22 September 2016
Every company in the world today is involved in determining how to leverage digital technologies to improve its business. The key to getting this challenge right is having the correct cultural and psychological approach to this question: are you transforming in response to customer needs or to counter competitive digital disruption threats? If the latter is what's motivating your company, you'll probably fail. 

Disruption isn't a new concept. It's been going on since the beginning of time. While it may have taken US Steel Corporation many years to feel these effects, the barriers to create and bring to market a new disruptive innovation are substantially lower and thanks to cloud computing, much faster and cheaper. I don't need to build a factory to disrupt an industry anymore -- I just need to know what their customers want and to be innovative in my delivery.

Many of the innovations that get the most press come from startups appearing out of nowhere with these brilliant new ideas that capture consumer and industry customer needs in new ways. The most prominent of these is Uber's approach to transit. But it's important to note that startups don't always have a unique idea; they often just figure out a better way of doing business because they don't have incumbent products or processes that limit the thinking of the incumbent player. 

It's not the startups you should be following and worrying about though. The bad part of this mindset is that your mental focus is on who's trying to disrupt me, the technologies that are disruptive and how do I counter those efforts -- you're on the defense rather than thinking about how you can leverage digital technologies to deliver better experiences. Defensive thinking is fast-follower thinking, not innovation thinking, and by its very nature, you will end up second if not worse in the market. 

Your focus instead should be on your customers, what they are trying to accomplish and how innovative technologies can give them faster, more responsive, more accurate and higher value experiences. If, for whatever reason, you have to put your strategy in the context of startups, that context should be, "If I'm at risk of being digitally disrupted, it'll happen because that company spoke to my customers first and found out what more they wanted, even though I know my customers best."

Customers Are the Basis for Transformations
How can I take a different mindset and be successful? You can learn from the Ubers of the world, but you have to go back to when and where they started and not what they're doing to you now. Their first step was to ask customers what they were looking for and to apply innovative and transformative ideas to address those desires. That, your company can absolutely do.
The number one thing that disruptive companies accomplish is to eliminate friction from the system.
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The number one thing that disruptive companies accomplish is to eliminate friction from the system -- friction impedes customers from achieving their objective as quickly and efficiently as possible. Uber eliminated the friction associated with taxis because the ride can be an unpleasant and expensive experience if you can hail a cab at all. What Uber did was make it super easy to hail a ride and process payments on an app so riders don't pay the driver or figure out the tip, which makes for a very predictable and efficient ride.

Other companies have done the same in different industries. Before fitness bands, you had to exercise, find a coach, hope they could interpret what you're doing and make the right call on how you could improve -- and if you were lucky, that would provide the motivation you needed to stick with it. That process had a ton of friction in that it was difficult to ensure the coach had the right information about your exercise efforts and was incredibly inaccurate. Fitbit improved that process by gathering information while you're exercising to give you feedback right away. These bands encourage people to exercise more because they do a better job of tracking and reporting on your progress.

Apply Pay and Square eliminated some of the friction at the cash register -- rather than dig out your credit card or cash from your wallet, you can point your phone and automatically pay. Square also eliminated friction for the retailer because they can get a low cost point of sale system that runs on mobile devices rather than expensive point of sale systems.

Small Transformations Can Be Huge Innovations 
The psychology and culture of the company become the most important aspects when it comes to transformation. 

If there's a chance a startup will talk to my customers and bring out something new, who has more information about my customers, the startup or me? I do, and if I'm a well-established company, I have a huge history with my customers. 

This is both a good and bad thing. It's good because I can mine that information to understand customer patterns and identify friction within the system. But it can be bad if that history holds you back from making changes for fear that change, in and of itself, might cause the customer to leave. That's a part of the psychology that prevents businesses from being innovative. Guess what: not changing will accomplish that objective by itself. 
The psychology and culture of the company become the most important aspects when it comes to transformation.
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Where Does Friction Exist in Your Business Today?
When it comes to flying, one of the biggest points of friction that customers often experience is a flight delay due to maintenance issues. The length of delay is often determined by the amount of time it takes to diagnose the problem, then, once we know the problem, whether the right parts and properly trained maintenance people are at that airport to quickly do the repair.

Boeing started looking at this problem about a decade ago. They realized that they could put sensors throughout the plane and aggregate that information. Now, when an alarm goes off or the pilot notices a problem, they could quickly diagnose the problem and communicate that to the airline's maintenance team. This gave them time to prepare for the repair and thus reduce the customer dissatisfaction. 

But knowing what needs to be repaired doesn't mean the necessary parts will always be in stock at the airport where the plane is landing (especially if the airport isn't a hub for that airline). Nor is it a slam dunk that the maintenance team at that airport is fully trained and expert at addressing this particular problem. If no one on the maintenance staff has seen and fixed this problem before, the chance of fixing the issue in 15 minutes is slim. 

That's why Boeing started working with Microsoft on HoloLens technology. With HoloLens, any technician can have the right documentation in the corner of their eye the second they need it. They can also watch a video or talk via Skype with another technician who's an expert on that problem and able to guide the technician while installing the part. That's digital transformation from the inside that drives up customer satisfaction. That's the mindset that most companies need to get.

There are more stories like this that will be shared at Microsoft Ignite conference in Atlanta on September 26-30. Also, if you will be in Stockholm during these dates, I will personally be at the IP EXPO Nordic conference talking through digital transformation and how to drive up developer productivity. 
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