Leading digital (and social) change in the business

In any given week, at least a few of the posts in the Social channel here at GigaOM Research touch on the coordinates of change in business, but this week it seemed to be the major theme. I thought I’d take the opportunity to recapitulate some of the most critical aspects of the discussion here, and elsewhere.

Recently, I have come to believe that much of the thinking about adoption of social is operating at the wrong scale. I think we need to back up, and address a wider field for our considerations of the changing nature of business, stepping back to see the largest possible context, instead of limiting it to narrow-bore considerations like which social technologies to deploy.

As I said in Overview of my Social Now talk: The Future Of Work In A Social World,

The arrival of social tools is one part of a larger, swirling mess of large-scale change smashing into our lives like a tornado, and tearing the roof off the world of business. The elements of that mess all influence each other — tech factors like digital, mobile, and the cloud, societal shifts like urbanization, new media, and the always-on lifestyle, and correspondingly massive stressors like climate change, globalism, the shifting social contract, and the boom/bust cycle of the world economy — these seem to be the new normal in the 21st century. The new normal is that there is no normal anymore. Welcome to the Postnormal.

The most prescient of CEO’s are acutely aware that the world has dramatically changed in the past few years. The rise of social networks on the open web is one facet of that, and offers some opportunities for new productivity and innovation in the organization and better ways to become connected with customers. But it is only one facet in a larger, and more complex set of factors — stressors — that are collectively changing the environment for business in profound ways. As a consequence, CEO’s are being forced to contend with these factors in parallel, and in a coherent way. And that is driving a reappraisal of corporate strategy and direction, across the board. Among other drivers is the relentless rate of innovation, which is making it essential that businesses become more agile, forcing the adoption of lean principles across the board, even in parts of the business that have been historically distant from design-and-development thinking and culture.

One issue is that the conventional approaches to strategy are also getting lean, because corporate strategy setting has been a long and slow process. Witness the rise of crowdsourced innovation tools, for example (see Opal is a small and simple social brainstorming application, and Brightidea and the disruptive power of crowdsourced innovation).

We are hearing more about CEO’s becoming impatient with IT-led and marketing-led digital transformation projects, and rummaging through their executive suites and finding no one there with the experience or vision to move the company from 2005 to 2015. But where to find the right person? And what is their mandate?

In many of the corporate revolutions of past decades management consulting firms were brought in to help companies make painful, systemic changes in the face of the need to adapt to a rapidly changing world. In the ’90s, enterprise reengineering was a corporate manta, and consulting and technology firms helped turn companies from near-feudal management approaches based on paper and up-down reporting and drove the transition to process-based and software-mediated work. In the background, we also saw the coming and going of knowledge management, another pill offered up by management consultants as the cure for a knowledge-based economy. The process-centric business became the norm, while knowledge management seems to have become a failed metaphor.

Why? Yes, we know that work is becoming less routine, and more cognitive (see Work is rapidly becoming nonroutine), but that doesn’t mean the knowledge in people’s head can be managed as an asset, like bacon or butane. All the immense efforts involved in trying to strip-mine what people know and store it in ‘knowledge repositories’ turned out to be a waste, since content without context is not particularly useful: like a bowling ball with no holes.

Knowledge management fizzled, and it’s curious, because only a decade later we witness the rise of social networks, where people are happy to offer up their opinions on nearly anything, both on the open web and behind the firewall. We should have just waited. Instead of a paucity of knowledge, where companies had to incent workers to document best practices or write end-of-project lessons-learned documents, now the world — and every company — is awash in more data than we know what to do with. Instead of a deficit we are drowning.

But most of business management theory is still back in 2005, or 1995. And CEO’s are impatient. They are aware — according to a great deal of corroborated research from McKinsey, Deloitte, and others — that the productivity gains of the ’90s (based on moving to business processes), and the gains of the ’00s (based on aggressive increases in personal productivity) cannot be used again. There is no margin there.

And in the latter case — longer hours worked per full-time employee, a shift to part-time and temp workers, and offshoring — seem to have been pushed as far as possible, and perhaps even too far. Many companies are getting into classification fights with ‘part-time’ workers who are not actually independent, and the IRS is getting aggressive in that regard. And let’s not get into the discussion of work/life balance and the fraying social contract.

Nonetheless, there is increased pressure to gain more productivity, and the consensus that is emerging is that it must come from a new, more social way of work. And, as I suggested, there is little experience in the upper echelons of most organizations to steer that digital transformation.

Others have suggested outsourcing this revolution, bringing hired guns like advertising agencies or consulting firms (see Who can help your company with its digital transformation?), but the new trend is for the creation of a Chief Digital Officer to lead this push into the present.

In particular, I think the psychological makeup of the CIO is all wrong to undertake this role. It needs to be someone looking at the topline, not costs, and someone that is not risk averse, but opportunity seeking. As I wrote last week,

Stowe Boyd, The Chief Digital Officer is likely to own social, and IT

Not too long ago, I suggested that companies might need a C-level executive to drive social adoption, but I am now betting that will be the domain of the new Chief Digital Officer, and that the CIO will become a director-level job working for the CDO. And maybe marketing will as well. Why?

The inexorable transition from a performance-based IT strategy — where companies had an incentive to manage their own hardware and software, to get the biggest bang for the buck — has been inverted by the quantum shift to cloud computing, and the companies can’t really keep up with Amazon, and other ‘cloud center’ innovators’ capabilities in virtualization and power efficiency. The old data center is being dismantled. Likewise, the opportunities for cost savings and increased mobility around BYOD is also decreasing the central role of IT.

Instead of IT investments, the CDO will be focusing on people, not hardware; on social networks, not supply chains. Social, mobile, and new means to communicate with partners and customers will become the critical transition for business.

The CDO will also play the role of Chief Social Officer, because social is one of the most critical legs of the digital stool.

And, I think that CDO will be the new stepping stone for the next generation of CEO’s, instead of sales and marketing, or COO. In fact, that might be be a turning point to look for, indicating the end of the age of digital transformation, five or so years from now.