Case Of The Month December 2013: Success And Failure In Transformation

John Ward

business transformation dataIn developing the BTM methodology, we carried out 13 case studies of different types of business transformation in large European corporations. Of these 30% were successful, 40% partly so and 30% were unsuccessful. Each case was assessed against the BTM methodology disciplines to understand why they were more or less successful. Many of the failures were due to lack of alignment with the business strategy, lack of clarity of the expected benefits and inadequate risk assessment. In implementation, the IT and process changes were often performed more successfully than the organizational changes, resulting in some benefits being delivered, even in some of the less successful cases. But this rarely was enough to enable the transformation to achieve its strategic objectives and the majority of the benefits. Overall the organizations whose approach to managing transformations included attention to the majority of the BTM component disciplines were more successful than those that did not.

This article reports the results of an analysis of 13 business transformation case studies. Some were successful, some failed and the rest were partly successful. It shows how the BTM2 disciplines influence the outcomes and explains why some are more successful than the others.

To remain competitive in increasingly global markets, many businesses need to transform either what they do or how they do it or both. Economic turbulence and uncertainty can also make the need to change more urgent but, at the same time, make it more difficult to accomplish successfully. Given these challenges, it is not surprising that studies show that only about 30% of transformation programs are completely successful, while 30% fail completely. Our study of 13 business transformation cases of different types in large European corporations is consistent with this pattern of success and failure:

  • 4 of the transformations were very successful achieving all the main objectives
  • 5 were partially successful as some expected benefits were achieved, but not all
  • 4 were unsuccessful, achieving none of the transformation objectives, or they were not completed

Most incurred substantial costs. Every business transformation is different but not unique and lessons can be learned from the experiences of others. Because these cases showed the same pattern of transformation success and failure as other studies, they were valuable in developing and testing the BTM methodology.

The cases were developed through interviews with those involved in the transformation and reviews of relevant documentation. They were carried out, analyzed and written up by teams consisting of experienced academics, consultants and senior company managers. Some have already been published in the BTA “360° – the Business Transformation Journal” and others will be in future. Each case was analyzed in terms of how extensively and how well the BTM component disciplines were performed. The results were compared to identify significant aspects which appeared to affect the level of success achieved. Analyzing these transformations of varying degrees of success shows that those organizations whose approach to managing transformations paid attention to the majority of the BTM disciplines were more successful than those that did not.

The case studies were in the following industries: automotive, pharmaceuticals, construction (see case study in issue 1 of this journal, page 38), food, oil (issue 2, page 46) and chemicals, financial services (issue 1, page 52), telecommunications (issue 2, page 54) and IT. The cases included transformations to develop new products and services as well as restructuring and reorganizing core business functions and introducing global processes and systems. All involved changes in organization structures and individuals’ roles, responsibilities and behaviors, including, in a few cases, large scale staff relocations and redeployments. All the cases included new and significant investments in IT to enable the business changes, but, in all except one of the cases, IT benefits were not the main rationale for the transformations.

The BTM methodology disciplines

As would be expected, the successful cases were largely green with some amber and even a few The direction and enablement disciplines (source: BTA)red. In the unsuccessful cases, the boxes were mostly red and amber, but there were also always a few that were green!

Findings for each of the eight methodology disciplines are now discussed, starting with the three direction disciplines, before considering findings regarding the enablement disciplines and the ‘Meta Management’ aspects.

1) Strategy Management

A transformation needs to be driven by a clear strategic rationale – a rationale which should be easy for every employee to understand, otherwise there will be little motivation to change. All the successful ones had imperatives to transform the business, not just one function. It was also clear that in all the unsuccessful cases the need for transformation was relatively low; either there was no pressing strategic need or it was not seen as a business priority at a senior level.

In three of the four successful transformations the need for change was endorsed at executive level and then time and effort was spent to gain the buy-in of the rest of the organization and develop the ability to undertake the changes. In most of those that were partially successful, the readiness to transform appeared to be ‘high’, as well as the strategic need. They were not entirely successful mainly due to over ambition, or even over enthusiasm; too many ‘positive’ assumptions were made with little assessment of the potential risks.

Fig. 2: Example pattern for a partially successful case (source: SAP) (see also journal issue 1, page 25)

 

Having a clear vision of the intended future business and organizational models and then allowing compromises and trade-offs in the detail of how they are implemented, is most likely to achieve stakeholder commitment. However, in some cases, when the drivers demand urgent action, a top down, mandated approach to implementation can also work, but it tends to achieve stakeholder acceptance rather than positive commitment. Most transformations involve at least two distinct phases – to create a new capability and then to deploy it. In most of the cases the capability was created, but not (yet) always exploited; hence the benefits achieved were often less than those originally envisaged. Creating a new capability can be done separately from business as usual, but deploying it usually competes with other operational priorities.

2) Value Management

In the unsuccessful transformations the objectives and business cases were often vague, based on a ‘benefits vision’ rather than evidence based benefits and an understanding of how to realize them. This made it difficult for some stakeholders to believe the transformation was worthwhile and commit the required time and resources.

There was also often confusion between ‘changes’ and ‘benefits’: for example introducing
common global processes is a change, not a benefit, although it may create the potential for benefits, such as reducing costs or higher service levels. Too often business benefits were overestimated, while the risks and the problems in making the changes were underestimated – perhaps deliberately, otherwise it would be difficult to get funds and resources?

3) Risk Management

Risk management was often glossed over, but given the high failure rate it makes obvious sense to identify and anticipate what could go wrong, before it happens! As a result many risks only became apparent during implementation, leading to increased costs, delays, scope reductions and even abandonment. This reluctance to explore the risks earlier may have been influenced by executive instigation of the transformation, which can discourage negative feedback, making it inadvisable, even career limiting, to point out the potential risks!

To maximize the probability of delivering the intended benefits, the transformation should be planned in short deliverable stages, if possible. This also reduces vulnerability to changing business conditions and makes it easier to adjust the transformation to retain strategic alignment.
In essence, the outcome of the transformation could be predicted from the predominant ‘color’ in the assessment of the directional disciplines. How clearly and comprehensively the transformation strategy, value and risks have been understood and communicated provides a strong indication of likely success. Had the organizations undertaken this analysis early in the transformation, some failures and the significant resulting waste of money and resources could have been avoided.

Having considered how the direction disciplines affect the level of success of a transformation, our attention turns to the enablement disciplines and how well they were performed in the cases.

4) Process Management

The IT and process changes are usually performed more successfully than organizational changes, resulting in some benefits being delivered, even in some of the less successful cases. But this was not enough to enable the transformation to achieve its objectives and the majority of the benefits. In some of the cases IT or process methodologies dominated the overall transformation approach, making the implementation of other changes more difficult. In two of the unsuccessful cases the IT function tried to satisfy all the expressed user needs, which increased the scope and consequently the costs considerably outweighed the benefits.

5) Program and Project Management

Transformations cannot be fully planned in advance and have to adapt to both changing business conditions and program achievements. This is not necessarily a comfortable position for senior management and requires an empowered governance group to oversee and, as necessary, adapt the program. Effective management of the change content and benefits delivery is more important than the efficiency of the process. In some unsuccessful cases the organization relied heavily on the knowledge and capabilities of a third party supplier throughout, which changed aspects of the transformation towards what the supplier could do, rather than what was required. The transformation manager should have expert knowledge in the area that is being changed and also how to manage change in the organization. A key skill is being able to reconcile the differing views of the change and resource implications between senior managers and operational line management. The priority early in the program should be to gain agreement between senior and line management as to what changes the transformation involves, before ‘negotiating’ for the funds and resources required. In some of the less successful cases the ‘contract’ between the program team and senior management was agreed before the views of line managers had been taken into account.

6) IT Management

The transformations whose main benefits were seen as IT cost reduction or rationalization or were led by IT were not successful. Some business transformations become ‘IT replacement projects’, as the first phase is about replacing old technology and systems and IT methodologies and approaches are used with little business involvement. It then usually proves very difficult to regain business interest when the IT part is completed. IT is often in a weak position in the context of a business transformation due to a lack of real business knowledge, but with a perception that they know how it works, but they only know how the IT systems work. These notions created conflict in some of the transformations. When IT ‘won’ the argument the transformation was unsuccessful, but when it was ‘business- led’, any potential conflict was more easily resolved.

7) Organizational Change Management

These cases suggest that organizations should manage business transformations as orchestrated, continuous, incremental sets of changes – co-evolving and coexisting with business as usual priorities. The successful transformations usually addressed the organizational, people and capability aspects first, then the process and IT components. The less successful tried to do the reverse. Understanding and addressing stakeholder issues and having a strategy for accommodating or dealing with them as early as possible in the transformation is vital. The longer the time available to transform, the more the stakeholder views can and should be included in how the transformation is conducted. The methodologies used should enable all the main stakeholders to directly contribute their knowledge and plan their involvement, instead of relying on experts to interpret the stakeholders’ ‘needs’. Stakeholder engagement is a critical success factor in almost every transformation, and early alignment or reconciliation of multi-stakeholder interests is very important in order to avoid, for example, dominance by a minority of stakeholders or destructive negotiations between dissenting groups. The ‘transition curve’ (see figure 3), describing how people and organizations experience major change should be respected. A comprehensive and sustained approach is needed to minimize the period that people spend in the ‘valley of tears’, which is characterized by uncertainty and even disillusionment. Figure 4 shows that different groups reach this point at different times in the transformation. Senior management interests may have moved on, just when many line managers and staff are under stress, usually due to change and business as usual pressures colliding.

Fig. 3: The transformation experience curve (source: SAP)

 

Fig. 4: Employees experience the effects of the transformation at different times (source: SAP)

 

8) Competence and Training Management

Assessing existing competences as part of the ’Readiness’ is important in order to determine the strategy, because what can be achieved is a function of two factors: first, the amount of work required to make the changes and second, the knowledge and skills that can be made available at the required times. If some essential competences skills are limited is needed early in the transformation. In the successful transformations people were informed and educated about what the intended future business should look like. This helped them apply their existing knowledge to determining how the vision could be achieved, but it also exposed where knowledge was inadequate. Where suppliers are providing essential competences, those also need to be appraised and managed – in case they have over-estimated their capabilities. Organizational and individual experience cannot always be transferred from transformation programs in other organizations. In addition to the eight direction and enablement disciplines discussed so far, ‘Meta Management’ considers themes which influence the performance of any type of organizational transformation. From the case studies a number of lessons about leadership, communication, culture and values can be learned.

Leadership

The successful transformations had ‘CEO’ sponsorship and a C level executive leading the transformation. Involvement should be real and visible or other executives will not see it as important. The evidence from these cases suggests that continuous personal involvement in the governance of the transformation is what is needed, but it is not always easy for a busy executive to sustain this over the extended period of most transformations. But the cases also show that the early transfer of ‘ownership’ to a coalition of business managers, who will actually deliver the changes and benefits, is the best way to develop the capability to change. One key decision that needs to be taken is the mode of ‘change agency’ to be adopted. Either an ‘expert task force’ or devolving change responsibilities to operational managers can work, but a lack of role clarity is likely to cause fragmentation and even disintegration of the initiative.

Communication

A common lesson from many of the cases – even the successful ones – is that no amount of communication is ever enough! Informing everyone in the organization why change is necessary and about the consequences of not changing usually needs regular repetition. Equally important is being open about what the changes are going to mean, even if they will be unpopular with some stakeholders. Evasiveness builds distrust or suggests ignorance, both of which reduce credibility and hence commitment.

The communication must explain what is going on and what the intentions are, and it must be conveyed in the ‘language’ of the different stakeholder groups. Delivering it at the appropriate times when it is relevant to the working context of the recipients is also critical if it is to be effective. Also communication is a twoway process; this is sometimes forgotten – and in some of the less successful cases little attention was paid to questions, concerns or feedback which the transformation team (wrongly) felt to be distracting or unimportant.

Culture and values

All the transformations included significant changes in organizational roles, responsibilities, and behaviors, and in many cases the changes were counter to the prevailing culture. The successful transformations recognized this was either desired or inevitable and addressed the organizational issues first to create a new context within which to bring about further changes.

In some cases the transformation also demanded a change in the organization’s values: for example, loss of autonomy and reduced discretion for local investment, consolidation to achieve corporate control of resources or standardization to achieve corporate rather local business advantages. Inevitably these changes created tensions and exposed cultural and value differences across the business units and functions, which had to be either reconciled or over-ridden to succeed with the transformation. In the less successful transformations these tensions were not addressed and existing power structures prevented or subverted the changes.

The structure and mode adopted to bring about the transformation should normally reflect the organization’s overall management style. The ‘task force’ approach, which exercises the use of power, worked well in a situation when the need to transform was urgent, the objectives were very clear and the means of achieving them were known. In the opposite situations, a more devolved approach enabled at least one successful organization to increase the scope and ambition of the transformation, through knowledge sharing across the organization and individual managers learning from experience as the program evolved.

As the transformation proceeds, it may be necessary to change modes and in turn the governance of the program. In particular the creation of a new capability can be carried out by a task force largely separated from day to day operations. However, deploying the new capability usually competes with other business as usual pressures, which can cause unexpected problems, delays or even unsuccessful deployment.

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About John Ward

John Ward is an Integrated Marketing Expert at SAP. He has over 30 years of professional writing experience that includes marketing material, sales support, technical documentation, video scripting, and magazine articles.

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The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.

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Sundar Kamak

About Sundar Kamak

Sundar Kamak is the Vice President of Products & Innovation at SAP Ariba. He is an accomplished Solutions Marketing and Product Management Execuive with 15 + year's broad experience in product strategy, positioning, SaaS, Freemium offering, go-to-market planning and execution.

Transform Or Die: What Will You Do In The Digital Economy?

Scott Feldman and Puneet Suppal

By now, most executives are keenly aware that the digital economy can be either an opportunity or a threat. The question is not whether they should engage their business in it. Rather, it’s how to unleash the power of digital technology while maintaining a healthy business, leveraging existing IT investments, and innovating without disrupting themselves.

Yet most of those executives are shying away Businesspeople in a Meeting --- Image by © Monalyn Gracia/Corbisfrom such a challenge. According to a recent study by MIT Sloan and Capgemini, only 15% of CEOs are executing a digital strategy, even though 90% agree that the digital economy will impact their industry. As these businesses ignore this reality, early adopters of digital transformation are achieving 9% higher revenue creation, 26% greater impact on profitability, and 12% more market valuation.

Why aren’t more leaders willing to transform their business and seize the opportunity of our hyperconnected world? The answer is as simple as human nature. Innately, humans are uncomfortable with the notion of change. We even find comfort in stability and predictability. Unfortunately, the digital economy is none of these – it’s fast and always evolving.

Digital transformation is no longer an option – it’s the imperative

At this moment, we are witnessing an explosion of connections, data, and innovations. And even though this hyperconnectivity has changed the game, customers are radically changing the rules – demanding simple, seamless, and personalized experiences at every touch point.

Billions of people are using social and digital communities to provide services, share insights, and engage in commerce. All the while, new channels for engaging with customers are created, and new ways for making better use of resources are emerging. It is these communities that allow companies to not only give customers what they want, but also align efforts across the business network to maximize value potential.

To seize the opportunities ahead, businesses must go beyond sensors, Big Data, analytics, and social media. More important, they need to reinvent themselves in a manner that is compatible with an increasingly digital world and its inhabitants (a.k.a. your consumers).

Here are a few companies that understand the importance of digital transformation – and are reaping the rewards:

  1. Under Armour:  No longer is this widely popular athletic brand just selling shoes and apparel. They are connecting 38 million people on a digital platform. By focusing on this services side of the business, Under Armour is poised to become a lifestyle advisor and health consultant, using his product side as the enabler.
  1. Port of Hamburg: Europe’s second-largest port is keeping carrier trucks and ships productive around the clock. By fusing facility, weather, and traffic conditions with vehicle availability and shipment schedules, the Port increased container handling capacity by 178% without expanding its physical space.
  1. Haier Asia: This top-ranking multinational consumer electronics and home appliances company decided to disrupt itself before someone else did. The company used a two-prong approach to digital transformation to create a service-based model to seize the potential of changing consumer behaviors and accelerate product development. 
  1. Uber: This startup darling is more than just a taxi service. It is transforming how urban logistics operates through a technology trifecta: Big Data, cloud, and mobile.
  1. American Society of Clinical Oncologists (ASCO): Even nonprofits can benefit from digital transformation. ASCO is transforming care for cancer patients worldwide by consolidating patient information with its CancerLinQ. By unlocking knowledge and value from the 97% of cancer patients who are not involved in clinical trials, healthcare providers can drive better, more data-driven decision making and outcomes.

It’s time to take action 

During the SAP Executive Technology Summit at SAP TechEd on October 19–20, an elite group of CIOs, CTOs, and corporate executives will gather to discuss the challenges of digital transformation and how they can solve them. With the freedom of open, candid, and interactive discussions led by SAP Board Members and senior technology leadership, delegates will exchange ideas on how to get on the right path while leveraging their existing technology infrastructure.

Stay tuned for exclusive insights from this invitation-only event in our next blog!
Scott Feldman is Global Head of the SAP HANA Customer Community at SAP. Connect with him on Twitter @sfeldman0.

Puneet Suppal drives Solution Strategy and Adoption (Customer Innovation & IoT) at SAP Labs. Connect with him on Twitter @puneetsuppal.

 

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About Scott Feldman and Puneet Suppal

Scott Feldman is the Head of SAP HANA International Customer Community. Puneet Suppal is the Customer Co-Innovation & Solution Adoption Executive at SAP.

Why Strategic Plans Need Multiple Futures

By Dan Wellers, Kai Goerlich, and Stephanie Overby , Kai Goerlich and Stephanie Overby

When members of Lowe’s Innovation Labs first began talking with the home improvement retailer’s senior executives about how disruptive technologies would affect the future, the presentations were well received but nothing stuck.

“We’d give a really great presentation and everyone would say, ‘Great job,’ but nothing would really happen,” says Amanda Manna, head of narratives and partnerships for the lab.

The team realized that it needed to ditch the PowerPoints and try something radical. The team’s leader, Kyle Nel, is a behavioral scientist by training. He knows people are wired to receive new information best through stories. Sharing far-future concepts through narrative, he surmised, could unlock hidden potential to drive meaningful change.

So Nel hired science fiction writers to pen the future in comic book format, with characters and a narrative arc revealed pane by pane.

The first storyline, written several years before Oculus Rift became a household name, told the tale of a couple envisioning their kitchen renovation using virtual reality headsets. The comic might have been fun and fanciful, but its intent was deadly serious. It was a vision of a future in which Lowe’s might solve one of its long-standing struggles: the approximately US$70 billion left on the table when people are unable to start a home improvement project because they can’t envision what it will look like.

When the lab presented leaders with the first comic, “it was like a light bulb went on,” says Manna. “Not only did they immediately understand the value of the concept, they were convinced that if we didn’t build it, someone else would.”

Today, Lowe’s customers in select stores can use the HoloRoom How To virtual reality tool to learn basic DIY skills in an interactive and immersive environment.

Other comics followed and were greeted with similar enthusiasm—and investment, where possible. One tells the story of robots that help customers navigate stores. That comic spawned the LoweBot, which roamed the aisles of several Lowe’s stores during a pilot program in California and is being evaluated to determine next steps.

And the comic about tools that can be 3D-printed in space? Last year, Lowe’s partnered with Made in Space, which specializes in making 3D printers that can operate in zero gravity, to install the first commercial 3D printer in the International Space Station, where it was used to make tools and parts for astronauts.

The comics are the result of sending writers out on an open-ended assignment, armed with trends, market research, and other input, to envision what home improvement planning might look like in the future or what the experience of shopping will be in 10 years. The writers come back with several potential story ideas in a given area and work collaboratively with lab team members to refine it over time.

The process of working with writers and business partners to develop the comics helps the future strategy team at Lowe’s, working under chief development officer Richard D. Maltsbarger, to inhabit that future. They can imagine how it might play out, what obstacles might surface, and what steps the company would need to take to bring that future to life.

Once the final vision hits the page, the lab team can clearly envision how to work backward to enable the innovation. Importantly, the narrative is shared not only within the company but also out in the world. It serves as a kind of “bat signal” to potential technology partners with capabilities that might be required to make it happen, says Manna. “It’s all part of our strategy for staking a claim in the future.”

Planning must become completely oriented toward—and sourced from—the future.

Companies like Lowe’s are realizing that standard ways of planning for the future won’t get them where they need to go. The problem with traditional strategic planning is that the approach, which dates back to the 1950s and has remained largely unchanged since then, is based on the company’s existing mission, resources, core competencies, and competitors.

Yet the future rarely looks like the past. What’s more, digital technology is now driving change at exponential rates. Companies must be able to analyze and assess the potential impacts of the many variables at play, determine the possible futures they want to pursue, and develop the agility to pivot as conditions change along the way.

This is why planning must become completely oriented toward—and sourced from—the future, rather than from the past or the present. “Every winning strategy is based on a compelling insight, but most strategic planning originates in today’s marketplace, which means the resulting plans are constrained to incremental innovation,” says Bob Johansen, distinguished fellow at the Institute for the Future. “Most corporate strategists and CEOs are just inching their way to the future.” (Read more from Bob Johansen in the Thinkers story, “Fear Factor.”)

Inching forward won’t cut it anymore. Half of the S&P 500 organizations will be replaced over the next decade, according to research company Innosight. The reason? They can’t see the portfolio of possible futures, they can’t act on them, or both. Indeed, when SAP conducts future planning workshops with clients, we find that they usually struggle to look beyond current models and assumptions and lack clear ideas about how to work toward radically different futures.

Companies that want to increase their chances of long-term survival are incorporating three steps: envisioning, planning for, and executing on possible futures. And doing so all while the actual future is unfolding in expected and unexpected ways.

Those that pull it off are rewarded. A 2017 benchmarking report from the Strategic Foresight Research Network (SFRN) revealed that vigilant companies (those with the most mature processes for identifying, interpreting, and responding to factors that induce change) achieved 200% greater market capitalization growth and 33% higher profitability than the average, while the least mature companies experienced negative market-cap growth and had 44% lower profitability.

Looking Outside the Margins

“Most organizations lack sufficient capacity to detect, interpret, and act on the critically important but weak and ambiguous signals of fresh threats or new opportunities that emerge on the periphery of their usual business environment,” write George S. Day and Paul J. H. Schoemaker in their book Peripheral Vision.

But that’s exactly where effective future planning begins: examining what is happening outside the margins of day-to-day business as usual in order to peer into the future.

Business leaders who take this approach understand that despite the uncertainties of the future there are drivers of change that can be identified and studied and actions that can be taken to better prepare for—and influence—how events unfold.

That starts with developing foresight, typically a decade out. Ten years, most future planners agree, is the sweet spot. “It is far enough out that it gives you a bit more latitude to come up with a broader way to the future, allowing for disruption and innovation,” says Brian David Johnson, former chief futurist for Intel and current futurist in residence at Arizona State University’s Center for Science and the Imagination. “But you can still see the light from it.”

The process involves gathering information about the factors and forces—technological, business, sociological, and industry or ecosystem trends—that are effecting change to envision a range of potential impacts.

Seeing New Worlds

Intel, for example, looks beyond its own industry boundaries to envision possible future developments in adjacent businesses in the larger ecosystem it operates in. In 2008, the Intel Labs team, led by anthropologist Genevieve Bell, determined that the introduction of flexible glass displays would open up a whole new category of foldable consumer electronic devices.

To take advantage of that advance, Intel would need to be able to make silicon small enough to fit into some imagined device of the future. By the time glass manufacturer Corning unveiled its ultra-slim, flexible glass surface for mobile devices, laptops, televisions, and other displays of the future in 2012, Intel had already created design prototypes and kicked its development into higher gear. “Because we had done the future casting, we were already imagining how people might use flexible glass to create consumer devices,” says Johnson.

Because future planning relies so heavily on the quality of the input it receives, bringing in experts can elevate the practice. They can come from inside an organization, but the most influential insight may come from the outside and span a wide range of disciplines, says Steve Brown, a futurist, consultant, and CEO of BaldFuturist.com who worked for Intel Labs from 2007 to 2016.

Companies may look to sociologists or behaviorists who have insight into the needs and wants of people and how that influences their actions. Some organizations bring in an applied futurist, skilled at scanning many different forces and factors likely to coalesce in important ways (see Do You Need a Futurist?).

Do You Need a Futurist?

Most organizations need an outsider to help envision their future. Futurists are good at looking beyond the big picture to the biggest picture.

Business leaders who want to be better prepared for an uncertain and disruptive future will build future planning as a strategic capability into their organizations and create an organizational culture that embraces the approach. But working with credible futurists, at least in the beginning, can jump-start the process.

“The present can be so noisy and business leaders are so close to it that it’s helpful to provide a fresh outside-in point of view,” says veteran futurist Bob Johansen.

To put it simply, futurists like Johansen are good at connecting dots—lots of them. They look beyond the boundaries of a single company or even an industry, incorporating into their work social science, technical research, cultural movements, economic data, trends, and the input of other experts.

They can also factor in the cultural history of the specific company with whom they’re working, says Brian David Johnson, futurist in residence at Arizona State University’s Center for Science and the Imagination. “These large corporations have processes and procedures in place—typically for good reasons,” Johnson explains. “But all of those reasons have everything to do with the past and nothing to do with the future. Looking at that is important so you can understand the inertia that you need to overcome.”

One thing the best futurists will say they can’t do: predict the future. That’s not the point. “The future punishes certainty,” Johansen says, “but it rewards clarity.” The methods futurists employ are designed to trigger discussions and considerations of possibilities corporate leaders might not otherwise consider.

You don’t even necessarily have to buy into all the foresight that results, says Johansen. Many leaders don’t. “Every forecast is debatable,” Johansen says. “Foresight is a way to provoke insight, even if you don’t believe it. The value is in letting yourself be provoked.”

External expert input serves several purposes. It brings everyone up to a common level of knowledge. It can stimulate and shift the thinking of participants by introducing them to new information or ideas. And it can challenge the status quo by illustrating how people and organizations in different sectors are harnessing emerging trends.

The goal is not to come up with one definitive future but multiple possibilities—positive and negative—along with a list of the likely obstacles or accelerants that could surface on the road ahead. The result: increased clarity—rather than certainty—in the face of the unknown that enables business decision makers to execute and refine business plans and strategy over time.

Plotting the Steps Along the Way

Coming up with potential trends is an important first step in futuring, but even more critical is figuring out what steps need to be taken along the way: eight years from now, four years from now, two years from now, and now. Considerations include technologies to develop, infrastructure to deploy, talent to hire, partnerships to forge, and acquisitions to make. Without this vital step, says Brown, everybody goes back to their day jobs and the new thinking generated by future planning is wasted. To work, the future steps must be tangible, concrete, and actionable.

Organizations must build a roadmap for the desired future state that anticipates both developments and detours, complete with signals that will let them know if they’re headed in the right direction. Brown works with corporate leaders to set indicator flags to look out for on the way to the anticipated future. “If we see these flagged events occurring in the ecosystem, they help to confirm the strength of our hypothesis that a particular imagined future is likely to occur,” he explains.

For example, one of Brown’s clients envisioned two potential futures: one in which gestural interfaces took hold and another in which voice control dominated. The team set a flag to look out for early examples of the interfaces that emerged in areas such as home appliances and automobiles. “Once you saw not just Amazon Echo but also Google Home and other copycat speakers, it would increase your confidence that you were moving more towards a voice-first era rather than a gesture-first era,” Brown says. “It doesn’t mean that gesture won’t happen, but it’s less likely to be the predominant modality for communication.”

How to Keep Experiments from Being Stifled

Once organizations have a vision for the future, making it a reality requires testing ideas in the marketplace and then scaling them across the enterprise. “There’s a huge change piece involved,”
says Frank Diana, futurist and global consultant with Tata Consultancy Services, “and that’s the place where most
businesses will fall down.”

Many large firms have forgotten what it’s like to experiment in several new markets on a small scale to determine what will stick and what won’t, says René Rohrbeck, professor of strategy at the Aarhus School of Business and Social Sciences. Companies must be able to fail quickly, bring the lessons learned back in, adapt, and try again.

Lowe’s increases its chances of success by creating master narratives across a number of different areas at once, such as robotics, mixed-reality tools, on-demand manufacturing, sustainability, and startup acceleration. The lab maps components of each by expected timelines: short, medium, and long term. “From there, we’ll try to build as many of them as quickly as we can,” says Manna. “And we’re always looking for that next suite of things that we should be working on.” Along the way certain innovations, like the HoloRoom How-To, become developed enough to integrate into the larger business as part of the core strategy.

One way Lowe’s accelerates the process of deciding what is ready to scale is by being open about its nascent plans with the world. “In the past, Lowe’s would never talk about projects that weren’t at scale,” says Manna. Now the company is sharing its future plans with the media and, as a result, attracting partners that can jump-start their realization.

Seeing a Lowe’s comic about employee exoskeletons, for example, led Virginia Tech engineering professor Alan Asbeck to the retailer. He helped develop a prototype for a three-month pilot with stock employees at a Christiansburg, Virginia, store.

The high-tech suit makes it easier to move heavy objects. Employees trying out the suits are also fitted with an EEG headset that the lab incorporates into all its pilots to gauge unstated, subconscious reactions. That direct feedback on the user experience helps the company refine its innovations over time.

Make the Future Part of the Culture

Regardless of whether all the elements of its master narratives come to pass, Lowe’s has already accomplished something important: It has embedded future thinking into the culture of the company.

Companies like Lowe’s constantly scan the environment for meaningful economic, technology, and cultural changes that could impact its future assessments and plans. “They can regularly draw on future planning to answer challenges,” says Rohrbeck. “This intensive, ongoing, agile strategizing is only possible because they’ve done their homework up front and they keep it updated.”

It’s impossible to predict what’s going to happen in the future, but companies can help to shape it, says Manna of Lowe’s. “It’s really about painting a picture of a preferred future state that we can try to achieve while being flexible and capable of change as we learn things along the way.” D!


About the Authors

Dan Wellers is Global Lead, Digital Futures, at SAP.

Kai Goerlich is Chief Futurist at SAP’s Innovation Center Network.

Stephanie Overby is a Boston-based business and technology journalist.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

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About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu

About Stephanie Overby

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Retail Tomorrow: How Today’s Technology Is Shaping Retail’s Future

Stephen Sparrow

Do you ever think about tomorrow? Many retailers don’t. They’re too concerned with what’s happening in the moment. They’re too wrapped up in managing their daily business operations or maintaining profit margins.

Don’t get me wrong – those things are important. But tomorrow matters more than they know.

With game-changing technologies like the Internet of Things (IoT), virtual reality, and machine learning reshaping the retail landscape, tomorrow can no longer be ignored. If your company wants to stay ahead of the competition – both now and in the future – you need to begin experimenting with these innovations today.

Beer, there, and everywhere: Create an immersive customer experience

Imagine you’re a Brooklyn-based brewery. You craft the most delicious beer anyone’s ever tasted, and Brooklynites are absolutely gaga over your product. But how do you spread the word? How can you make people in Seattle or San Francisco thirst for your beverage?

Virtual reality and IoT tools can help you create a more immersive customer experience – one that gives people an in-depth view into your brewery – so folks across the country can get excited about sampling your suds.

By setting up a 360-degree video camera and implementing virtual reality capabilities, you can invite people all over the world to tour your facility. They can visit the tasting room, check out the outdoor patio, and watch the kettles work their magic in the production area.

IoT sensors, meanwhile, can provide prospective customers with insight around your brewing processes. Attached to the brew kettles, these sensors enable you to share real-time data about each batch of beer, from when the hops reach a boil to when fermentation is complete.

If viewers like what they see, they can order a case of your beer online.

Creating an immersive customer experience, where people get a glance behind the curtain to see how your company operates and how your product is made, is a surefire recipe for retail success.

A passion for fashion: Predict trends so your customers are always dressed to kill

Instagram, the popular image-sharing app, has a global community of more than 800 million users. These users share upwards of 95 million photos and videos per day.

If a woman from the United States is traveling to Tokyo for an upcoming vacation and wants to make sure she looks fashionable while visiting Japan’s capital city, where can she turn?

Instagram, of course.

With a simple keyword search for “fashion” and “Tokyo,” this woman could be knee-deep in results highlighting the top trends from this chic metropolitan hotspot. Now, with a better idea of what the locals are wearing, she can pick up a few new outfits before her trip, and she won’t feel so out of place in her American attire when she visits.

Retailers, particularly fashion brands, can benefit from how consumers are using apps like Instagram. By analyzing what people are wearing in photos taken in fashion meccas like London, Paris, Tokyo, Milan, or New York, your business can have its finger firmly on the pulse.

Pairing your analysis with machine learning capabilities can enable your retailer to detect and predict the hottest fashion trends. This will help your designers tailor the clothing they create to what’s happening – or what will be happening – in the market.

If more people are wearing floral-print miniskirts, you can design matching leggings. If more people are dressing in denim, you can ramp up production on jean jackets.

Staying up to date on the latest fashion trends can keep your retailer at the top of its game. Predicting the next big thing in fashion using machine learning? That will have your business declaring “game over” to all your competitors.

Not your grandma’s kitchen: Increase customer convenience through greater connectivity

Connected products are invading our homes. We have smart TVs in our living rooms. We have showerheads equipped with Bluetooth speakers in our bathrooms. We have lights that brighten or dim based on our sleeping schedules in our bedrooms.

In the kitchen, though, things are getting really intelligent. From precision cookers that alert you when dinner’s ready to coffee makers you can operate with your smartphone, kitchen appliances are creating a whole new level of convenience for customers.

With a smart refrigerator, customers can create shopping lists using a touch screen on the door. IoT capabilities enable people to add or remove items from their lists using a mobile device. Customers can even submit their grocery orders to a nearby store through their smart fridge, a convenient click-and-collect shopping scenario.

Augmented reality, meanwhile, allows people to peek inside their refrigerators without even opening them. If a woman at work wants to see if she has enough milk for a bowl of cereal tomorrow, she can check using a tablet or smartphone.

Retailers and consumer products companies can leverage this technology to deliver a more engaging product experience. The packaging of a stick of butter, for instance, might have a code on it. When a man peers into his refrigerator using his smartphone, he could click on the code and find out the product’s expiration date. Or perhaps he can learn a few new recipes he could bake using the butter.

By creating a hassle-free shopping experience and enhancing how your buyers engage with your products, you can increase sales and earn your customers’ loyalty.

Home sweet home: Modernize retail like real-estate agents have revolutionized homebuying

Think of how the realty business has changed over the past 25 years. In the early ‘90s, prospective homebuyers had to schedule an appointment with a Realtor or attend an open house to see a home they liked.

In the mid-2000s, house hunting went online, with sites like Trulia and Zillow springing up. Today, homebuyers can snap a photo of an on-the-market house they like using a mobile app and see pictures of the home’s interior, learn the price, find out the square footage, and discover how many bathrooms it has.

Retailers should strive to modernize their industry like the realty business has revolutionized homebuying. Barcode scanning and sensor tracking are just a couple technologies that could help.

If a customer is walking through the aisles of your store, you could offer them the opportunity to scan a tag on a shirt with their mobile device and instantly give them access to outfit ideas or show them accessories that match the top.

Sensors, meanwhile, could track where a shopper is in a store, allowing your retailer to send timely and relevant offers based on their location.

Adding value to your customer experience is the name of the game in retail. And there’s no better way to create a more valuable in-store customer experience than with the latest technology.

Innovation experimentation: Forge your path to a brighter future with revolutionary tech tools

Innovations like IoT, virtual reality, and machine learning are shaping what retail’s future will look like.

Your company’s success – both today and tomorrow – will depend on your willingness to embrace these technologies and experiment with new ways to engage and satisfy your customers.

Join us at the National Retail Forum’s 2018 conference and EXPO at the Jacob K. Javits Convention Center in New York City on January 14–16 to learn how the SAP Leonardo digital innovation system can help your organization bring these exciting technologies to life.

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Stephen Sparrow

About Stephen Sparrow

Stephen Sparrow is the Director of Retail Marketing at SAP. He defines, champions and executes marketing strategies to increase penetration and capture of revenue opportunities across SAP's retail enterprise accounts. He also develops industry advancing and perception enhancing programs to drive brand preference for SAP in the retail community.