At the end of last year I interviewed two business leaders, Damon Aldrich and Liz Dadanian about what they saw as the future of technology trends and innovation. One thing they mentioned was the fear around change and technology but also the opportunity – here’s an excerpt from that conversation that illustrates why the pace of change affects our ability – as innovators, as consumers, as a society – to absorb it.
[00:26:58.320] – Liz Dadanian
It is the change… Okay, Oh, boy, where do I even start on this one? I would say it even stronger than Damon said it. At least from what I’ve seen, it’s adapt or die. Yes, there’s protect the core, but what I’m seeing is adapt or die. You will very quickly become irrelevant by not changing. What does that mean on an organization? And maybe to relate it back to what you do, Kevin, change management in an environment? I don’t think humans are used to changing at the speed of tech, and it is very hard on a workforce. It’s so taxing intellectually and emotionally. And I think it also erodes or it can end up eroding the trust in leadership a little bit because it seems like, well, why are we always changing? You said this was going to work. And so as much as people say they love to be part of innovation and they want… That they embrace change and they’re, We really are change adverse at the core, especially if there’s not always a win at the end of every experiment. People’s enthusiasm wears out pretty quickly. And so to really build that institutional toughness and resiliency is probably going to be one of the number one challenges for management.
[00:28:26.960] – Liz Dadanian
So the way that we’ve thought about change management before, like what you learned, let’s say, in the 90s in business school was all about managing linear change with known components and a known outcome. Bye-bye. That’s gone. That is not how change is managed anymore. I think you have started to hear tech talk about it a little bit in terms of like, Well, we’re going to be agile, or we’re going to do Waterfall, or we’re going to do whatever. And that’s right, but what it still doesn’t do is I still don’t think that we have learned what it means for humans to be able to digest that much change, especially in a remote environment. So you keep layering on these complexities. In each one of the things that I mentioned is a complexity, and it becomes very hard to move an organization forward. I don’t know that we have completely figured that out yet. I think we’re still in the process of figuring that out. I also think that there’s a size constraint. I’ve seen companies grow to 750. With this complexity, you almost need to break the organization down to a smaller number of people, or I think you almost need smaller units because people’s heads just explode.
[00:30:30.680] – Damon Aldrich
I’d like to underline something that Liz just said, which I think is super important. Actually, a couple of comments. One is the importance of resiliency through change and that in your workforce. Just it’s hard to overstate how important that really becomes, especially in times of change. I think the other point that she was making, and maybe I’ll state it maybe just slightly differently, but it’s driving toward the same thing, is the subject of incentives. The established incentives, especially in established organizations, really disincentivize change to a large degree. Take, for example, in the existing auto market, it’s very much managed month over month over month. There’s sales targets to hit. Much of those pay plans are based on hitting certain metrics. You could say that that’s a moat around maintaining the core and not introducing change to whatever extent you want to either defer the change or kill it. That is exactly against the best interests, the longer-term interests of the survivability and exactly the conditions under which that organization can thrive in the future, which gives rise to maybe it’s a third point Liz was making, which is how do you then create a system of aligned incentives in an organization to bring about the right pacing of investment in a change or in a different future without threatening what is currently in place to keep the company alive.
Why Fear the Pace of Change
I was thinking about this interview when I read about Comerica’s technology upgrade that left the wealth management unit short millions of dollars. For trust clients, Comerica administers the assets that are managed by a third party. They advance clients the funds, then get reimbursed by the third party. After upgrading their technology platform in May, Comerica had trouble receiving those reimbursements which in turn depleted the wealth management unit’s funds.
My first thought on reading the article was, “Oh no, stories like this make it so much harder to get buy-in for tech transformations.” And my second thought was, “That’s why these companies will need DAI.”
ERP Horror Stories
As someone who has implemented many Enterprise Resource Planning or ERP transformations, I was surprised to see such a large company in a regulated industry struggling, but not shocked. Companies of all sizes struggle with ERP implementation because they fail to account for the size and scope of the transformation. Change brings complexity – and resistance. The larger the scale of the transformation, the more units and stakeholders need to be brought in to minimize disruptions.
For example, in a notable ERP failure in 2022, CEO of Mission Produce Stephen Barnard said, “While we weren’t naive to the risk of disruption to the business, the extent and magnitude was greater than we anticipated.”
So how does a leader properly evaluate the magnitude of disruption that comes with tech transformation?
Don’t fear the ERP
The answer is not no new technology. In 2023 we saw an explosion of Artificial Intelligence (AI) applications promising to have the same impact on business as the internet. Just as we can point to companies that tried to innovate – and failed – we can also point to companies that failed to innovate – and failed. Blockbuster is one of the most notable examples because they had a golden opportunity to move into the digital age by purchasing Netflix in 2000 for $50 million dollars. The CEO at the time declined, calling Netflix a niche business. Now, some readers will have to google “what was Blockbuster” while Netflix’s revenues in 2023 were over $30 billion dollars.
Failing to transform your technology is not an option. What innovative leaders need to do is recognize where disruptions will arise, mitigate risks, and move forward strategically and thoughtfully.
How do they do that? I’m so glad you asked. Here are the key elements of successful technology transformations and their corresponding pitfalls.
Successful ERP Strategies (and Pitfalls)
- Strategic Vision and Leadership:
- Clearly defined vision: A well-articulated vision aligns technology initiatives with overall business goals.
- Strong leadership: Effective leaders guide the transformation, fostering a culture of innovation and adaptation.
- Pitfalls: Fragmented leadership, lack of overall strategy, and “heads down, no questions asked” culture
- Comprehensive Planning:
- Robust strategy: Develop a comprehensive strategy that outlines the scope, objectives, and expected outcomes of the transformation.
- Risk assessment: Identify potential challenges and develop contingency plans to mitigate risks.
- Pitfalls: Rushing strategy and/or implementation, failing to properly scope and source providers
- Agile and Adaptive Culture:
- Foster a culture of agility: Embrace agile methodologies to respond quickly to changes and iterate on solutions.
- Employee engagement: Ensure employees are involved and empowered throughout the transformation, promoting a culture of innovation.
- Pitfalls: Relying on “the way we’ve always done it”, putting functional managers in charge of transformation
- Digital Infrastructure:
- Robust IT architecture: Invest in a scalable and flexible IT infrastructure that can accommodate future growth and changes.
- Cybersecurity measures: Implement stringent security protocols to safeguard against potential threats and vulnerabilities.
- Pitfalls: Selecting a particular technology as opposed to an overall solution, failing to properly address cybersecurity and train staff at all levels
- Data-driven Decision Making:
- Data management: Establish effective data governance and management practices to ensure the quality and reliability of data.
- Analytics capabilities: Leverage data analytics to make informed decisions and gain valuable insights into business operations.
- Pitfalls: Not collecting data or collecting the wrong data
- Technology Integration and Interoperability:
- Seamless integration: Ensure new technologies integrate seamlessly with existing systems to avoid disruptions.
- Interoperability: Choose technologies that can work together cohesively, promoting a more connected and efficient ecosystem.
- Pitfalls: Failing to test integrations and adapt new systems
- Talent Development and Acquisition:
- Skill development: Invest in training programs to enhance the skills of existing employees, ensuring they can effectively use new technologies.
- Talent acquisition: Recruit individuals with expertise in emerging technologies to fill critical gaps in knowledge and capabilities.
- Pitfalls: Hoping that training and talent is enough without a robust integration plan
- Customer-Centric Approach:
- User experience: Prioritize user experience when implementing new technologies to enhance customer satisfaction.
- Continuous feedback: Solicit and incorporate customer feedback throughout the transformation process to align technology initiatives with customer needs.
- Pitfalls: Believing that because the tech works for your company and employees, it will also work for your customer
- Measurable KPIs and Continuous Evaluation:
- Key Performance Indicators (KPIs): Define and track measurable KPIs to assess the success of the transformation.
- Continuous evaluation: Regularly review and reassess the technology transformation strategy, making adjustments as needed.
- Pitfalls: Neglecting a post launch or go-live plan, concentrating so much on the sunk costs of the transformation that people cannot adapt
- Regulatory Compliance:
- Stay informed: Keep abreast of relevant regulations and ensure compliance with data protection and industry-specific standards.
- Pitfalls: Creating more problems, and more expensive ones, than when you started
It’s my hope that this post illustrates that the process of using technology as a tool to transform your business is as complex as it is necessary. I highlighted the pitfalls because it’s those challenges in particular that are Directed Action’s specialty.
As organizational change management consultants, we have worked with countless teams to deliver ERP implementations that are cause for celebrations- and keep their companies out of the Wall Street Journal. It’s not possible to opt out of technology innovation, but you can make the process less painful with the help of trusted advisers and guides.