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Companies still chasing the digital dream

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A recent survey published by McKinsey found that companies from around the world are re-investing in digital projects again.  What’s more, much of this growth in investment is coming directly from the top, with the report revealing how CEOs are often the ones driving the digitization projects.

When I first heard about the report I kinda dreaded that it would be another example of organizations bowing at the feet of the technology gods and hoping that buying some new kit would solve their woes.  Indeed, the report went on to highlight that many organizations believed they still had to address key organizational issues before the technology can make the impact they hope it will do.

Alas, this hasn’t stopped so many executives putting the technology horse before the process cart.  The McKinsey report revealed that digitization was the single biggest strategic driver in many an organization, with both CEOs and other C-level executives devoting more and more of their personal time and attention to their organizations digital initiatives.

This is despite the lack of tangible benefits those same executives either see, or even expect to see, from that investment.  Just 7% of executives say they understand the exact value at stake from digital, with a measly 4% reporting high returns on their digital investments.  Perhaps even more worryingly, just 40% actually have any processes in place to measure how effective their digital investments have been.

There was a particularly strong sense, especially amongst larger organizations, that their structures and processes were so often unsuited to the new technologies they were investing in.  These structures and processes function effectively with legacy channels, but, according to respondents, are hindering their companies’ efforts to take advantage of new digital opportunities.

It underlines how little we actually learn from history, for the failure to assign process innovation the same importance as technological innovation is an incredibly old one.  A good example to illustrate this point is the shift from steam powered factories to electric powered ones.  Many factories simply replaced their steam powered devices with their electric powered counterparts, maintaining exactly the same layout and organizational processes that had served them well in the steam age.

This was despite all of that not really making much sense.  You see, in steam powered factories, it paid to cluster all of the machinery near to the power source, with the thirstiest machines closest of all.  Those same restrictions didn’t really apply when electric powered factories started to emerge, yet the initial reluctance to alter the way factories operated meant that very few productivity gains were witnessed as a result of the new technology.

It was only when factory layouts began to change towards designs that are more familiar to us today that we began to shift the dial on productivity, with process innovations like lean, six sigma and total quality management revolutionizing the productivity of our manufacturing operations.

Here’s the kicker though.  Those process changes probably took something like 30 years to materialize.  That’s a long time to fully gain the benefits from a particular technology, but I see similar things occurring in the social business world.

We have technologies emerging that can fundamentally change the way our organizations operate, but too many organizations are simply dumping these tools onto the same industrial style processes that existed previously.  The social technologies are generally good enough already, it is the organizational processes that will need to evolve for the productivity gains from social business to fully materialize.

In the manufacturing era, the shift from steam to electricity didn’t really happen until those managers steeped in steam powered traditions retired, hence the incredibly long lag between the new technology arriving and the productivity gains emerging.  Hopefully our senior managers today will have learned those lessons and won’t provide a similar barrier to progress.

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