My former colleague Ted Shelton said recently here on Social Media Today, “Social is sending a shockwave through the enterprise and challenging organizations to rethink the way they are organized and how all of their processes work”. I see something different.
I see organizations that are having a hard time making decisions, but that’s not because they experience a shockwave or that they are mulling over how best to rethink all their processes.
They not only have a hard time making decisions about social, but about any form of innovation. In fact social is one of the easier decisions they have to make. It is relatively low risk, but positioning social in a digital transformation strategy is a lot tougher. And that’s where they run into trouble. They run into trouble with transformation. But it’s why they run into trouble that matters for marketers and social media specialists.
Over the past twelve months I’ve interviewed and analysed 160 companies, specifically looking at how they innovate, the pressures they are under to change, and how they make decisions about innovation and transformation.
The latest research was undertaken with the Apigee Institute in collaboration with its Director Bryan Kirschner. You can see the first output of that in the paper Swapping Innovation For Transformation.
In the research we focused very specifically on the decision-making style of enterprises in the context of digital transformation and interviewed 30 companies that the objective of gaining real-life insights into digital decision making. So what did we find?
The first is that most companies are aware that they face transformation. They know they are not just introducing new processes or techniques. They are creating a new enterprise landscape. But they don’t see social as the catalyst for that. They see a range of stressors out there but, primarily, a more diverse competitor base and a new need for speed, within the context of much greater uncertainty.
In this context social undoubtedly plays an important role – one often quoted benefit is the possibility of acquiring some certainty through data. But we were interested in something different, how do they make decisions, particularly decisions that would lead to change, and what we found were three different approaches:
In this category companies typically have a strong orientation towards the stock market and the demand for predictable growth. They are typically AGGREGATING companies, drawing in new acquisitions so that the growth story remains strong. That in turn leads them to focus strategic decision-making away from transformation.
They tend to maintain strong, conventional, financial KPIs and have a strong narrative around the core business. Taken together all that means their decision-making leads them to under-invest in innovations that have a transformational effect. Their big priority is to reflect unity rather than change. Digital must not be disruptive!
2. Brand-Centric Core Companies
This category of company takes a very traditional approach to decision making and is very bound by financial KPIs. They have a very strong narrative around core competencies, rather than core business, and have quite static or traditional brand values.
In the hospitality industry and in banking, in particular, they seek customer trust from an overarching narrative based around corporate traditions. Companies in this category believe the brand, rather than any specific decision that they can take now or in future, is the North Star.
There is nothing necessarily negative about that. And typically their “transformation” efforts will be in the direction of greater customer-centricity, which is good. But this type of decision maker sees change as a cultural challenge rather than one that has fundamental technological or process solutions. They limit the change agenda by focusing on culture. They will always frame the decisions in terms of contribution to the brand, because the brand is the culture, rather than transition to a new way of working.
3. Multifocal Strategists
We called the third category multifocal. In this category companies grow a second strategic focus away from, but strongly related to, their core business. These secondary foci allow them to experiment with new idea generation techniques and non-financial KPIs. In most cases the bifocal become multifocal.
This is the type of company most likely to expand its competencies, the one that embraces digital transformation and invests in new foundational capabilities. Over time they develop multiple business foci and strategize around alternative futures for themselves. They continue to talk about their core competency but in reality they move beyond it, building distinct new capabilities as they go.
And that is one of the key questions we asked. Do you make your investment decisions based on conventional ROI prior to project launch, or ongoing net present value, or do you seek out new revenue streams or do you invest in new foundational capabilities?
Over half the companies use the first two approaches exclusively, with only a third using new foundational capabilities as an investment guideline.
Stop and think about that though – we were clearly asking about NEW projects, about projects in a transformational environment where it is hard to predict an ROI and where it is essential to develop new capabilities.
Very few companies prioritise the latter even in transformational environments. They hope to capture the future with their existing skills. And they do so not because of any turbulence created by social but because that is their decision making practice, developed in the days when business was orderly and predictable.
The implications for people in social business are this. Social is not the shockwave but is a major part of the earthquake. Companies need to rethink the edifices around them but they follow decision practices that don’t allow them to see the context of social or for that matter digital transformation as a whole. They carry on building in the same way.
My conclusion is that we still have a lot of work to do to explain the transformation. We have to work harder to build the bigger picture of social in a transformational setting. We assume it is a given but plenty of companies do not see transformation, though they may easily see tweets and Facebook.
Companies are stalling change because of their decision-making style. They are opposed to transformation not because they fear it necessarily but because they have a better or closer-to-hand answer. In some cases they do but more often they don’t.
So we have to start rethinking how decisions are made. We can do that not out of a sense of frustration but in the happy knowledge that new times call for new tools. Although one of those is social media my belief is the critical one will be social decision-making. Wherever you place your bets, at least half the companies we interviewed felt they knew better.
(digital transformation / shutterstock)