Why the whole board should join in on digitalisation

Source: Management Scope magazine (April 2017); Interview: Jurgen van Weegen – Text: Marike van Zanten

Many businesses are realising that they’re not built for the digital world. It’s important to let this sink in, says Professor Stijn Viaene of Belgium’s Vlerick Business School. Only when the whole board is on the same wavelength can the organisation really start to transform. What about bringing in consultants to ease the process in a little? “Don’t accept lazy directors: demand that everyone pulls up their sleeves.”

A couple of days before the interview, Stijn Viaene stood before 34 executives, all trying to find their footing in times of disruptive innovation. His task? To initiate them in the secrets of successful digital transformation. Top-level managers expecting phased plans were bound to be left feeling cheated. The Flemish management guru – with trendy glasses, beard and an infectious laugh – says he hates methodologies and instead holds a sacred belief in a principle-based approach, rather than rule-based, when it comes to steering cultural and behavioural change. Most of all, he condemns the behaviour of ‘lazy directors’ who rely too heavily on others. They need to get their own hands dirty. At the same time, Viaene provides assistance to top-level players in corporate Belgium and the Netherlands by paring back the complex reality into manageable proportions with his ‘ExConomy’ model. He is known for his passionate talks on digital transformation, peppered with practical examples from the turbulent world of today’s digital business landscape.

Viaene is a full professor and partner at Vlerick Business School where he heads up the Vlerick Digital Transformation Center. In addition, he advises the CEO and CIO of the VDAB (Flemish Organisation for Employment and Career Development), where he is also a member of the Audit Committee. He is also a board member of JCI Smart Cities, a think tank for urban development. In June, Vlerick Business School and ‘Het Financiele Dagblad’ published the Transformers 200: a ranking of 200 leading Dutch companies that can be seen as pioneers in the field of digital transformation, based on Viaene’s ExConomy model. For Viaene, theory clearly goes hand in hand with practice.

What is digital transformation exactly?

“A digital transformation is first and foremost a business transformation. The term ‘digital’ refers to the dominant role played by digital technology in this transformation. What we’re talking about is holistic, end-to-end corporate change. It is simply not enough for the IT department or the marketing department to change. The entire operation has to undergo a digital transformation. Not only in terms of strategy, but in terms of the organisational structure, processes, HR and remuneration. I still hear directors saying: digital transformation isn’t about IT, technology is ‘just’ an enabler. This is completely missing the point. Technology plays a crucial role in the fundamental rethinking of business operations. Another misconception is that digitisation is the domain of a specific role in the organisation. But no: the whole C-suite has to be on board. Not only the CEO, but his or her whole management team.”

How does your ExConomy model respond to current developments?

“Technological developments have totally changed our external environment and the whole dynamic of competition. In the ExConomy model I differentiate four realities within this new actuality. First of all, customer experience holds a central position. Customer experience has become the most important value for companies. A negative experience can lead to the loss of a customer in the blink of an eye. Second: the customer has become a moving target. He or she is the director of their own ‘customer journey’ through mobile communication and social media. You have to be able to follow that customer in order to spark the right interaction at the right time. Companies are no longer in a position to do this on their own. Which brings me to the third point: organisations have to work together in ecosystems. In the future, competition no longer entails a battle between individual organisations to curry favour with the customer, but a showdown between the strongest ecosystems. The fourth and final point: the power of these ecosystems is determined by digital platforms and the ease with which data can be exchanged.”

It’s clear that companies are being forced into a digital transformation by external factors. How should they go about the transformation of their business?

“People often think this is a question of who in the company should be the owner of the digital transformation, but this is misguided. It’s a matter that concerns every discipline of top-level management. The whole board needs to form a ‘band of brothers’, a coalition that speaks the same language: the language of the ExConomy. Every executive needs to translate the four realities to his or her area of responsibility and proceed based on the relevant skills. Customer experience, for example, calls for design thinking, for real ‘outside-in’ thinking. A good example of this is Motif Investing, a fintech that enables customers to put together their own ‘shopping cart’ of investments based on their own insights, preferences and values – their motives. Then the system cleverly provides the necessary robo-advice and social benchmarking in order to sufficiently outline the risks for the customer. It’s a far-reaching form of co-creation and a good interplay between business, customer and the creative power of digital technology. Customers today are moving targets. As a business, you have to keep them in your scopes, as it were, in order to follow them on their virtual journey. Only data, big data, provides access to the digital identity of the customer and their ‘second life’. Good data management is critical in order to come out on top.”

You give the example of a fintech: why does this seem to present so much of a challenge to traditional banks?

“Banks are already working hard on transformation, actually. But start-ups have the advantage of being free thinkers; they are not bogged down by all manner of policy rules and procedures. If employees at large companies start to colour outside the lines, they are often told: you can’t do that. One example: we set up a digital service lab at the VDAB with a focus on young people. For this we came up with an app that worked a bit like Tinder: young people were linked to a mentor in their dream sector. A great app, but ultimately it couldn’t realise its full potential due to a complete underestimation of the real challenge: how to effectively reconcile this innovation with the existing business operations, with the other channels. A successful digital transformation calls for the breaking down of silos and a change of mind-set and culture. A start-up has a more flexible structure and culture and can thus move forward and react more quickly than established companies. But why would you, as an established company, not work with them? Well, it puts your existing operations under pressure. But this pressure is a necessity today.”

Should established companies innovate within the existing organisation, or is it better to set up a separate business unit?

“You have two models: the tanker and the speedboat. It takes a lot of time to turn the tanker around. For example, Procter & Gamble has recently said goodbye to around a hundred brands in order to concentrate on the remaining brands and to be ready for the next phase of growth. This is a costly and time-consuming process. What’s more, there is the question of whether the tanker is the right vehicle for the journey that lies ahead. On top of that, it’s getting more and more difficult to form a clear image of what the future may hold. Due to the many strategic uncertainties, you have to take various different scenarios into account. So, it’s advisable to start thinking about deploying a number of speedboats: not putting all your eggs in one strategic basket, but developing a new vision for the future based on the ExConomy model, forming a dominant coalition and exploring different strategies in preparation for different future scenarios. We have to dare to take a gamble on the future. Or even better, multiple futures. On the other hand, it remains a necessity to have a strategic focus: having too many strategic investments may endanger financial continuity. A nice little strategic paradox, in other words.”

The digital world is forcing businesses to consider the need for value creation. How can they best respond to this need?

“First of all, know your customer and make the customer experience central to your approach. In addition to this, companies need to be aware of the unconscious assumptions they are making in their value propositions. Such as when a financial institution gets behind robo-advice, but at the same time keeps an alternative in their back pocket: a flesh-and-blood advisor. This betrays the assumption that some customers still don’t trust a robot. My advice to them: don’t jump to conclusions. Test your assumptions as soon as possible against the customer perspective by means of a pilot product or service. Also test assumptions on the corporate level. Ask yourself fundamental questions to get at the core of the issue: Why did we start this company? Who are we? What do we stand for? How do we stand apart from others? ING provides a nice example of this kind of DNA research. The management didn’t go back to the company’s origins, but back to a certain moment in their history: the moment when ING Direct was launched. In formulating its digital ambition for today, ING went back to this anchoring point of ground-breaking innovation in the financial sector. ING took inspiration from this moment in its history to make the choice to write history today with an innovative approach to banking.”

A brave decision with repercussions for the whole organisation. In Belgium, this led to great unrest with respect to employment. What’s your perspective on this?

“ING wants to move towards a unified operating model in Europe: digital first. Realising this ambition comes at the cost of the autonomy of the national branches and leads to a reduction in the number of employees. This hurts in all the affected countries and sometimes has significant social consequences, as in Belgium. Is ING at fault here? From a strategic point of view, it’s a completely defensible decision. Most of all, employees need to realise that companies and jobs don’t last forever anymore and that employment is becoming more flexible. You could question whether ING has invested sufficiently in the training and employability of its people. Employees need to have a dynamic skillset in order to switch smoothly between different scenarios. But the development of these skills is not only the responsibility of the company but the implicit duty of everyone: the government, the education system and the employees themselves. The latter need to continually invest in themselves in order to keep up. They should see themselves as the first line of defence when it comes to employability, rather than palming off the responsibility for this to others.”

Are directors also duty-bound to lead the digital transformation themselves?

“Definitely. It’s up to the CEO to form a band of brothers. This all starts with the digital transformation of the board of management, the ExCo and other key figures in the organisation. Look at Silicon Valley or China’s Silicon Dragon, invite gurus and academics, sit in on the selection panels of incubators, etc. Digital natives have an enormous advantage, directors need to try and catch up with them. The process of realising that your organisation is not built for the digital world can take up to a year. Only when the board has been galvanized as a band of brothers can the organisation really begin to transform and include the employees in this transformation. An important rule throughout the whole process: don’t accept lazy directors, demand they get involved. You can bring in consultants, but ultimately, it’s the directors that have to bring about the transformation themselves, contributing the necessary commitment. They need to resist making it easy for the organisation and themselves. They need to dare to say to employees: We understand that this transformation is tough, and we’ll work together to carry the load, but it’s something that has to happen. No excuses. No compromises.”

How can the ‘band of brothers’ go on to turn the organisation around?

“Cookbooks with detailed recipes are for the kitchen, as far as I’m concerned. I take a principle-based approach. The big challenge is, how you effect change in an existing company without ushering in the changes too hastily and scuppering the transformation. First of all, the organisation must give the customer a central position, such as through the use of a lean approach. In addition, the organisation needs to evolve towards a network structure so that knowledge and innovation can be shared easily both within and outside of the organisation. Furthermore, teams need to be formed that are multifunctional and self-steering. Then you will learn as you go what works and what doesn’t. All very pragmatic.”
Self-steering sounds well and good, but in practice it can be tricky ...    
“True, people often say that they want to make decisions themselves, but then when you give them responsibility for a result many will eat their words. If you say to people: I’ll give you a budget of 25,000 euros, two people and five months to come up with a well-thought-through, ready-to-launch proposal for a radical new digital customer service department, make it happen, most will wave a white flag. So, you have to coach people in ownership and empowerment so that they are fit to take on the responsibility and dare to do so. You have to prevent their managers from back-seat driving and, out of either impatience or enthusiasm, taking back control of the project. This leaves the employees frustrated: so much for empowerment!’”

How optimistic are you about the capacity for digital transformation in Europe?

“We’re not doing badly, but from a global perspective, we’re lagging behind. We’re good at technical innovation but not so good in the marketing of it. Where are our Googles, our Amazons, our Apples? We need more entrepreneurs with vision and courage. In Europe, we’re also good at collaboration, but not in the sharing of data. Admittedly, governments often don’t make it easy for us. But organisations need to change their DNA themselves and move towards a different architecture, a flexible and modular structure comparable to Lego. This paves the way for collaboration and the exchange of information. Directors don’t need to start carving up their whole organisation, but they do have to decide which parts of the organisation need to be transformed in order to facilitate the exchange of data with partners, like start-ups. Otherwise they won’t be able to catch up with Silicon Valley and digital native companies. The Chief Executive Officer has to transform him- or herself into a Chief Enterprise Architect.”

Want to learn more? On the 5-day management programme ‘Digital Leadership’ you’ll learn how disruptive technologies – like social media, analytics, mobile and cloud – have the power to make your business perform like never before. Discover this innovative programme.

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