Published on 12/04/2017 | Strategy
Wouldn’t you want a crystal ball to see what the IoT will become and enable? In a complex world and despite all the data and analytics we have, predicting which services and products will conquer the hearts and minds of the customer is more complex than it seems. As the saying goes, “the future is rational only in hindsight.”
Companies such as Kodak and Polaroid know what that means: making the wrong decisions and not recognizing the opportunities caused them to miss the changing demands of customers in a digital era. These decisions seemed rational to leadership, but the future proved them wrong. The opposite is true as well: making the right decisions for the future today will prove to be rational and valuable later.
Check this video on the Internet of things:
So, how do you know what the customer will want and what will prove to work at scale amid uncertainty and accelerating change?
1/ Leadership
It's where the critical role of leadership and middle management in digital transformation comes in. Senior leadership sponsorship and oversight is needed to digitally transform a customer experience and an existing portfolio. Leadership needs vision and the ability to make the organization digitally savvy.
Leadership needs to create the conditions for the hyper-awareness and innovation capabilities that are required in digital transformation. It shapes an environment where middle management is involved, the voice of the customer is heard, and digital mine canaries are not ignored.
As a leader, you can't do everything. There is often someone who will understand the reasons and necessary steps to transform, innovate, and challenge the status quo before others do. Those who recognize the need for change often face marginalization and skepticism.
2/ Digital Mature Organizations: The Importance of Digital Coal Mine Canary
I introduced the term “digital coal mine canary” in my book, The Internet of Things: Digitize or Die, to explain that an organization that accepts to be challenged by its own members, and that is ready to listen to them, is mature enough to embrace digital transformation.
That is precisely why Polaroid missed the boat; they were not digitally mature. Carl Yankoswki joined Polaroid in 1988 as vice president in charge of the business imaging, U.S. consumers and industrial marketing. He quickly identified the necessity for Polaroid to acquire electronic imaging technologies to transform. Unfortunately, MacAllister Booth, his CEO, vetoed the plan, stating that, "Anyone who says instant photography is dying has his head in the sand." The next CEO, Gary DiCamillo, had a very similar approach. In a 2008 Yale interview he stated that, "People were betting on hard copy and media that was going to be pick-up-able, visible, see able, touchable, as a photograph would be." A couple of years later he analyzed the situation, "We knew we needed to change the fan belt, but we couldn't stop the engine. And the reason we couldn't stop the engine was that instant film was the core of the financial model of this company."
This is similar to Fujifilm’s model; the major difference is that Fujifilm’s management made a clear strategic choice to cannibalize their own market in order to enable the transformation to happen and build a longer-term success. Such an environment unleashes the opportunity to get early warning detection systems for your business, much like a canary in a coal mine. So, keep in mind that the canaries are not the problem. Rather, it’s the way you, as a leader and as a company, leverage them to create value for your customers, your channels, your company, its employees, and the shareholders.
3/ Digital Savvy Organizations: The Importance of Middle Management
When dealing with digital transformation, leadership very often sets a vision and clearly states the necessary changes to be successful. But vision and leadership is not enough. The Polaroid case clearly shows that even though they had performed thorough market research, even though they could have acquired the technology and even though they had leaders that had perceived the opportunity behind the risk, they did not realize the importance of middle management in digital transformation.
George Casper Homans was an American Sociologist and founder of behavioral sociology and the Social Exchange Theory. He expressed in his different publications the importance of middle status of individuals in social organizations as well as their capabilities to absorb and drive creativity.
He considers that any hierarchical social organization is constituted of:
If you apply those categories to a standard medium-size company, you could categorize the groups as follows:
Why Middle Management Kills Innovation
Recent studies seem to show that when dealing with innovation, transformation and change in a social organization such as a company, the middle status individuals will be more concerned than other groups to follow the rules at the cost of creativity and innovation.
From an innovation point of view (organizational, R&D, process and so forth), being criticized and negatively evaluated for suggesting creative ideas may be particularly salient to middle status individuals. Middle status individuals tend to be less creative than those with high or low status but on the other side they can boost the group’s performance by focusing on productive tasks and filtering out irrelevant information.
High status individuals seem to have more willingness to risk the expression of creative ideas due to the fact that they are well established as high status individuals and do not fear of losing the position. Interestingly Michelle M. Duguid and Jack Goncalo in their article “Squeezed in the Middle: The Middle Status Trade Creativity for Focus” study seem also to show that, even if the high-status individuals’ creative ideas are objectively not more creative than ideas from the middle or low status individuals, their status and associate confidence makes them more confident to persuade the rest of the group.
In the Polaroid case, middle management didn’t embrace the high-status individuals’ beliefs and because of that they were pushed to the side. This caused major issues with innovation, digital transformation, cohesion and keeping digital talents in the company.
Leaders willing to embrace the IoT to transform the customer experience, innovate and create customer and financial value should help the company’s middle management to understand the goals and outcomes, as well as the risks and threats to the existing business.
Why Digital Transformation needs middle management?
Setting a vision and giving a sense to the mission is not only about defining what needs to be done but also about creating the environment in which employees can challenge the status quo. Challenging the business model, processes, products and services and to the corporation itself and creating enhancements to those.
Explaining the “why” to middle management, and more importantly enabling innovative action in the edge of the “mothership,” creates the environment for change and adds a sense of urgency and accountability amongst the middle-status individuals.
Even if middle-status individuals seem to be more concerned than other groups about following the rules at the cost of creativity and innovation, other studies suggest that middle managers can be very valuable contributors to the execution and the realization of a digital transformation within the company. Unfortunately, middle management contributions in digital transformation are often unrecognized or not valued enough by most senior executives. In one article published in the Harvard Business Review, Quy Nguyen Huy, highlights the fact that those contributions occur in four areas:
Let’s have a look at another well-known company that underestimated the importance of middle management and because of that, nearly vanished: Nokia. This resilient giant has managed to go through major transformations since 1865 from rubber and paper to cable, from cable to mobile phones, from mobile phone to mobile internet.Nokia was one of the leading manufacturers in mobile technologies producing over 100,000,000 mobile phones in 1998. So, what happened?
In 2014, Quy Nguyen Huy, INSEAD Associate Professor of Strategy and Timo Vuori, Assistant Professor of Strategic Management at Aalto University interviewed Olli-Pekka Kallasvuo, former CEO of Nokia, on this subject. Theirexpert opinions were made clear: “The problem of Nokia, after all, seems frustratingly similar to those of many large companies such as Microsoft or Sony who could not develop high-quality innovative products fast enough to match their rising competitors. As the companies grew larger and richer, each department became its own kingdom, each executive a little emperor and people were more concerned about their status and internal promotion than cooperating actively with other departments to produce innovative products rapidly… the overriding emotion felt by top managers and middle managers within the organization was one of fear. And yet, it wasn’t necessarily a fear of being fired which pervaded; it was more about fear of losing social status in the organization.”
Digital transformation is a team sport. You need the digital mine canaries, middle management, hyper-awareness regarding change and, finally ecosystems of expertise of innovation in the extended enterprise.
Learn More:
You can learn more by reading the following blogs:
About the Book
Understand, master, and survive the Internet of Things with one simple and pragmatic methodology broken down into four steps. Digitize or Die is used by front-line business decision makers to digitize their strategy, portfolio, business model, and organization. This book describes what the IoT is, its impacts and consequences, as well as how to leverage the digital transformation to your benefit.
Inside these pages, you will learn:
About the Author
With 15+ years of computer networking industry experience, Nicolas Windpassinger is the Global Vice President of Schneider Electric’s EcoXpert™ Partner Program, whose mission is to connect the technologies and expertise of the world’s leading technology providers, pioneer the future of intelligent buildings and the Internet of Things, and deliver smarter, integrated and more efficient services and solutions to customers.
As a result of his work, Schneider Electric’s EcoXpert™ Partner Program has been granted a 5-Star rating in the 2017 Partner Program Guide by CRN®, which is part of The Channel Company group. The 5-Star Partner Program Guide rating recognizes an elite subset of companies that offer solution providers the best partnering elements in their channel programs.
Nicolas has been recognized by The Channel Company’s Top Midmarket IT Executives list. This annual list honors influential vendor and solution provider executives who have demonstrated an exceptionally strong commitment to the midmarket. The Channel Company, has recognized Nicolas as one of 100 People You Don’t Know But Should in the IT channel for 2017.
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