In a recent interview at CXOTalk, Chris T. Hjelm, executive vice president and chief information officer at The Kroger Co., talked about the various and complex systems and technologies supporting the retailer’s far-flung operations, from manufacturing to logistics to retail outlets and supermarkets. The 130-year-old company has been through countless disruptions in its life, and is taking the lead in the digital space as well.
Photo: Joe McKendrick
Photo: Joe McKendrick
Tellingly, Hjelm divulged the real ingredient to digital success. In his interview with CXOTalk’s Michael Krigsman, he credits people and management foresight as the ultimate deliverer of digital success. “How we continue to drive better solutions for our customers, and necessary process improvements and solutions for our associates to deliver service to our customers, and how we package up innovation and each of those areas requires a lot of expertise, a lot of diligence, and ultimately a group of super-talented people that make it happen every day. That’s the fun part of the scale and complexity – you have to work across all of those aspects of our business. Pay attention to today, but also think about tomorrow and the future and balancing that so that you can have a successful company today, but also position yourself for success down the road.”
Perhaps this is a lesson that needs to be kept in mind as we proceed full-bore into the digital realm. There is no end to the reports and recounting of how Silicon Valley startups and Uber-style ventures are scaring the daylights out of established businesses with their digitally disruptive ways. Ultimately, however, the greatest threat to established organizations isn’t brash startups; it’s themselves. To paraphrase Pogo creator Walt Kelly, “We have met the enemy and he is us.”
Consider some telltale signs your business is ripe for digital disruption, asidentified by Angus Dawson, Martin Hirt, and Jay Scanlan, writing in the latest edition of McKinsey Quarterly:
• “Your customers have to cross-subsidize other customers.
• “Your customers have to buy the whole thing for the one bit they want.
• “Your customers can’t get what they want where and when they want it.
• “Your customers get a user experience that doesn’t match global best practice.
• “Redundant value-chain activities, such as a high number of handovers or repetitive manual work”
• You have “well-entrenched physical distribution or retail networks”
• You are in an industry with “margins that are higher than those of other industries”
• “You offer a physical product, such as thermostats, that’s not yet ‘connected.’”
• “There’s significant lag time between the point when customers purchase your product or service and when they receive it.”
All these early-warning signs point to opportunities for some startup ready to take a bite of the market. These are all conditions that can be addressed before things get Ubered or Amazoned. “The digitization of processes and interfaces is itself a source of worry,” the authors state. “But the feeling of not knowing when, or from which direction, an effective attack on a business might come creates a whole different level of concern.” They even equate the sudden chomping off of market share by digital players to that of shark bites suffered by surfers. That is, you simply don’t know what’s about to eat you until you suddenly feel teeth sinking into your leg. “Thanks to outsourced cloud infrastructure, mix-and-match technology components, and a steady flood of venture money, start-ups and established attackers can bite before their victims even see the fin,” the authors state.
Again, it doesn’t have to be this way. In fact, there isn’t anything that is necessarily mysterious about digital disruption. It adheres to the same forces that have commanded the course of business for eons – “supply, demand, and market dynamics,” Dawson, Hirt and Scanlan clarify.
Understanding how customers are being shorted or underserved by existing business models is half of the battle to avoid becoming shark food. The other side of the equation is understanding that technology, in and of itself, is not the solution. Slapping on digital front-ends or even back-end technology does not an innovative business make. Organizations have been known to sink millions of dollars into technology expecting miraculous transformations to profitability, but only opening up money pits instead. The business itself needs to change, enabled by new technology. It takes forward-looking management that is open to innovation, tolerant of failure, and willing to engage and elevate employees to make it all work.
As Harvard professor Robert Kegan put it in a separate McKinsey piece:
“Some kinds of automation help organizations to move faster and more efficiently, versus transforming the business and bringing about a new paradigm. You have to be mindful of the difference. Take the simple example of student papers today. Thanks to technology, they are more handsome to look at than they were in earlier times. You could be forgiven for thinking, sometimes, that they’d been published by a professional publisher. But the thinking of the students isn’t necessarily any better. Technology can keep us where we are, but moving faster.”
That’s why digital disruption needs adept, forward-looking leadership. And, importantly, team-oriented leaders. As Kagan put it: “Automation is not an inspiring topic. It creates the specter of employees losing their jobs. Talking about the tools that will make our lives better, about unleashing potential, is a more uplifting way of looking at it. Leaders have to frame the story differently, as an opportunity, not a threat.”
Often, it’s a challenge to drive change and innovation within a creaky and calcified organization. “New leaders frequently ‘talk about the changes they are going to make, but they are doing no more than saying what their predecessors said,” Peter Grauer, chairman of Blomberg, is quoted as saying. “Resistance to change is difficult to confront. I call it ‘corporate obesity’ — big, lumbering, complicated, sometimes paranoid, sometimes complacent organizations that will have to change.”