David L. Rogers - The Digital Transformation Roadmap Part 1 - The Innovation Show

Episode Transcript
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Aidan McCullen (00:00):
Today.
Every business is talkingabout digital transformation.
With the acceleration of newtechnologies every organization knows
it must adapt to survive but by theirown admission seventy percent of
businesses are failing to transform.
Across industries, established companiesare held back by the bureaucracy,
inertia and old ways of working.

(00:22):
How can businesses breakthroughto drive real change?
Today's book provides everyleader with the answer.
Our guest argues that businessesmust transform, not just products
and business models, they musttransform the organization itself.
Based on two decades of researchand advising companies around the
globe, he identified the five biggestbarriers to digital transformation,

(00:46):
vision, priorities, , experimentation,governance, and capabilities.
He then shows how any businesscan evolve by heeding the
lessons of several exemplars.
It's a great pleasure to welcomethe author of the digital
transformation roadmap David L.
Rogers welcome to the show

David Rogers (01:04):
Thank you, Aiden.
It's such a pleasure.
I love the show and I'm delighted tobe on to talk with you about digital
transformation and corporate innovation.

it's great to have you and we were limited on time
today unfortunately david has awebinar highly in demand it's been
a long time waiting to align ourdiaries to get david on the show.
And he was so busy that back in twentysixteen he wrote the first book on digital
transformation the digital transformationplaybook a book that i was telling them

(01:33):
off-air i could have done with so badlyi was working in the media industry maybe
we'll share that a little bit becauseit really put the topic on the map,

Thank you.
Yeah, it was it was at thattime was a very different era.
I mean, when I wrote the playbook,I was writing, the first book
on digital transformation.
Digital transformation perse, really arguing that, look,
this isn't just a matter ofinterest to sort of new startups.
Of course you had a lot of those,it was digital native companies that
had already arisen, but every legacycompany needed to be thinking about

(02:05):
how do we really rethink our business?
And at that point you had certainsectors like yours, the media
people understood absolutely right.
They were living it.
They had been living throughdisruption for several years.
A lot of other industries though,we're still thinking of digital.
It's like, Oh, that might affect us.
We're a bank, we're auniversity, we're a government.
Maybe we could do something there.

(02:26):
They didn't see the urgency yet.
So that was the context in which Iwrote that book and argued, look,
this is something every organizationis going to have to think about
and what does it really take?
It's really, it's not about technology.
It's much more about redefiningwhat business you're in.
Now, fast forward to a couplemonths ago when my sequel came out,

(02:46):
and it's a very different contextbecause everyone is at least giving
lip service digital transformation.
It's been in their annualreports for a few years now.
I was just talking with globalfinancial services for yesterday.
And we're going to be traveling, do somework with and talking about timeframe.
They said, we should try to schedulethis in the next few months, because
honestly, we had our last report toanalysts and digital transformation

(03:10):
was just a bullet on a slide of,Hey, here's what we're doing.
And it's clear, we can'tget away with that anymore.
Our next analyst report in a fewmonths, we have to really explain like,
how is this impacting the business?
What's, what's our agenda?
What are we trying to achievein the next few years?
How are we going to drive and unlock newgrowth through digital transformation?

(03:31):
So it's really become much moreelevated on the agenda of companies.
And yet the other differences today,we all realize how hard it is.
Even if you're commit to it and arefocused on it and dedicated and put
resources into it How hard it isto really effectively drive change
of this kind in organizations?

David, there's so much that has changed but also so little
has changed for so many organizationswhere many of our audience are
struggling with change and fromreading your book you really see.
How important other aspects is like ifyou're somebody trying to strive and
swim against the tide you stand littlechance of survival or success in many many

(04:13):
ways and i hope we'll get through this.
In the book today and particularlyi wanted to share with you i
didn't say this to off-air i weara pin to try and reflect the show
every week and i was gonna wear a.
A butterfly or a caterpillar becausei thought of transformation is like
you know it's too cliche so i actuallywore just one here that you can see the
word why and this is because why is soimportant to this whole thing it's almost

(04:38):
the top or the bottom of the pyramid notthe top because that's where it starts.
And I thought before we even get there,because you mentioned media and I
mentioned it as my own transformationstory, I thought we'd open with a case
study and the way I thought about this,I write an article each week to try
and reflect the show and I wrote anarticle about this with the Dickens

(04:59):
quote, it was the best of times.
It was the worst of times.

Yes.

And this is something that we still see.
I just quote a littlepiece here from the book.
You said creating a separatedivision for digital initiatives,
establishes a pattern.
Few people are tasked withdriving all things digital and the
rest of the organization sticksto their old ways of working.
Meanwhile, the legacy organizationalstructure with its historic separation

(05:25):
of the business side from thejournalism side remains untouched.
This still happens everywhere.
It's so frustrating to see it happen.
Despite books like yours written in 2016.
Leaders read this book the digitaltransformation Roadmap it's so important

and that was really what impelled me to write this
follow on this, this sequel.
I mean, that book still stands.
It's, they compliment each other.
The prior book was reallylooking at strategy.
How do we rethink and redefine ourrelationship to customers, our competitive
landscape our use of data as a sourceof value creation, our approach to
innovation and our value proposition.

(06:02):
Those are these five sort of dimensions ofstrategy that it's, how do you step back.
Really get past your blind spots thatyou've inherited of you think, you know
what your business is and really takea fresh eye to all of those things.
But what I learned since then is evenif you are able to do that, right, if
you commit to making real change, ifyou're able to bring fresh strategic

(06:24):
thinking and come up and identifynew opportunities for growth to make
the change happen, you're In theorganization itself is incredibly hard.
And so, I opened with that case where,as you said, it's written to highlight
the stories of a particular company.
In this case, the New York times, everyone of the things that they the traps that

(06:46):
they fell into, the mistakes they made.
I see time and again in everyindustry and industrial firms and,
consulting firms and big banks and,insurance companies and telcos.
One of them being this sort of, well,we need to make some kind of change.
Let's give a squad, the skunk works usedto be the old model from decades past.
The organization is slow.

(07:07):
So the solution to that is we'll getsome small team, let them move fast.
And then that allows theorganization to never change.
It gives , an excuse for everybody elseto just go about their business and make.
You don't have to change becausethat would be too hard for you.
And guess what?
That, that doesn't work out wellin the, in the longterm or even
in the medium or short term.

Before we, delve in deeper, that case study of
New York times is a brilliantone because you see how, okay.
Firstly they fail but then they succeedso they go from the seventy to the thirty
which is great cause we rarely see thethirty and david talks a lot about in
this book about the thirty percent whohave succeeded before we go any further
it's probably important for us to define.

(07:48):
And clarify the definition ofdigital transformation or DX,
as you call it from now on.

so I define it this way.
It's simply transforming anestablished business to thrive in
a world of constant digital change.
Right.
That to me is whatdigital transformation is.
And.
Let me pull out the sort of afew things that that sets up
three sort of essential truths.
One, this is, this is notabout technology, right?

(08:17):
It is about the business.
It's about your customers.
This is a very common misconception aboutdigital transformation, that it's an I.
T.
project and it's aboutworking with your I.
T.
vendors.
No, this is about the business, right?
Transforming an established business.
Second this is You know, it's, it'sreally quite distinct than startups.

(08:37):
It's not simply a matter ofidentifying market opportunity
or iterating and discovering aneffective digital business model,
this is about existing organizations.
And so all the things you have to dohave to happen within the context that
you already have employees and customersand a brand reputation and distribution

(08:57):
partners and already products andsources of revenue that are out there.
And, financial obligations andprobably legal contractual obligations
with partners channel conflict.
All these things are already in place.
And so the trick is to.
Turn all the things you have as anestablished business of some scale to
your advantage, because unless you'revery smart, they will actually work

(09:19):
against you and make it much harderfor you to compete, simply because
it'll be much harder for you tochange and adapt and to move quickly.
And the third sort of truth of digitaltransformation I take from this
definition is digital transformation.
Is not a project, right?
It is that it doesn't come witha start date and an end date.
This is a journey that you are going to beon continuously about becoming over time

(09:45):
a more and more adaptive organization thatis better and better able to continually
change, reinvent itself and again, respondto this world of constant digital change.

And David, I wanted to double click on one
of the barriers to change.
So why the companies that arein the 70 percent are in there

Just to underline that's, multiple studies we've had at
this point that have looked at again.
By now we have hundreds and hundredsof companies who have taken formal
digital transformation efforts and putmoney and people into them, not just
a bullet point on a slide and it's.
Yeah.
The data all seems to report at least70%, some as high as 80 percent are
failing, right, are not achieving theirgoals, are not really driving sustainable

(10:27):
change and new value creation versusthe 30 percent are the ones that are
succeeding, that are really makingmeaningful change in the business.

I think thanks to work like yours and others, the
30 is getting bigger, thankfullyit's, so it's getting there,

not a fixed ratio.
That's, that's my goal.
Exactly.
Try to try to shift,shift that balance a bit.

absolutely, man.
I'm with you.
And the, one of the things I wasgoing to double click on here was
to think about how difficult it is.
Depending on the size of your organizationsize does matter because that increases
organization complexity versus a startupso we have that spectrum of people who
listen to the show from startup founderssolo printers i am one i know how easy

(11:12):
it is well apart from the boss been abit of a jackass apart from that it's

have to worry about making the employees feel empowered.
Yeah.

Exactly looking in the mirror.
Come on, we got this team.
What's our vision repeat after me, buthow difficult it is then as you scale
up the business, even two people addscomplexity, but when you're a multi
sized organization across multiplegeographies of operation with different
business models, everything changes.

(11:42):
And I think this was somethingthat's often overlooked.

I wrote an article on this recently under the famous
quote "every organization isunique just" like all the others.
I think the original quote wasMargaret Mead would tell her
students, every one of you is unique,just like all my other students.
And every company, feels that they havethese unique pressures and challenges
and why it's so hard to change.
And I see incredible commonalityfrom one to another, but it is harder

(12:08):
for some businesses than others.
And what I've discovered is there'sa lack of an understanding of why.
Most commonly, people think it'swell, I will hear them point to age.
Well, the company is so old.
We've been around so long.
That's why it's hard to change.
Some companies willpoint to their industry.
Oh, you just don't understand.
Our industry is so old fashioned.

(12:29):
So, averse to change.
So stuck in its ways.
I hear regularly nationality,national culture.
Oh, well, you have to understand Japanese.
Companies or brazilian companiesor italian companies, we're
not, we're not good at X.
All of those can be factors, but whatI've learned through my work, my research
is they are not the biggest factor.

(12:49):
The real challenge, the most predictivemetric is organizational complexity,
and that seems to be pretty wellmeasured by the three factors.
You, you echoed back from the book,how many employees do you have?
Right.
1, 2.
Okay.
150 classic Dunbar number getsharder to stand up in a room and
just talk with everyone about thestrategy and what you're doing.

(13:12):
So number of employees, lines of business.
Do you have different offerings todifferent types of customers, different
business models and geography?
Geography adds.
Has always added complexity in terms of,supply chains and distribution, honestly,
less today than it did in the past.
Although clearly still some, butregulation adds a huge amount of

(13:32):
complexity when you're operating indifferent geographies as well as marketing
and customer messaging and so forth.
So really those three things, if you are,this was part of my journey learning.
Towards writing this book of why theorganization matters so much, if you're
trying to transform the business andreally take it in a new direction and
unlock some new digital opportunities forgrowth, if you're a company of a hundred

(13:54):
people and you've got one line of businessand you're operating in one country you're
If you have a clear understanding whatyou're trying to do, I'm not saying it's
easy, but it's relatively straightforward.
It is easier.
But then if you're a company with10, 000 employees, let alone 100, 000
employees, your multiple geographies,you've got different lines of business

(14:16):
serving really different markets withdifferent needs to make Any kind of
pervasive change across the organizationis just much, much harder because of the
complexity of the organization itself.
And that's why I really found thatthese kinds of complex organizations
really needed some tools and learningfrom, as I call them, the 30 percent

(14:39):
from those who have actually beenable to make true, substantial,
Meaningful change in the organization.
What did they do?
Right, right.
What can we learn from them?
And that was my goal is topull those insights together.
Look at the patterns and say, here arethe things that make this possible.
Not easy, but even with theselarge, complex organizations, it

(15:00):
really is possible to make change.
So

me of, you're trying to make a journey.
And what are you gonna have you canso you have google maps most of us you
know where apple maps if you use applemaps but you have a map and this is
what was missing for so many peoplebut then there's key ingredients of
that map in a certain order that isreally important and i'm gonna get.
Frame this show really a way you haveone of your tools is the PO statement

(15:28):
so the problem opportunity statement andi'm gonna start with the problem because.
This problem statement reflects whatso many of listeners experience these
are the top barriers to dx success noshared vision no growth parties no focus
on experimentation no flexibility andgovernance and no changing capabilities.

(15:48):
Now there's a lot in those.
I'd love to take them one at atime, David, if that was okay.
And I might pepper in quotesevery so often, but otherwise
I'll hand over to you.

the first one no shared vision, right?
This is a really fundamental problem.
I see incredibly frequently incompanies that are trying to transform.
And I meet with them and theysay, yes, we're embarking
on a digital transformation.
And the language they use about whatthey're trying to achieve is things like,
we want to become a digital first company.

(16:18):
We want to future proof our business.
We want to be a digital leader amongour peers, set things like this.
Setting aside that some of that isjust kind of consultant gobbledygook.
It's also incredibly generic.
Right.
So to have a vision that is actually goingto pull you forward as an organization,
it has to be specific, right?

(16:39):
It has to be unique to your organization.
I see so many of these vision statements.
If you took your thumb and youcovered up the logo at the top of
the memo, you would have no ideawhat company this pertains to.
You wouldn't even be able to guessthe industry in many cases, right?
So that is, that's areally common barrier.
And I find, I'll talk to three differentexecutives in the same company.

(17:01):
I'll say, what does digitaltransformation mean for you?
You get three different answers, right?
There's no commonality.
Second barrier as youmentioned, no growth priorities.
It is essential as you embark on thisto really define what are the problems
that matter most to your business.
What are you really going to try to solve?
What are the sort of levers of businessvalue creation that you are really going

(17:23):
to try to prioritize above all others?
Because as you start to look at, newdigital Business models, interaction
models, customer experiences, markets, youwill, if you're seriously curious, you'll
start seeing a hundred different ideas.
And that's what happens.
I see companies, they just start shootingoff in a lot of different directions.

(17:45):
So it is so critical that we linkthis process of digital innovation,
really what I call, it's this missinglink between strategy and innovation.
In so many firms, I'm actually writingan article about that for Harvard
Business Review right now, companiesthat sort of set up some kind of team to
drive innovation and pursue new ideas.
And they're just given.

(18:05):
It's like a blue sky, a thousandflowers bloom, just come up with.
If it's a good idea, it's a good idea.
It's like, no, you havean existing company.
Just because something is a goodidea for someone to build or pursue
or a good market doesn't meanit's one that you as a particular
established business should go after.
So you have to define these specificpriorities and of course they

(18:28):
have to be linked to a carefulstrategy process about the company.
Often I would say mostly not there.
Third barrier very often seeis no focus on experimentation.
And this is companies that arestill following the old planning
playbook, what I would call atraditional planning process.

(18:49):
And by which I mean, you're trying,you're thinking of doing something new.
You're making a big planor a possible investment.
What do you do?
You start with a lot of third party data.
Right.
You hire others, independent consultantsand so forth to bring in lots of
benchmarks, best practices, right?
No, not first party data, notactual testing and experimentation
of your own, but third party data.

(19:11):
Then you do a lot of analysis,business case writing and so forth.
Then you go traditional classic,take it to the top of the ladder.
Who makes the decision?
It's the highest paid person'sopinion, as they say in Silicon
Valley, the hippo, right?
Senior executive makes the calland then everything focuses on
just executing that plan, right?

(19:31):
We have the plan.
We've detailed it out.
Inside our meeting rooms in greatspecificity of what we're going to do.
It's gotten approval and now wejust have to execute, execute.
And like, we just, thetrain has left the station.
We're going down the tracks and,and, who knows what's ahead.
That is the exact oppositeof the whole approach of.

(19:51):
Continuous rapid experimentation,which I've written about for years.
I've drawn great, insight in andthinking from folks like Steve
Blank and Bob Dorf and Rita McGrathand Stefan Tompkin and others.
But really, All the companies that arereally driving change, they take this
approach, this mindset of definingthe problem you're going to solve and

(20:13):
then rapidly testing and validatingdifferent options in the business
hypotheses around each the fourthbarrier that's very common is what
I call no flexibility in governance.
So that is, using what'scommonly called BAU business as
usual, your kind of existing.
lines of decision making, your traditionalbudgeting processes, your traditional

(20:34):
organizational structure, everythingthat was developed over time for the
core business, the legacy business,the business, well, and maybe actually
fit that suit that quite well, butjust apply that same approach, that
same management model and rules andprocesses and procedures when you're
trying to do totally new things.
And then lastly, the last barrier Isee is companies who are trying to

(20:56):
digitally transform, but they arereally not making any significant
change in their core capabilities.
And by that, I would include, reallyrethinking their technology stack, but
also really, Rethinking and growingtheir talent base, the skills that people
they have and also really their culture.
What is the culture we have as anorganization that's brought us to where

(21:18):
we are today being really thoughtfulare the things about that that need
to change if we're really going toeffectively head where we're trying to go.
So many companies I find justare not addressing those things.

Beautiful, man.
Beautiful.
Thank you for going through those.
And just on the last one, I just wantto remind our audience recently, we
had Mike beer on the show, three partseries of Mike, and he talked about
that strategic fit, which was also thetalent or capability fit to the new
strategic ambition of the organization.
Such an essential part that's overlookedbecause, and then you hire in, but you

(21:52):
might be missing some of the stuff Davidtalked about earlier in like no vision.
This has happened.
Me, for example, in digitaltransformation, David, where it's
like on constantly asking what the,the strategy was, and I was told.
Basically you look after thedigital strategy and i was like oh
well that's gonna fail if there'sno organizational strategy cuz
it's just an enabler you know i so ididn't have the language or the road

(22:15):
map and or the playbook so i just saidi could have done with this to even
gonna go here i got you a copy of thisthis would have been helpful but em.

better late than never.

Absolutely now we understand the blockers i thought
we might revisit that n y t storyafter the innovation report so that
this is available publicly by theway if you want to look at google.
You might be using being these days beingthe innovation report it's back baby

(22:48):
because you'll see the n y t report whichwas a damning report that was released
it was leaked from the n y t but then.
They got it there are together theylearned and they went from the seventy
to thirty and maybe you'll tellthat story is a little just a little
vignette here and then we'll get intodeeper dive until okay now we know
what not to do here's what to do.

Yeah, so, so the story was the New York Times had started, I mean,
to their credit, they started very earlyon embracing digital and thinking about
how is this going to be a part of our,our, our, our future of the business.
The common wisdom I've heard manytimes is, oh, the most important thing,
digital transformation is a CEO mandate.
You have to have the, the chief executivehas to be behind this and pushing for it.

(23:36):
Obviously, I would always argueyou want to have that, right?
It's going to be much harder to makechange happen without that support.
But we've seen time and again,companies where there's a very
strong clear digit mandate.
From the CEO and the chief executive,and complete failure, right about
general electric and, and theirfailure of digital transformation and
why that was so predictable, why youcould see why that it was never going

(23:58):
to work, despite the fact that ithad this very loud and vocal support
and, and, and resources from the top.
So the New York times was a similar,it was, it was the chief executive, of
course, there was a publisher and itwas at the time, Arthur Soltzberger jr.
And.
He said, the digital is the future.
We are going to be a part of this.
They were to my knowledge, thefirst, at least major news existing

(24:22):
legacy newspaper to go on the web.
They were there right from the thebeginning with launching a website.
They set up a separate subsidiary,separate division, as we talked
about to figure out, do allthis digital media stuff.
And yet they, from the beginning fellinto what I call the digitalization trap.
And this is part of why.

(24:42):
When I meet with companies, Istress why, digital transformation
and, corporate innovation are notlike two separate things, right?
It can't be like two differentteams, two different agendas
going in different directions.
This is, these have to be wedded together.
So when you don't do that, youfall into the digitalization trap,
which means digital transformationis just about taking what you have

(25:05):
already done and integrating it.
Adding some technology to it, sayinglet's put some more technology.
Let's use technology, newcapabilities in service of doing
the same thing we have always done.
And so that was the.
Unspoken and at times actually clearlyspoken mindset of the New York times.
This was all about let's use allthese new digital tools to deliver

(25:27):
the same print newspaper, right?
Everything was just another way to getthe print newspaper to the customer.
That was the language that thepublisher used talking about, I'll
use any technology, CD ROMs, theweb, whatever, to get the newspaper.
The New York times, he said, heck,I would beam it into your brain.
If I, if you'd show me the neural linktechnology for it, he thought that

(25:48):
was very forward looking, but it wasactually completely confined to the
history and the past of the company.
And so everything was alwaysabout the print first.
I mean, literally.
The cadence of digital publishingwas based on the print.
It was like, well, of coursewe'll write digital articles once
a day, because that's when wewrite them for the print edition.
Everything started from that viewpoint.

(26:10):
And despite a lot of, digital experimentsand hiring people and building technology
and bringing people in and, winning.
Prizes for interesting multimedia, newexperiments and, and, design of a story.
It wasn't really touchingthe core business itself.
The digital talent they hired wasnot sticking around cause they

(26:32):
realized there really wasn't.
A chance for them to do anymeaningful change in the business.
New digital entrants started togrow much more quickly in terms
of attracting a younger viewers.
And more fundamentally, the companywas suffering because it had not
reckoned with the change in theeconomics around advertising.
In print media and and so year afteryear, they saw it was a dramatic

(26:56):
was a seven year period revenue.
Total revenue for the NewYork Times declined 52%.
So then we had this yearwhere the bombshell dropped.
And that was, as you mentioned,the innovation report.
It's almost like all the president's men.
It's made for, televisionstory of journalism.
I'm not sure why it hasn't been made yet.
Maybe I should make the movie.

(27:17):
And what happened was, so this internaltask force, this small scrappy team
, of Not a bunch of senior executives.
Actually, it was, itwas very smartly done.
I mean, clearly folks at the leadershiprealized this was not working.
So they put this small team togetherof people from different backgrounds,
investigative journalists, not peoplewith long standing in the times and said,

(27:38):
we want you to spend several months.
Figuring out what is actually goingon, what's changing, what's not,
why is our innovation not keepingpace with what it needs to happen?
So they wrote this report, they talkedto everyone inside the times, they
talked to competitors, they talkedto partners and they wrote this
incredible report that really detailed.
An organization at war with itselfright over its digital future, the

(28:03):
people, the older employees werefiercely clinging to the status quo.
The silos that were built overdecades of tradition, a century of
tradition were just completely rigid.
This culture of sort ofperfectionism, which.
It had its time and place, right?
Protecting and growing the brand.
But today it had become a barrier toreally any experimentation and real

(28:25):
learning inside the organization.
So all of this was detailed in thisreport that was supposed to be read
by, I think it was five people, right?
It's just a secret reportfrom the top leadership.
But then, and like classic journalism andHollywood fashion it was leaked, right?
Somebody who was presumably, one ofthe writers and authors of the report
probably leaked it and it first showed up.

(28:47):
It was on the pages.
I think it was a buzzfeed and, soon it wasuploaded just publicly on the web and it
was it sent shockwaves actually throughoutthe industry because all their peers
had been looking to the New York Times.
They didn't know what to do about it.
This dramatic decline in thewhole economics around news.
And they said, well, the New York Times isgoing to figure it out and then we'll just

(29:09):
follow whatever model they come up with.
And suddenly it was like,the emperor has no clothes.
Right.
But most importantly, insidethe organization, no one could,
no one could say anymore.
We should just stick to ourour old ways of working.
We'll just we don't need thatmuch change and so forth.
And so it was this real kind of.
Essential necessary kindof shock to the system.

(29:31):
Hey, we have to reallychange much more deeply.
And of course the, the, the great news,the good, part of the story is that
it did, it helped to really unlockand accelerate a true transformation
of the business that has happenedover the last, really decade.
I mean, by now they're really actuallyquite well established, but it took
several years to really write the ship.

(29:52):
And.
Both financially and really transformthrough all kind of the five steps of
the roadmap, which I lay out in the book.

i love that story it's so great because i was one of
those looking at them as this hero thearticle snowfall came out for example
like look at what these guys are doingbut we experienced everything i think
everybody who had worked has worked intransformation has experienced this where.
Older executives , long tenured executivescling onto the past business model

(30:23):
because they don't want the changeto come, maybe hoping till retirement
comes quicker, et cetera, et cetera.
In one case, David, you'llfind this one funny.
We had put teams together fromdiverse parts of the business and
they had these open, Invested innew tables, so they'd be all sitting
beside each other, open office type.
And they started to build likethese literally out of cardboard

(30:43):
silos around themselves.
Man, it was unbelievable.
So yeah, not many, but yeah,they were definitely there, but

Yeah.

thought it just, and this, this is just a little sidetrack
from the book for the moment, butyou talked about that period of.
I consider it like the messy middle of atransformation of the caterpillar has to
goes into the cocoon and become this messygoo in order to become the butterfly.
And I say that because there's, thereis a period of change that's needed.

(31:12):
There's, you can't just, there's noseamless, Oh, it's a DJ fade across
on the record to a new record.
It's a new song.
It takes, it's messy in the middle.
And I think that's something that's so.
seldom recognize and you'veseen that with many of the
organizations you've worked with

Yeah.
The companies that have madereal substantial change.
It is not a flip of the switch.
It's not, we've got the plan.
All of a sudden everything,everyone's on board.
I mean, one of the things I, I try tolet people set reasonable expectations.
I often see.
People coming and saying, look, there'sjust so many people in the organization

(31:50):
who are, not supporting this or their oldfashion, or I don't think even if I give
them, expose them to the right readingand classes or whatever, I, I think
they're, resistant and I say, look, yourjob is not to persuade everybody at once.
Right.
That is not going to happen.
Nobody like waves, the magic wand.
I swear CEOs come in.

(32:11):
I think they're asking me for ahypnosis lessons or like, how do I
magically like brainwash or changethe minds of everyone in my company?
I said, that's not how this happens.
Right.
You are going to define.
A much clearer vision of whatyou're doing, what you're aiming
for, what you're trying to achieve.
And if you do this right, there are somepeople there's going to be a guarantee.

(32:32):
You may think no one is with you, butif you actually say I'm serious about
change and you have a clear and compellingmessage of where you're going and why.
You are going in why you are theorganization to position to hold that
position to take that path in the future.
There are going to be some people inyour company who are going to say, thank
God, we're finally going to like dosomething and they're going to be excited.

(32:55):
They're going to be aminority probably, right?
But they're going to be the oneswho take up the ball first, right?
And that's the whole point.
And then you give them the resources andyou make the organizational changes to
start to give them the leeway and the.
The, the operating models, the governanceand so forth, the tools to do the
right work, and they'll start to do it.
And then it's snowballs.

(33:16):
If you do it right, if you doyour job as a leader, they'll
start to show impact success.
Others who are on the fence, whoare like, Oh, it sounds interesting.
I'm not sure I want to risk my careerbeing the first team working on this.
They'll say, Oh, okay, this is for real.
And like, People are getting,spotlighted and rewarded and

(33:36):
recognized for doing this.
I, I, I'd step up and try to do someof that in my, supply chain team or
regional marketing team or whatever else.
And it starts to gradually, expand asit deepens through the organization.
So yeah, it's not going to be smooth.
It's not going to be overnight.
But it's, it's the workthat has to be done.

(33:57):
And if you have that clarity of why you'redoing it, that makes all the difference.

People ask me i've been in the show eight years five hundred
episodes plus and what have i learnedthe most it's empathy it's empathy
for those people who are resistingchange it's often driven by fear.
Of some sort, and I thought justbefore we move on to solution mode to
opportunity mode in the PO model thatwe'd share how the failure to innovate

(34:26):
is what's holding legacy firms back andwhat two key challenges you recognize
to corporate innovation really are thechallenges of uncertainty and proximity.

So, so, I've done a lot of looking at corporate innovation.
Cause as I said, this is a bookabout digital transformation, but
it's also a book about innovationin established businesses, right.
And what makes it particularly hard?
And that's been somethingI've been looking at.
Cause and what I found is really, there'stwo fundamental reasons why innovation is,
is hard for, for established businesses.

(35:00):
Now, the first is.
The challenge of uncertainty, and thatis just foundational to innovation.
The whole point of why innovationis hard is because you're doing
something you haven't done before.
And more particularly, it's not justthat you haven't done it, but that
there is uncertainty to it, right?
If you're going into a new line ofbusiness where there's already a lot
of established competitors and themarket's well formed and so forth,

(35:22):
and you just say, Oh, we're gonnamake an acquisition or something.
There's not necessarily a lotof uncertainty, but most of what
we talk about when we're reallytalking about corporate innovation.
It's like a startup.
First challenge you face is youdo not know what is going to work.
And actually as a corporate innovator,I would say the first challenge
is you don't admit that, right?

(35:43):
You believe that you can figureout in advance what will work.
You think there's a crystal ball.
It's called the business case, right?
There is no such thing.
Right.
As, as my friend, Bob Dorff used to saybusiness plan writing should be taken
from the business schools of universitiesand moved into the creative writing
departments of the English departments.
So, there is no crystal ball andthat is that that fundamental

(36:06):
challenge, and fortunately we've got.
Some really great thinking andsome models by now about how do you
address uncertainty in innovation?
And broadly speaking, there'stwo essential levers that
I talk about in the book.
You have to bring an approachof iterative experimentation.
I also wrote that about that inthe previous book, a whole chapter

(36:27):
on rapid experimentation and Andwe can look to the lessons of lean
startup thinkers like Steve blank.
We can look to agile software development,look to the practices that have evolved
under what's called product managementand, and, and design thinking.
I talk about these as forthe four religions of rapid
iterative experimentation.
And there's lessons to be drawn fromall these and I write about the book

(36:48):
and and give some structures andtools to actually apply this within a
company and sort of a repeatable basis.
You can teach the teams.
So that's the first challenge.
Now, I'll point out that as achallenge that is held in common
with startups, which is why.
Our best thinking has come outof the startup world because
they live or die by this.
You don't even have a business ifyou don't solve for product market

(37:10):
fit and find that, the elusive, thesearch for a repeatable, scalable,
profitable business model is Stevelike talked about it is that's,
that's what the job of a startup is.
So.
We have, they have thesame problem, right?
But there's a different challenge.
There's a second challenge thatis not faced by startups, right?
And that is faced byestablished companies.

(37:32):
And the second challenge ofcorporate innovation is what I
call the challenge of proximity.
And what this means is it is muchharder to pursue innovation that
is farther from your core, right?
Farther from your current businessthat you know so well, it is
inherently easier to innovate.
Within the core business, right?

(37:53):
I'm not saying it's easy, but relativelyso it is much harder for companies to
manage the process and effectively take agood idea all the way to market at scale
when it is not, doesn't have a naturalfit inside the current organization.
And there's all sorts of reasons Italk about why this is, companies

(38:13):
apply the metrics and the KPIs fromtheir legacy business to the new thing.
And it doesn't work.
Doesn't fit whatsoever.
Simple budgeting, right?
Budgeting is often dictated by.
You know what parts of the businessare creating revenue now, and
that's how they get resourcesto invest in next year on DSO.
If there's nobody currentlydoing this, who's going to
put the resources behind it?

(38:34):
Lines of of control and oversight.
There's all sorts of reasons whywhen you're venturing beyond the
core It's very challenging, right?
It even starts with just mindset.
Again, this sort of this trap ofTed Levitt, wrote about it decades
ago, defining your future in termsof the products of the past, rather
than in terms of customer needs.

(38:54):
So this sort of habitual mindsetis going to just keep steering you
away from these Innovations thatare further from your court, right?
Because you haven't donethose products before.
So those are the two challengesand we have to address both of them
if we're going to really unlockgrowth because it's not enough.
Yes, every business has to look athow do we continue to incrementally

(39:15):
improve our existing business.
But that is not going to be enoughwith the level of dynamism and change.
We see in, in wave after wave ofthe digital era, we have to also
be able to pursue innovation.
I talk about three paths togrow three paths to innovation.
One is, is low uncertainty innovationwithin the core business, right?
And that is the easiest path, right?

(39:36):
That can be managed basically by yournormal business as usual processes.
The second path is.
Often neglected in a lot of theoriesof innovation is highly uncertain
innovation in your core business.
And here you naturally do it in yourcore business, except they don't
have the right processes in place.
They're not used toiterative experimentation.

(39:57):
And so you completelyoverestimate your certainty and
your knowledge of the future.
And you have Lots of costly mistakes.
And then the third pathis, beyond the court.
So you need for each of these,a different management model.
You actually need different processesand funding models and so forth to to
manage each of these paths to growth.

(40:17):
And that's.
Really at the heart of driving anykind of change and transformation
in an established company.

We're going to come to the end with a couple of things.
One of the things Davidmentioned there was funding.
So the VC funding approach.
Facebook is a great example that hopefullywill come to that and then what we're
gonna do is we're gonna park the steps ofthe road map for part two and go through
those at a high level in part two cuz wesimply won't have time to even touch on
that and only be, frustrating you willbe like when's the next episode of the

(40:46):
netflix documentary coming out you'llbe waiting for so we won't go there.
What i wanted to mention another examplecause you brilliantly articulate the
example and i'll preempt this one with alittle quote from the book again just to
share with people the depth of writingand research in there, but also to two
tl sub for this great case study of cnnplus you said here under uncertainty

(41:11):
many practitioners describe, businessinnovation as an effort to address
three types of uncertainty desirability.
Feasibility and profitability,but others are critical as well.
Defensibility, scalability, andlegality with laws and regulations.
For example, for any specific venture,the sources of uncertainty become even

(41:34):
more specific, such as cost structure,competitive differentiation, channel
partners, user experience, and so on.
The failure of CNN plus launched in 2022.
As a new digital business forthe news is a perfect example.
I love you to share this, David.

Sure.
So, so, to the first point,all the different sources of
uncertainty, there's a whole chapterin the book on experimentation.
And that's really what I set out togive some tools around is I've been
coaching and advising innovation teamsin large companies and some small for
many years now, and there's a certainlight bulb moment where they, They've

(42:13):
been, I don't know, reading startupowner's manual or, whatever we've been
talking about with case studies andthey get this idea, ah, we've got to
experiment, got to test and learn with.
We have to recognize and writedown all of our hypotheses.
This is not a business plan.
It's all of unknownsthat need to be tested.
But then what happens time and againis they start writing down all the,

(42:33):
we don't know if it's going to work.
Matt pass legal compliance.
We don't know what the customer demand is.
We don't know what the price point is.
We don't know if there'scompetitive moats that we can build.
We don't know all these different things.
You don't know all these sources ofuncertainty and it's a huge list.
And then they're like,how do I get started?
Like, what the heck dowe, where do we begin?
So that's, that's a, somethingthat I really tried to focus on

(42:55):
in particular in that chapter wasgive a structure to that now in the
case of CNN, They didn't, right?
They didn't have that humilitythat, oh my gosh, there are so
many things we don't know, right?
They didn't detail the business hypothesesaround this idea, and then say, okay,
how could we pick these off one at atime and in a very low cost, low risk

(43:17):
low time investment, get some data, nottotal data, not perfect information, but
some direct first party learning aroundone of these hypotheses and another.
Like who's the right customer segment?
Is this and we're talkingabout streaming, right?
Would our streaming opportunity befor our current television viewers?
Or would it be for people whohave never watched us on TV?
Is it, is it, us isinternational and so forth.

(43:38):
Is there a price point?
Are people willing to pay?
Does it have to be ad supported?
There are lots of differentquestions you could ask.
They didn't ask and test, right?
They followed again, what I call their,their, their one great example of what I
call this traditional planning process.
So.
You've got this established business, CNN,of course, you've got the environment.
There's this whole shift digitalto digital and media wave after

(44:00):
wave, and it's finally come forthe television networks, right?
And they can't hold out anymore.
And it's not just Netflixin the game anymore.
You now have Disney and HBO andso forth, legacy players launching
major efforts to move into streamingbecause this is so clearly what the
market is looking for the customer.
So CNN.

(44:21):
To their credit, identified animportant strategic question,
which is what could we do here?
Could we offer some kind ofa streaming offering, right?
With our brand, our kindof content and so forth.
So that was important, buthow they went about it, right?
They did not start with the humilityof all the things they didn't know.
They said they hired athird party consulting firm.

(44:43):
You would know them very big globalone, and they did a lot of things.
Data gathering of what's the stateof the streaming market for all
these other companies, right?
And all the millions of viewers of, Disneyplus versus, Amazon prime video versus,
of course, Netflix, et cetera, et cetera.
And then they wrote up thesedetailed business plans and

(45:03):
they have this business case.
Well, here's what we can do if we theycouldn't interesting little wrinkle here.
Not unusual.
They're constrained by prior legalcontracts, so they can't just take
their content that's going out onthe cable shows and repurpose it.
Stick it in the app, right?
They are prohibited from doing that.
So they said, okay but we've got a plan.
We're just gonna shoot all new video.

(45:25):
Right.
All new shows some with the same stars.
So we'll take advantage of, we're knownCNN and like, what's our sub brand things
like Anderson Cooper and Wolf Blitzer.
All right.
So we'll have some of our marquee namepeople do new shows and then we'll
bring in higher end, some other big nametalent from, NPR and Fox and others, I.
People with, with a known reputationand we'll create all these new shows.

(45:47):
We're going to have this streamingbundle and a launch as a standalone
app that you pay 6 a month for.
And we'll start with our currenttelevision viewers and they'll love,
they finally have this option andwe'll start in the U S and then
we'll go global started internationalexpansion year two and so forth.
And they have all the plans of themillions of viewers that are going to
get your one, your two, your three.

(46:07):
And it all looks rosy.
And they sent the planfor top approval, right?
And if was Jeff Zucker was the head atthe time of CNN, his boss, Jason Keillor,
smart people, experienced people, right?
But relying on the experience,the, the intuition or opinions of
experienced people, what I callexpert opinion is a tremendous trap

(46:29):
when you're dealing with uncertainty.
And so they said, ah, thislooks like the future of news.
We think this is the whole thing.
This is where CNN is going to be.
All of our opportunity islet's go for it all in.
And so again, the plan is greenlit and you're building the plan.
The train has left the station.
They spent 300 million, Aiden,before, before launch, before day one.

(46:52):
That was all just filming and hiringand putting it on the teams and
contracting the talent and producingthe, getting shows in the can and so
forth and building the technology, wholething, everything was built and they
launched bang right out of the gate.
And I often ask if I'm teaching thiscase, what percent for folks who are not
in the media industry, what percent of oftheir current customers, their television

(47:15):
viewers do you think would sign up for,for even a trial of the streaming app?
Cause.
Bear in mind, whenever you launch afree, a streaming service, there's
always a free trial of some numberof days, how many people would
even, try it out, create an account.
And people will say 30%, 20%, 25%.
It was about 1%.
So dismal pickup rate and.

(47:38):
Huge costs invested.
And then what happened?
There was a leadership change comingin and they had to make a decision.
And they just said, this is crazy.
We're shutting it down, right?
Why did we spend all this money?
Let's stop hemorrhaging the bleeding.
Cause the plan was to spend another300 million, 300 million every
year into the foreseeable future.
So worst of all, this isthat kind of costly mistake.

(48:00):
It was a good question to ask.
It was an important strategicopportunity to pursue, right?
But the point is, you could have found outI could have told you or got you the data.
Any good team, smart startup team couldhave brought you the data with like 30,
000 and 30 days to say, you know what?

(48:20):
There may be an opportunityhere, but it's not.
What you think it is, it's not goingto go at the rate and maybe not with
this customer segment, you believeit is, but like all your projections
for year one are completely wrong.
And what do we want to do about that?
Right.
Let's make an informednext step of decision.
So it was a great question toask, but incredibly costly.

(48:41):
And then when you do it, things thatway, it becomes very hard to take
the next step, to try something new.
Next month, next quarter, peoplewill feel like we've been burned.
We don't want to do thiswhole digital thing.
We don't want to do this innovationthing that like never led to anything,
or it was a huge waste of resources.
And that just makes it much harderfor organizations to drive the change

(49:01):
that they really need to drive.

That exactly that thing about, it's almost like
you've squandered the opportunityand again, I was mentioning one
of the biggest lessons is empathy.
And it's because you mightcome in as the second.
Head of innovation or CDO or CXO.
And somebody has done that damagebeforehand and you don't know that that's

(49:24):
gone on beforehand and it's spoiled.
It's spoiled the apple carts.
It's poisoned the well for you in so many

Like, why does nobody want to support any of my ideas?
Why is nobody signing up tojoin the team for this venture?

it's you, I mean, that's the thing you think it's you and it's
just, it's the, it's the process is theproblem, but maybe we'll, we'll mention.
Quickly the facebook version ofhow facebook the vc approach to
funding an idea like cnn plus.

yeah.
So, so the, the opposite approach.
So we talked about this challengeof uncertainty, which is really
the, the, the big challenge CNN.
It was not, not so much that itwas that far from their core.
I mean, the delivery model is radicallydifferent, but the content was the same.
The bigger challenge was, is, wasjust so much uncertainty around this
particular this particular businessmodel they were going to pursue.

(50:14):
And what that requires tacklinguncertainty really cause two things.
Just very high level.
One I already mentionedis rapid experimentation.
So iterative experimentationof actually trying and testing
and building and learning.
The other thing you have to pairthat with is iterative funding.
And that's baked in.
If you're in the startupworld, it's like, well, right.
Nobody says, oh, that's a neat idea.

(50:34):
You've sketched out on a slidedeck for your new business.
Here's a billion dollars.
No, there's a reason why it'scalled, a seed funding and then
series a and then series B.
They are built aroundthis idea of iterative.
Facebook is a great example becausewe have the historical record and
it's really interesting to see whathappened at each of those stages.

(50:55):
Their very first seed round Facebook,I think was called the facebook.
com was just four monthsold, had zero revenue.
It had just been on, Ithink, campuses, right?
And it was Peter Thiel whoinvested I think it was 500, 001.
I'm not sure what that one was for.
I'm sure there's a story behind that.
So half a million dollars,he got a little 10.

(51:16):
2%.
So a little over 10 percent stake.
So that to be clear means the companyis valued at just under 5 million.
Now, a year later, what had happened?
They still had zero revenue,but they had a million users.
No, I'm sorry.
They, they had zero profit, right?
So by year, year, one yearlater, they actually had revenue.

(51:36):
So they had eight, many more users, right?
It wasn't just a few early campuses.
They had a million usersand they had revenue, right?
It was actually, and not just somerevenue, it was from major advertisers.
That's what they were trying to advertise.
And they had big companies likeMasterCard advertising on them.
So they got 12.
7 million.
The valuation went from 5 million.
Almost 5 million to almost 100million, right, in one year.

(52:00):
Next, what happens?
Facebook spreads to not justcolleges, but to high schools and
even corporate campuses, right?
It raises a Series B round, valuingthe company at 500 million, another
five times increase in value.
Year after that, What has happened?
Facebook has now launchedon mobile, right?
It has started its news feed,what we now think of as the

(52:20):
core experience of Facebook.
It has opened up to app developers, right?
Now Microsoft leads the Series C round.
It values Facebook at 15 billion.
The core idea of what Facebook istrying to do hasn't really changed.
In these, from its seed launch to itsseries C round, but the market value has

(52:42):
gone from 5 million to 15 billion, right?
Even though the company will not turna profit for two more years, right?
So what changed?
In those three years, what changedwas the uncertainty went down, right?
When you started that, like anystartup uncertainty is massive.
It's, you have so many business unknowns.

(53:02):
Who's the customer?
What's the total addressable market?
What's the possible revenue model?
What's the cost to operate?
Who are the partners you need?
What's the, is the technology there?
Every year they're takingthat uncertainty out.
You're starting to see, okay,here are the customer segments.
Here is how fast we can drive growth.
Here's what.
The tools are, they're going to bring usin, a new subscribers here, all the kinds

(53:25):
of companies that are going to advertisehere are the kinds of advertising formats.
All these things are becoming clearer andclearer, even though again, you're not
profitable, but the uncertainty of thebusiness model is getting less and less.
And so that's why that's thethinking of venture capital.
And I write in the book about how dowe take that model, not literally VC
funders outside the company, but take thatmodel of iterative funding that is tied.

(53:49):
Not to milestones of time not toannual budgeting, but to milestones of
learning and reducing of uncertainty.
How do we bring that model insidea corporation and reinvent the way
we fund and invest in new ventures?
And it's absolutely doableand a repeatable process.
And we see it now in a numberof different, more progressive

(54:11):
or forward thinking companies.

And so many ideas get shut down by a CFO who goes, this needs
to be profitable in 12 or 18 months.
Otherwise we're shutting it down.
That's happened to me again.
The, the

Yeah, you've got.
You got the totally wrong,you had the wrong sequence of,
of innovation metrics, right?
It's like your profit, of course, right?
Ultimately, if the innovationisn't going to be profitable yeah,
you're, you're not going to continuescaling it up, but it's, it's done.
So many companies do those.
They put the metrics in the wrong orderand the wrong sequence in the wrong time.

promised David he's on in 15, less than 15 minutes for a key
webinar that he's delivering and heneeds a mental amuse bouche before then.
So I'm going to give you that,but I just want to mention
one thing, cause I want to.
Neatly close this part managing proximitythree key elements of this focus on
problems that play to your strengthsmake it independent and i love this term.

(55:07):
Keep an umbilical cord to the corebeautiful beautiful day so it will wrap
up then where can people find you i'mgonna link to all those places anyway link
to the book and to some of the episodesyou mentioned we've had steve blank on
the show before a link to those episodesfor people that find that helpful.
Where's the best place to find you david.

Best place to find me is David Rogers dot digital.
So Rogers is R O G E R S.
Just spelled like BuckRogers and Will Rogers.
And the domain is not com.
It is digital.
So davidrogers.
digital.
And in particular, I mean, there's awebsite there, a little information
about my work, my speaking, my advisingof companies, but also you'll see right

(55:48):
on the front page, you can sign up formy my free newsletter my sub stack.
And if you subscribe to that, you actuallyget a free chapter of my latest book,
The Digital Transformation Roadmap.
Plus some of the articles that I'vementioned that I've been writing on,
the missing link between strategy andinnovation the digital transformation
digitalization trap, et cetera Iwrite published regularly on those.

(56:09):
So, I encourage that's really thebest way to, to keep in touch.

And I've linked to that on the innovation show sub stack as well.
And David also very generouslygives away some of the toolkit
that he has produced as well.
And there's also a pro accountthat you can sign up for as well.
For now, it's been an absolute pleasure.
David really enjoyed it.
Got to go and get your mentalamuse bouche author of the digital
transformation roadmap and thedigital transformation playbook.

(56:35):
David Rogers.
Thank you for joining us.

Thanks so much, Aiden.
I look forward to our next conversation.

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David L. Rogers - The Digital Transformation Roadmap Part 1

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}David L. Rogers - The Digital Transformation Roadmap Part 1