WHAT FAKE BOILING FROGS AND REAL CAMEL NOSES TEACH US ABOUT DIGITAL TRANSFORMATION
What’s with humans and animal analogies? There’s boiling frogs (which depicts how a frog will boil to death if put in cool water that’s boiled slowly), there’s camel noses (an Arabian fable describing how a camel which asks to poke his nose in the tent slowly ends up taking over the tent) and there’s poor Schrödinger’s cat. And, don’t even get me started on space monkeys. Can we all just agree to stop animal cruelty in idioms? No? What? You want me back on my meds? OK fine!
1. Your industry's trends: There are several signals for these specific disruptions already available from industry data, including digitalization potential of core processes, the number of digitally native start-ups, the number of successful disruptive start-ups, overall industry growth and profitability, adjacent industry disruption and venture capital business trends. There are numbers available for each of these. It's time to put them together and start gauging trends.
But can I at least share that our favorite management fable on slow change being treacherous is fake? Yes indeed - the boiling frog story is not supported by science. While it’s true that any frog that’s thrown into hot water will jump out immediately, scientists have proved that if you put a frog in cool water and slowly turn up the heat, it will jump out when the temperature becomes uncomfortable. Shoot - there goes our favorite analogy for slippery slope situations.
However, that doesn’t eliminate the issues of slow treacherous change itself. So, issues ranging from climate change to digital disruption must still be described somehow, and of course be addressed. Specific to digital transformation, if only there was a way to sense and respond in time to the increasing dangers over time? Actually, there is. Adding a digital disruption metric to your organization's strategic plan would obviate the necessity to act based on just intuition alone.
THE DIGITAL DISRUPTION INDEX
I call that metric the “digital disruption index.” It’s a composite number on a five-point scale that is the average of four individual ratings. The warning signs come from the following risk areas:
2. Your customers' information: Customers have long been the most reliable sources of early-warning signals. However, beyond traditional market share information or customer satisfaction scores, there’s a new breed of customer experience (CX) metrics that are more reliable indicators of potential digital disruption. Measures such as social customer influence and customer engagement, especially when monitored across adjacent industries, are a good indicator of potential disruption as well as the degree to which CX could disrupt you. The customer effort score (CES)—the amount of effort needed to accomplish a task—is another good indicator, especially when compared to digital alternatives. A high CES score says that you might be exposed to a disruption driven via CX.
3. Your business model trends: Any attempt by competition to better meet your customers’ needs, via a disruptive path to market or method of value creation, can disrupt your business model. The only question is timing. Measuring the trends in alternative business models via the following provides a good indication on how imminent the business model changes are. These include channel evolution, value proposition changes, shifts among start-ups on key activities for business execution, shifts in key resources used for the business and changes in possible partnerships.
4. Your digital business performance and digital organization feedback: There's another interesting set of metrics on disruption risk - how investments on digital capabilities are changing over time and how much of your business is digital. The digital investment measure here should include the following - levels of investment in emerging technology, investments in a digital workforce, percentage of the business that is digitally based, amount of digital investment that is ultimately customer focused and how much of the digital investments are sustainable ongoing.
ABOUT THAT CAMEL'S NOSE...
Is the science behind the camel's nose solid? Unfortunately, this hasn't made it to the priority list for testing among scientists yet. The term refers to an alleged Arab proverb that if a camel is allowed to get its nose inside of a tent, it will be impossible to prevent the rest of it from entering. I'd love to see this one tested:-) However, the broader point that a small, seemingly innocuous act or decision can lead to much larger, more serious, and less desirable consequences down the line is solid. Any decision to ignore or delay action on digital disruption is akin to the pretending that the camel can be ignored.
Leaders tend to have a sense of their organization’s digital disruption peril already. The bigger question is how much they are reacting to it, and if not enough, then why. The answer to this tends to be sociological—fear, inertia, and misjudgment. Fear about cannibalizing existing products and about the cost of change. Inertia caused by complacency that the current strategy has historically worked. And finally, misjudgment on the potential impact of digital disruption and an optimistic view of the organization’s ability to withstand the new competition. Whether that's like the proverbial boiling frog, or the good old Arab allowing the camel into the tent is a good question. The science behind these analogies may be a bit shaky, but the disruptive trends are unfortunately extremely real.
Go forth and transform.