149: Jerry Kane — People Are the Real Key to Digital Transformation

Well, the conventional wisdom goes if you're going to make it in today's world, you need to go digital. You need to get some tech working in your business. Right. And while there is some truth to that, today's guest is all about the fallacy behind that, the technology fallacy, and how people can make or break your systems, your technology and everything else, and how to merge the two better. So listen in on this conversation about technology, where technology meets people in developing a scaling company. I think you'll find it interesting. Hello and welcome again to the Scaling Up Business podcast. I'm your host and scaling coach, Bill Gallagher. So on the show with me today is Jerry Kane. Jerry has a lot of things I won't get it. All right. Because he's got that kind of academic background where there's a million different seats and chairs and lots of hats. Lots of hats. But highlight, he's a professor from Boston College, Right?

Absolutely.

And in the world of IT information systems in the business school.

So the business side, on the business.

Side, the IT side of the business school. And he's got a new book out that I thought was really cool and relevant. I see it a lot with our clients. So welcome to the show, Jerry.

Thank you. Thanks for having me.

Awesome. So we're going to talk about this business of how the real problem is often people, not the technology, but at the intersection of the two is what's, I think, interesting. And you've got some great takeaways for folks. Talk to us then about a little bit of your background.

Where are you from?

How do you get into this line of work? How does your brain work?

Yeah, well, perhaps the best place to start is start now and then we'll back up how I got into now. So my three hats are, I'm a professor of information systems at the Carroll School of Management at Boston College, and I've been teaching information systems there since about 2006. Ironically, my first day ever as a professor, I actually did healthcare IT to start in my dissertation. And my first day as a professor was the day that Facebook launched Newsfeed. And so all my students came in to class mad and saying they were going to leave and go back to MySpace. And I told them why. So I took, I call it an audible. And so I said, you know, I took off from what I was supposed to teaching and I told them why they weren't going to go back to MySpace and because of network effects, et cetera, et cetera. And then about over the next 48 hours, a group called Students Against Facebook News Feed formed and gathered. I think it was like 500,000 people in. In the course of 48 hours. And this is 2006. That was news. And so that and a couple other events led me to say, hey, this social media thing might really be something. So I chased that rabbit for a while, for about six to eight years, and then had an opportunity about the time I got tenure to pivot a little bit towards. I was really interested in how traditional companies were sort of trying to figure out the digital world. And so I started studying that in this joint effort between Deloitte and mit, Sloan Management Review. And we've been studying that for about the past five or six years. We've done surveys, we've done interviews, and this book is really the summation of that research. The last hat I have is, is as the faculty director of the Shea center for Entrepreneurship at Boston College. And through that I get to take students on trips, innovation treks to San Francisco, Louisiana, Seattle, New York, Boston. And we visit companies ranging in the size of 10 employees to the biggest companies in the world and figure out what they're doing with technology and how they're wrestling with things. So it's been a really fun journey to have multiple angles on this. This one problem of digital disruption and transformation.

Yeah, interesting. So talk to us about the. Let's just dive into the core idea of the book here and the research that you did to it. Maybe talk a little bit about the research and what you found and like that.

Yeah. So maybe start with the title. So the key takeaway is based on, you know, it's the Technology Fallacy. So the title is the Technology Fallacy. People are the real key to digital transformation. And really what we define as the technology fallacy. And unfortunately, it never actually made it. This definition never made it into the book because we came up with the title last. We didn't think that, oh, maybe we need to redefine this term. But it's the belief that just because many of the problems companies are facing are caused by technology or result from technology, it doesn't. Or the. It's the mistaken assumption that. That the solution to those problems will also be technological. And we don't find that to be the case at all. In fact, in the beginning of the book, we use a metaphor of the wizard of Oz and we talk about the cyclone in the wizard of Oz and we say how much of the story of the wizard of Oz is really about the cyclone. On one part, all of it is because we wouldn't have the story if Dorothy doesn't get whisked away from Kansas to the strange new world. But on the other hand, none of it is because we don't really care about how Dorothy got there. We care about how she finds her way through this strange new world and the friends she makes, the adventures she has. And we see that as the role of technology in digital disruption. It's the cyclone. It's causing all of this disruption that leaders and executives and employees have to deal with. But do we really care about that as much as we do? How do we make our way through this strange new world? And our argument is those aspects of making this journey are more about talent and leadership and culture and strategy and organization structure than it is about the technology itself. And yet most people pay attention to the shiny new toys. And so it's research driven. We've had five years of research. Over that time we've interviewed about 20,000 respondents. About two thirds of them are international and about one third of them are in the US and then we've conducted interviews with over 100 executives summit, you know, cutting edge companies like Microsoft and Facebook, Google and Facebook and Amazon and then some at traditional companies like Walmart and John Hancock and MetLife and then some small startups and thought leaders. And it's been a really fun and enjoyable journey.

Yeah. So when a company like Walmart embraces technology, what happens?

Well, what really impressed me about the Walmart story is they had, as I was interviewing their chief human relations officer, she forwarded the story that basically they, the leadership realized that Walmart probably wouldn't be around in 10 years if it didn't change its tune. And if Fortune 1 is worried about its own future, I would argue every company needs to be worried about its future. And actually what I was really impressed with is they actually, you know, put their money where their mouth was and they really embraced this, this change. And in fact the CEO went and worked with the board and you know, got their buy in because he said, look, once we start down these, try this path, we're likely going to take a hit, a short term hit in the stock market. But he did and, you know, started driving digital from the top, but also making sure the line level employees knew what the company was doing. They made some bold investments. They're working on changing the culture. You know, how you turn a battleship the size of Walmart or whether you can turn a battleship the size of Walmart is still up in the air. But I've been really impressed at a lot of what they've done, whether it's through acquisitions, through, you know, driving cultural change, etc, etc.

Well, that's I. So a lot of our clients go to embrace technology. They'll buy a new system like, oh, we read about this industry system that helps whatever, and then they'll, they'll get the system and then their people won't use it or they'll use it in a ham fisted way or they'll or badmouth it or try to sabotage it. I mean there's a range of things like that.

Absolutely.

Did you guys look at that?

We didn't look at it as much. Short answer is no. You know, more to the point, we were saying we want to change the nature of the conversation, that in some senses I don't want to say we don't care about the technology. But in some ways implementing the technology is the easy part. Making those sorts of behavioral and organizational changes are the hard part. So we assume that if you just implement the technology that that's how it's going to end up. Because we've seen plenty of stories around that. What we're trying to say is what can you do to make sure that doesn't happen and how can you do that process? Right?

So share a few of the examples.

Well, and so I'm trying to think. So we really focus on things like talent and we have some really interesting data on this that basically we ask people to what extent do they feel a need to update their skill set to continue to do their job. And something like 90% of our respondents said they feel like they need to update their skill set at least yearly. And yet fewer than half said that their organizations provided the opportunities for them to do so. And that's not just training, that's on the job learning, that's putting them in situations where they can develop new competencies. We also asked to what extent employees were likely to leave their organization within a year and it was something like 15. Employees were 15 times more likely to report wanting to leave in a year if they weren't receiving that sort of opportunity to develop their skill set. So it wasn't that companies employees wanted to abandon the sinking ship. What they were looking for is the opportunity to stay viable on the market. And these weren't young employees, they're not millennials, they're not low level employees, they're directors and VP level. So the very people organizations need to have. And then, you know, we have some great examples from, you know, we studied a lot of big companies, but like Aetna, so Aetna has a traditional reimbursement program, you know, education reimbursement program. But they took it a step further and they, they developed a strategic talent plan to say, okay, what are the skill sets we're really going to need in the next 10 years? And then they reimburse their employees at three times the rate if they were willing to get a degree in one of those valuable skill sets. And they did an ROI analysis and found that, you know, the ROI on this was over 100% because they got the skills they need, employees were more loyal, et cetera, et cetera. And you know, it's just in some senses that's a no brainer. It's like, why aren't all companies doing this and developing the strategic talent plan for growing the, the talent within their own walls?

You know, in the small companies we see folks just struggling. They're struggling with growth and managing everything like that. They're not really thinking in the early stages about developing people. Of course, in our world we're talking a lot about being a learning, growing organization and you can start it right from the beginning. As long as it doesn't just live with the CEO or the CEO and a couple of leaders that we're pushing that down into the organization. What are you doing to learning to learn how we're creating it, kind of a cultural practice and developing actual programs around it and even informal ones. I like, I talked to a, a guy at an accelerator program recently and he said, well, we've implemented God, I forget what he called it now. It was just like a learning launch on Wednesdays and learning lunch works. And this is a small team. I, I want to say they're like 40 people or something. But what happens is people sign up to teach something. So you know, if I was a chess fan, I might talk to you about how to play chess and how to get started and like that kind of thing. So people might teach something that's very businessy or they might teach something that is totally personal and people just show up and they hear and they have some lunch like that. But the result is it creates and attracts and retains the culture of learners and so shift something whether or not it directly applies to it. Which is really interesting.

Yeah, two examples, related examples. One were, you know, the small companies that they allowed their employees a certain amount of times, these are software companies, but they allowed their employees a certain amount of time per week to work on open source software projects. Because what they believed was that they, these employees were going to get more knowledge that they could bring back into their own development than they were, you know, just giving it away. So you're creating some of that cross boundary stuff. And then we interviewed the research and development company Mitre and they, you know, did a similar thing as your lunch and learn except it was really built around affinity groups so cyclists or cooking or something. And what happened was as employees started to interact along these interest groups, they actually like when they were cycling they'd have business conversations and then they would create connections within the company that wouldn't exist otherwise. So they began to know who knew what and could leverage that knowledge. And I think your point is right and I see this in a lot of the startups I visit. You know, getting culture right from the beginning is really key and knowing what those cultural factors are that are going to keep you motivated into the future. I think starting there is really, really important because it's really hard to retrofit an organization after, after you've grown.

Well, unless you did something to develop it. Right. Intentional, thoughtful, design centered, then you have an accidental or a default culture.

Right.

But there is a culture, there's culture.

Yeah. And that often doesn't end well.

As.

You know and that's somewhat of uber story is they didn't intentionally cultivate the culture and so they ended up with a bad one. Contrast that with Salesforce that take, you know, from day one has driven culture home as a really critical part and still does. And you know, Salesforce is one of the most, the strongest cultures at a very large company I've seen.

Yeah, well if you think about. So we're talking about learning and culture and creating the habits and you're talking about technology implementation and the fact that you've got to develop your people alongside it. It does seem like our middle mid career folks are a lot more concerned of being bypassed by technology than the entry level folks who want to be attached to technology. Technologically relevant companies, companies doing something interesting and current versus sort of dinosaur companies who are avoiding. Right. Well yeah, I mean you could see, you could say look, we're people are still thinking to go stores, we're just going to be that. And then one day you wake up and you realize actually people don't. Somebody delivers stuff to my door every few hours and I never go to the store. Yeah.

And you know, one of the really interesting trends we've seen over the five years of our research that's really captured in this book is I have definitely seen a notable increase in the number and types of companies that are taking it more seriously and in industries you wouldn't think of normally. You know, I, a friend of mine was a guest speaker in my class the other day and he does a, you know, works for a very small company that does, you're going to laugh. Poultry analytics. You know, so they work with chicken farmers to figure out sort of how to the best feed them and care for them to get sort of to the target weights. Well, they've recently implemented an AI based, you know, algorithm to help do these predictions. And they said within like six months this new algorithm has out, has blown away 20 years of work that they've done. And I tell my students, look, if you tell your boss, the chicken farmers are doing this and we're behind, so get up to speed. And you know, there's so many countless, whether it's health insurance, automotive, you know, financial services, retail, agribusiness. The. We asked the survey, we asked a question in our survey. To what extent do you think your industry is going to be disrupted by digital technologies? And 87% of our respondents said to a moderate. That would be to a moderate or great extent. And yet we also asked them to what extent is your company doing enough about it? And only 44% said they were doing enough. So we call that in the book this knowing doing Gap, that everybody knows this is happening. We don't make a big case out of it. It's what do we do now that we recognize it's happening? And I do think we've seen, I've been pretty impressed at the number of companies we see starting to take it seriously now. The challenge is moving it beyond just lip service to actually doing something.

So spending some money, putting some people on something, putting some current business or challenging some internal competition, is that what you're.

Yeah, you know, it's, it is spending money, but I'm also careful to say it's not just spending money. So we asked because it's, it's those new processes that are so much harder. So we interviewed a guy named John Halomka, who's the CIO of Beth Israel Deaconess Medical center. And we asked how, you know, how does he do it? For years he's been like innovator in his field with respect to technology. And he said, you know, we asked him what his secret was. And he said the secret was we don't have any money. So we have to sort of be scrappy, we have to be innovative, we have to sort of string stuff together. And we've heard that more than once that sometimes having Money is a curse because you throw the money at the problem, you buy the system, you think it's all solved. And you don't do that hard work of changing the culture, changing the processes, making your more organization, more nimble and agile to be able to respond to the changes that technology is wreaking in the, in the business landscape.

So in your, in your book you identified some pathways, some distinct routes or something like, or maybe their stages. Talk to me about that, would you?

Yeah, so, you know, so I, I need to confess that, you know, this research has been sponsored by Deloitte and in partnership with mit, Sloan and Management Review. I'm sort of the outsider that makes sure it doesn't become too consulting y and so when, when I came into the project they had this three stage model where so companies, you know, as consultants do, it's early maturing or early developing, maturing as, as companies grow. And I told the team, okay, look, this is as I build some cred. I said look, this just is too much like consulting model. We need something different. So I proposed doing a culture index where we, you know, we tried to identify different types of digital culture, you know, different types of culture at digitally successful companies. I even had a title in mind. I was going to call it 50 Shades of Digital Transformation and I, I saw that, yeah, I thought, okay, we'd have an Apple like company and a Google like company and you know, very different ways of approach this did the research, did the statistical analysis on it. You know, to geek out for a second, we did, we ran a cluster analysis and what the cluster analysis gave back to us was in fact there were three very distinct cultural models or cultural paradigms in our, in our research. And it almost exactly mirrored our early developing and maturing framework. So on the one hand I was really frustrated because I was trying to move them away from this framework and the data basically said that it was right. The exciting thing was this result was independent of our metrics of a company's digital maturity. So what it suggests is that these companies have a very distinct culture and you need those cultural shifts to be able to progress. And it's things like being more experimental, being more iterative, being more agile, being more collaborative, being more risk tolerant. And when companies ask where do we start? You know, where do I start with all this? That's where I point is, it's like, I don't know what technologies you need to implement, but I know the cultural characteristics you need to develop. And what's really interesting is the further along these Companies get in their digital maturity journey, the more likely they are to spend the time, energy and money to reinforce those cultural characteristics.

So what's, what does it mean to be far along in the digital maturity journey?

So, you know, what we did was we asked them a simple question. Imagine an ideal organization that's transformed by digital technologies to, you know, yada yada. Basically imagine, you know, a perfectly digitally transformed company. And then on a scale of 1 to 10, where do you match your, where does your organization fit? And we, if they put in 1 to 3, you know, like far that with 10 being closest, 1 being the farthest, 1 to 3 were early, 4 to 6 were developing, and 7 to 10 were maturing. Now what's really interesting about it is what we actually saw, and this is true over five years of research, really the peak, like the mo, the ones that report the best results are those that report about a 7 or 8. Nines and tens tend to underperform actually. And my working hypothesis there is those people who say we are the ideal company, we've gotten it, we've arrived, completely don't understand what it's all about. Those that really get it are saying, look, we're on this journey. Digital transformation is not a one and done effort, it's the new normal. Technology is going to keep evolving, technology is going to keep changing, technology is going to keep disrupting. And unless companies get into this mindset of continual learning, of risk taking and experimentation, they can't possibly keep up. So I do think a certain level of humility is essential in the face of these changes because what we've seen has been a radical shift. And I actually think the next 10 years are even going to be more radical with the technologies we have coming down the pipeline.

Yeah. Have you read the exponential organizations from Salim Ismail by any chance?

I have not, but I will add it to my list.

The list is always big and growing. But, but Salim worked with Singularity. It launched Singularity University. And he writes about companies getting disrupted by, by other industries and so on. So the disruption of either a company who changes a business model or a technology that, that makes something obsolete. He talks about the pace of those things and what are the core organizational things. But it seems like you're speaking to something that companies struggle with. And it's interesting that you talk about the people side and the technology adoption. So the culture people side versus the technology itself. Because there's these two sayings that come to mind. You, you maybe heard both of them, but one of them is, you know, Are, I don't know if they're saying, but if, what if we invest in our people and they leave? Right. Is the, is the question. And then the counter is, well, what if we don't invest them and they stick? Absolutely right. And then I think that on the technology side it's like, well, what if we compete with ourselves? What if we introduce something that makes us obsolete or undermines an existing revenue stream product line, like that kind of thing. And okay, but what have you done your competitors?

Absolutely. You know, on the first one of what if we invest in our employees and they leave? You know, if you. One thing we found in our research is that if you don't invest in them, they will leave because that's one thing they're looking for. And it's not going to be the people that you want to get rid of. So it's almost the reverse formulation. The people who can leave, your best employees will leave if you're not making good use of them. Them, it's the ones that you don't invest in and don't want to keep will stay. And then, you know, look, one theme we have seen throughout is that, you know, doing this is hard. And I want to be clear. We're not advoc. We're not saying, you know, technology is not going to be involved in this process. We're just saying everybody's talking about the technology, everybody's ignoring this people side of things. And I was going somewhere with that.

You were saying the investing in people disrupting themselves.

Yeah, but what was the second one you said? Well, oh, disrupting themselves, yeah, you know, and everybody points to the fact that it's really hard to innovate while also keeping the lights on. And that's just one of the challenges. Jim March this, the famous Stanford Business School professor who passed away recently has a seminal paper where he talks about exploration and exploitation in organizations where exploitation is, is taking advantage of the skill set you've got to drive profits now, whereas exploration is about finding new ways of doing things. And the results of that paper is really that what you want is a balance. You need to, we know you got to exploit, but you also have to keep exploring somewhat to make sure you don't cut yourself off from new ways of doing things. And some of my academic research actually showed that actually the level of excitement, experimentation or exploration that you need isn't really that much. Our results this year said about, you know, about 10% is really enough to get the meaningful change. But far more likely what I see out There is companies really driving just the short term things, just pure exploitation, maximizing their existing competencies and not thinking about the future. And you, I hear this excuse all the time of well, Wall street won't let us try new things. They demand short term innovation. And yet I see plenty of companies, plenty of public companies out there being bold and being innovative and really doing the right thing for their investors. And so I think the Wall street, you know, go into the Wall street short term thing is, is a cop out. I think everybody can innovate and explore to a certain extent and absolutely, it's an imperative in today's business environment.

So our listeners are probably more likely to complain about the pressure from equity partners around growth versus Wall street, but they're still complaining about the same phenomena like, oh, we have to focus on this now. And in the world of scaling up, we're talking with people often about what are the key things that you need to do now that are working on the business and, and dealing with addressing long, important long term issues versus, you know, just make it to the next quarter and survive.

So yeah, absolutely. And I think it goes back to the culture, you know, we all got to do things, you know, we have to keep the lights on and there's no, that's not an option and we have to scale and we have to grow. But again, I think if you, again going back to the Uber example, if you focus on that at the expense of all else, I do think you can get yourself into trouble, whether it's not recognizing an opportunity in front of you. And we've all heard stories of successful pivots or you know, startups really, you know, it's not their first idea that really works. It's the, you know, the third or fourth that was the logical conclusion of the first or it's about a side business that turns out to be much more profitable than the original one. So yeah, I mean it's certainly going to be formulated in a slightly different way and you just have to be careful. So startups, I think are a little more innovative by nature because they don't, you know, they don't have a clear track record of success and they're still figuring that out. But it's important that when you do start to figure it out, not get completely locked into one way of doing things because you can find that the, the digital carpet gets pulled out from the digital rug gets pulled out from under your feet and you want to be paying attention to those often opportunities. Really what we advocate is, you know, what I advocate is just making sure you spend a couple days a year as senior leadership getting up to speed, taking stock of the technological landscape, recognizing the threats and the opportunities that are ahead of you and make sure you're thinking long term enough. Because if you don't think, if you're not thinking ahead, it's gonna, and sort of skating to the puck no matter who you are. In this day of fast growing, fast moving, fast changing business, you run the risk of being disrupted.

You know, I think there's a tension in all companies and I'm curious what the research says, but there's like a poll, there's certain group, and it may be the majority of the minority, but there's some poll within any of your organization to say, just keep your head down, keep doing what we've always done, don't rock the boat, don't draw attention. It's conservative, it's risk averse, it's like that. And then there's another side that is at the extreme, it's like, let's throw it all out. It's all like, it's time for something new. And it's growth and development, innovation and new customers and new people and, and neither one is really the answer, right? If everything's new all the time, we're exhausted, we don't capitalize on anything, we don't get a return on development and so on. And it's funny, last week I ran into a dear old friend that I worked with nearly 30 years ago at a company called Sprint. Right? And in the early days of Sprint, it was the mashup of it was US Sprint and it was United Telecom and GTE Sprint and the United Telecom were the local phone company people, very conservative, very utility minded. And the GTE Sprint were the long distance, innovative new folks. Today it's a, it's a wireless company. It's completely sort of different organization. But there you could always tell there was a tension between folks who were from one camp or the other. There was a cultural war. And so it was really obvious there was a gift there. But, but even in a company that didn't result from a merger of two very different companies, there's a battle, there's a tension in what the culture says and what's rewarded and celebrated in that. And even if you're in the minority and it's innovative, there's going to be people that are like, stop showboating or settle down.

Yeah. And so we see that as well on a number of different levels. And most of our respondents reported that tension. And so a lot of what needs to happen is so obviously the answer is both. You need those, those two groups need to, to coexist. One interesting thing that one of our hypotheses was that digitally mature companies would be more experimental than early stage companies. And in fact, we didn't find that necessarily. I mean, we found some of that. But the bigger difference was what. While early stage companies reported experimenting and having like innovation labs and things like that, they were less likely to do things with those experiments. More digitally mature companies were likely to take the results of those experiments and then drive change across the organization. And so you can have like both groups coexisting, the experimental sort of innovative folks and the more established folks. But we do have to make sure that some of the findings, some of the insights, some of the best practices of those innovative people do make it over to the other side, you know, and what level the right is, is the right level to set that fire hose and to get that change going, I don't exactly know. But it is important to make sure if you do have those pockets of innovation, or if you don't have those pockets of innovation, create them. If you do have them, make sure they're at least changing those, the stodgy side of the organization somewhat and that they're keeping them, you know, honest and up to speed to a certain extent.

That it's being rolled out in some way.

Yeah, yep. Or just being allowed to exist in its own little pocket. And it never affects the core business that doesn't do any, that sort of innovation theater where, you know, we, ooh, look at our lab, look at our innovation stuff. Now it doesn't actually affect our business at all, but we have it. And that's really, I think, where a lot of companies run into problems.

Well, you know, so I, I tend to work with companies from. Well, I see some companies in, in our early stage companies in our workshops and in our accelerator programs. And those can be, you know, from 0 to 500, 5 million or something like that. And then the core companies we work with maybe are more like 40 million in average and but range from like 10 to 500. And what I notice in those environments is there's not really the having somebody dedicated to innovation is not pegged to the size of the company. At some of the large ones, there isn't somebody in or any functional thing in charge officially of innovation. It just happens at different parts of the company by different people and then. But at some of the small ones there, there is. And it doesn't seem tied. I see it in both cases. But we stop and we ask who's got learning and the development of people versus just the admin and hiring side of things that's almost never covered. And the, the folks with a, with a focused effort, a conscious effort on that R and D or innovation is pretty small in comparison that there's just not that. And almost the ones without the programs are implementing things more than the ones with the lab like functions where it may live. Like oh, that's Bob's thing. And he, he's the mad scientist over there. But you see a lot of his things don't get pushed out in the organization.

Right. And to be fair, in our research the companies that we saw struggled the most with digital disruption are those mid mid sized companies because the smaller ones are nimble enough that and often new enough that they can, they can respond more quickly. The huge ones just have resources to throw at the problem. It's those that those mid range companies that really need to be innovative in the way they approach this problem problem. And you know, we've seen things like maybe you don't have somebody dedicated to R D, but maybe you do, you know, one day a month, you know, working with a, a mid sized agribusiness company and they did a internal hackathon once a year with their employees, got them to work on a project and you know, this is not a huge glamorous company but they're really trying to keep that entrepreneurial mindset alive in the company. And that I think is what needs to happen is you don't want to lose that as you get to that mid size stage.

Well, it does seem like it's not always. I mean clearly the Googles, Apples, Facebooks are doing new things and working in new ways and challenging things. But there's a whole host of companies that you haven't heard of that are doing stuff. I think you talk about Harley Davidson, don't you? Yeah. What did you see there?

So yeah, so we were able to interview the CIO of Harley Davidson and you know, we were asking him to explain one of our findings. So one thing we found was that digitally mature companies were more likely to organize according to cross functional teams. And those cross functional teams, this year's research is showing they also tend to be managed differently. They tend to be managed, given more autonomy to accomplish their goals. They tend to be evaluated as a unit, not as distinct individuals. And we asked him why do you organize that way or what is this result? And he said we found the same things that basically digital is affecting all aspects of our product and if we don't start thinking about it in a unified way, we are never going to be able to integrate it into a unified way in our, in our team or in our, in our product. We also talked with CarMax. I don't know if they can be considered a mid range company for you. For sure. Yeah. And so they organize according to these cross functional teams and they report that it allows them to be more agile because these cross functional teams are working on different objectives and they can be more easily pivoted to address new concerns. They evaluate what the teams are doing, reassign as they go. It just that team based structure allows them to be more flexible and agile in the marketplace. And then Freddie Mac, which was the third one we talked to about this problem and she said we organize according to cross functional teams because if we don't organize differently, we're not going to think differently. And really what we're trying to do is drive a different way of thinking across the company. And these cross functional teams gets different people from different silos to be, to be in conversation with one another. Yeah.

And maybe make the ideas better. Right. When we work on process improvement in companies and we identify that one of the ways that regular operations go off is with processes that break down, it's usually in the handoffs between departments and, and functional areas. So we'll identify processes that span departments, functional groups and then establish an overall owner for it, name it, give it metrics and then go to work on various types of process improvement, whether it's mapping and lean work like that, developing checklists, the whole world of that stuff. But from that often come interesting innovations, whether it's applying a software tool of some kind or simply changing up the process, reimagining something, or a combination of technology and process change, we're getting that. But those ideas that may start with one person get profoundly better when a cross functional team is contributing to them, Right?

Absolutely. And then the key is with these innovations is make sure you start small. So we talk a lot in the book about agile software methodologies and how that that can be moved into organizational transformation. And you know, it's about experimentation, it's about those, those quick wins and those minimum viable improvements that then when they work you then begin scaling them up and so keeping that innovation mind and, and you can do that in teams because if a team fails, it's not a big deal. If an enterprise wide system rollout fails, that's a Real problem. So, you know, the team structure, you know, can enable this risk profile. And one thing we saw that was interesting, one of our respondents said, you know, we have our, whatever, our, our failure target, failure rate of whatever 5% or 10% or whatever. And he said, the real risk is that we were safer than that. And whenever we don't fail, at least 5 or 10% of the time, we up the risk profile of our efforts because that means we're not being. We're not being innovative enough or we're not pushing if we're fail. If we're succeeding 100% of the time, we are not nearly being innovative enough. Which I thought was a really refreshing sort of angle.

Yeah. Yeah. Well, this is something that I get asked about a lot is what's the balance? And I'm like, well, if you're failing at everything all the time, it's depressing. Right. Teams can't only take that much. But if you're winning at everything all the time, it's a little bit like the participation medal. You're like, yeah, okay, we're green again. Like, we expect to be green. And then, and then you're not growing, you're not developing. It's all a little too safe. So it's that tension of like, well, what percentage is it? I don't know. Are you willing to say, fail at 20% of things if you accomplish 80%? Right.

Yep.

Are you willing to miss a few.

You know, and this goes back to the venture capitalists I've talked to. It depends what those wins are. You know, what, what game are you playing? If you're playing a game of 100x, you know, talk about scaling. If one of these innovations is going to lead 100x a thousand x growth, then by all means get risky. If they're going to be smaller ones, then, you know, you adjust your risk profile accordingly.

Yeah. So evaluating the risk reward side of it and. Because I'm. Sometimes you just don't know. Right. Like, who knows? It feels like it's about here.

Yeah. Well, and then you, you know, and then if you're wrong, you reevaluate, you know, and so you. This is a, this can be a moving target. If you're failing 20% of the time and you're finding that that is not getting you. Well, let's say you're failing 30% of the time and you feel like that's not getting you where you need to go, then, okay, maybe tack a little, you know, one, figure out why you're failing that much is it? Because I mean, it's easy to fail. You know, we people just didn't show up to work well. That's why we failed. Make sure you learn. So one thing we learned from Google is they run experiments all the time and they said we don't care if it succeeds or fails. Google has that luxury because they have more money than they know what to do with. But what we care about is what we learn from it. And I think the key with those experimentations is make sure you know why you're failing and frankly why you're succeeding so you can learn and do business better and different. And that that culture of continuous learning is not just amongst the mindset of the people, but it's also at the organizational level too. How does your organization structure in a way so that you are continually learning? Because, because the digital environment keeps changing and we have to keep learning because. Because the, the rules keep changing. And so I think this is just, this is the new normal about what it's going to be like doing business in this day and time.

So here's what I'm getting is that, that we're all focused on digital transformations, bringing tech into our companies, building tech companies. But along the way we have to remember that it's people that use the tech, that interact with the tech, that select the tech, that cause it to win or lose, and that it takes at least an equal amount of energy on that side of things to work that into, to remain competitive.

I will take it even a step further because I will say we do not care about digital transformation. We care about business transformation in response to digital trends. And those are two very different questions. A great example recently is Best Buy who responded to digital threats from Amazon by becoming more customer centric, by doing showrooming, by, you know, they didn't do digital stuff. They just realized with their product, they developed a product set where they're at their strengths could be emphasized. And so an effective response to digital disruption is very different than using technology to change business. And I think, no, it may involve technology, but what we really care about is business response to digital disruption, not digital transformation of the company.

Right. So Best Buy is still relevant for those of us who have a Best Buy because we may want to go see something physically look at it and evaluate in person, talk to somebody who actually knows something about it. In some cases you want something fair, even more immediate than prime now can send to you, depending on, on where you live. Right?

Yeah, absolutely. And you know, Best Buy model isn't the only way to go, you know, we saw with Aetna, you know, their response to digital disruption was to develop this talent model to make sure their employees were getting the right skill set. That's not digital. And so the whole point is we're so fixated on the technological solutions that we've. And that's the technology fallacy book plug that we forget that, you know, what we care about is getting our businesses able to operate in a digital world. And so much of that has nothing to do with technology using technology at all. It's about being able to be more nimble, adaptable, experimental, iterative. Those are more important than most of the technological platforms out there. Now, sometimes to get there to be more nimble, agile, responsive, you need a digital platform to make that happen. But the business goals come first.

Yeah. Well, that's a beautiful summation to end it, the book Digital Fallacy. Jerry.

Technology fallacy.

Sorry, Technology fallacy.

Well, one of my interviewees called the Technology Phallus and I said, that's a very wrong.

I should have it right in front of me. Right. So Gerald Kane. Jerry Kane is the other. If you want to find out more and connect with, with, with Jerry there, you'll find him at Prof. Kane, P R O F k a n e.com Prof. Kane. And you can find link to the technology fallacy and, and your, your contact info and your work and that kind of thing at that.

Absolutely.

Your fine photo at your website there. Well, thank you so Prof. Kane.com and of course the link will be in the show notes so you can get that. Right. We're here every week, so with some topic, author, guru, CEO, somebody to share something in the world of scaling up, growing your business, you'll find 145 or so back episodes. We have workshops all the time. Get all that stuff@scalingcoach.com so go find something on virtually anything that you are grappling with right now in our back catalog of of podcast episodes and our blog posts, as well as free tools, worksheets, and things like that to do with the scaling up framework and getting your company scaling smart. So scalingcoach.com, go find us there and you can subscribe anywhere that you get your on itunes or wherever you get your podcast from. If you loved it, share it with somebody else along. Thanks again, Jerry. We'll talk to you all next week.

Thank you very much. I appreciate it.

Well, I want to give special thanks to the original growth guru, Vern Harnish, author of the Rockefeller Habits, Scaling up and host of our summits. This show is produced by Crystal Carson and the audio production is done at Podfly Productions with the audio editing by Albert Burge and show notes compiled by Ein Codena with proofreading by Tim McGowan. If you got any value out of today's show, please share it with somebody else so we can spread the love around like it and subscribe so you get next week and every week's episodes downloaded right to you wherever you get your podcast, itunes, stitcher, whatever works for you. You can of course find us and our whole back catalog of episodes like this@scalingcoach.com where we not only have that but also loads of downloads of free tools. You can get a copy of the Scaling up book, just pay the shipping handling and we'll give you it to to you. If you got some value out of today's show, please please share it. Thanks again for listening. Keep scaling.