it up. It's called Digital Transformation Payday. Tim, if people want to find out more about yourself or more about the book, what's the best way to do that? Tim Bottke: I think the easiest is to go to the landing page for the book. It's very easy. Www digital transformationpayday.com. And you will find more information on the book, on me, and you can reach directly, reach out to me over this channel. Brian Ardinger: Excellent. Well, Tim, thanks again for being on the show. Really do appreciate it and looking forward to continuing to see what happens when we transform the future. Tim Bottke: Perfect. Thank you, 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. FREE INNOVATION NEWSLETTER & TOOLS Get the latest episodes of the Inside Outside Innovation podcast, in addition to thought leadership in the form of blogs, innovation resources, videos, and invitations to exclusive events. SUBSCRIBE HERE You can also search every Inside Outside Innovation Podcast by Topic and Company. For more innovations resources, check out IO's Innovation Article Database, Innovation Tools Database, Innovation Book Database, and Innovation Video Database.