5 digital challenges for CEOs in 2020

Fernando Polo

31 January 2020

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Digital isn’t cool any more. Yes, our mobile phone screen time averaged 3.15 hours in 2019 but fake news, privacy concerns and social media anxiety proliferate while the prospect of ever-expanding artificial intelligence seems to threaten our jobs and transfer even more power to governments and big organisations.

Yet, corporations cannot avoid digital. In the past decade, they embarked on all kinds of digital transformation crusades forced by changing consumer habits and new business players threatening to make a dent in their balance sheets. As coordination efforts skyrocketed, top executives took the reins soon after. But compared to digital native players, corporations seem to play whack-a-mole, patching to catch up with leaner startups who appear to move seamlessly with modular organisations easier to scale and evolve.

Digital transformation has been defined in numerous ways, but as consultants churn out fancy frameworks the truth is that digital affects too many things at the same time. A step by step approach seems too little, too late. In 2014, we started using a framework inspired by MIT to help our clients divide and conquer when dealing with customer relationships, revenue streams and internal enterprise efforts. But a wicked problem is by definition … well, wicked. Everything is connected and merely breaking it to pieces won’t work. Whichever way you approach it, digital transformation is a top priority in the CEO agenda and from our conversations with top executives in previous months and lots of recent research on the topic, we’d like to highlight 5 challenges for 2020.

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1) Scale Agile teams

Adaptability and speed are linked to the concept of agility, that originated in manufacturing (Toyota) and spread to software development. As the scope of “Agile” broadens, going beyond scrum or kanban techniques, co-workers might get stuck, unable to react when their leaders demand speed but no concrete methodologies are provided. Though more than 90% of respondents report that their organisation practices agile development methods, other research signals that only “one in six employees feel strongly that their companies have both the mindset and the right tools and processes to respond quickly to business needs”. 

Many IT departments in industries like banking (especially affected by the digital revolution) have adopted agile techniques and are flooded with scrum masters and daily stand-ups, but most lack a real self-management culture or a flexible organisation to allow pools of resources (or guilds/chapters) to move accordingly from one department to another when needed. And once sprints and product logs have been adopted, how do we take it to the next level? Culture is usually cited as the main obstacle for digital transformation. Adopting new habits, changing beliefs and behaviours takes time. Scaling agile will be one of the priorities for every top leader in big and mid sized companies. Becoming truly agile (changing the mindset) is the next frontier to be included in our digital challenges within a couple of years.

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2) Make digital marketing pay

The problem is not that half of the marketing budget is being wasted and marketers don’t know which half. The problem is that no half might prove truly effective. It’s no surprise that CMOs have the shortest tenure in the c-suite. Chunks of money are being transferred from offline to online channels, and yet, serious doubts are casted upon their effectiveness, on top of other concerns like click fraud or lack of transparency by agencies and media. Some experiments with search ads were run in the last few years and they demonstrated that it’s difficult to discern how much money is impacting people who would have bought our products anyway. Thus, we might be preaching to the converted. I wrote recently about the decline of the advertising industry. Though some KPIs still show business as usual, data and transparency will prove that the emperor was half naked, half too expensively dressed. 

Customer experience will be the new advertising, but old habits die hard and media buying expenditure is still perceived as “the” way to promote sales. Though many CEOs are seriously establishing the experience function inside their organisations, CMOs are still in command thanks to their bulky ad budgets. That is why CEOs must ensure in 2020 that digital marketing efforts (be they influencers, martech software or the unavoidable Google and Facebook ads) create real ROMI. And we’ll leave the challenge of building a true Customer Experience corporate function for upcoming years.

3) Face disruption from insurgents

Some already infamous research by McKinsey stated what we were all witnessing – that by “reducing economic friction, digitisation enables competition that pressures revenue and profit growth”. The case they built for digitisation is based on its unavoidability and the fact that winners might reap huge benefits. But becoming a winner is a daunting task, the odds are against us and many companies are happy remaining in the middle. 

Everybody talks about Kodak and the digital photography tsunami. Or about Nokia, after the iPhone revolution. Or how fintech unicorns like Revolut are threatening big banks. But let’s be frank, 95% of companies don’t think theirs can be next on the disruption hall of fame.

CEOs must think long term, get closer to the startups that might become real threats. Switch from nice-to-have incubator programs to do-or-die startup launch or acquisitions. Different models for innovation have been tested. It’s time to go from pilot mode to business as usual. Doing it won’t ensure we avoid long term disappearance. However, not doing it does raise our chances of dismissal to 99.99%.

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4) Become more Human-Centric

Woke marketing and brand activism are trending topics at marketing events. But this is not something CEOs should be paying attention to right now. Let’s leave it for marketers chit chat while top bosses focus on why Bezos, the leader of one of the most customer-centric companies in the world is launching the climate pledge. Or why 198 CEOs at the Business Roundtable changed in a statement the purpose of the enterprise and invited all the corporate stakeholders – customers, suppliers, employees, communities and shareholders – to the table. Or why our teenagers will try to convince us to stop buying at a given retailer because they mistreat their employees

CEOs have to push their companies to be more human-centred.  We defined Human-Centred Organisations (HCOs) using three journeys: the well known consumer journey, the co-workers journey and the citizen journey (being this one a kind of a catch all persona to represent wider society). It would be more and more difficult for companies to focus on one of them, forgetting the others, because the journeys are intertwined -we are all sometimes customers, sometimes employees and sometimes, mere citizens affected by corporate actions. The idea of the HCO is nothing new. The rise of consumer power has forced companies to adopt human-centred design methodologies to put the user at the center of the stage. But digitisation empowers individuals to access and share information and organise collectively using crowd methodologies. This is why becoming an HCO should be a top priority directly linked to digital transformation programs.

The ROI of becoming a more human-centric organisation is demonstrated with different research, but even if it didn’t pay back, one should ask what’s the harm in becoming more human-centric if it doesn’t hurt our long-term financial position anyway.

5) Separate tech wheat from hype chaff

The first mobile phone to incorporate a camera was the J-SH04, developed by Sharp and released by J-Phone in Japan in November 2000. Instagram launched in October 2010 and with unprecedented adoption rates it took them more than 3 years to get to 100 million users. We needed several tech revolutions (camera phones, 3G, iPhone and social networks) and 15 years to get to selfie culture. How can we truly know when 5G will substantially change the promise of a more effective “Industry 4.0” where connected machines and robots will deliver the promise of cost reduction associated with an efficient preventative maintenance? 

Spotting overhyped promises by software vendors and consultants is no easy task. Allowing our CIO to go ahead with the new cybersecurity project looks like a wise decision but tens of similarly important tech investments lie on our CEO’s table. Prioritising technology investments in 2020 is harder than ever. Most companies rely on outdated technology, complaints of unusable interfaces are the norm. Still worse, most new technology deployments are not adequately exploited. Blocked data gather dusk in departmental silos, while gut feeling decisions are being made, disguised with fancy data-driven slogans and slides. Investing in making data accessible to operational decision makers seems like a clever investment, but IBM Watson or blockchain looked unescapable just two years ago and yet, the return seems years ahead. Investing wisely, balancing operational urgencies with innovation activities to explore and spot opportunities ahead of our competitors. Easier said than done. 

Challenges are everywhere for the CEO’s digital agenda in 2020. We stopped trying to be exhaustive some time ago. Breaking the issue into smaller pieces doesn’t make it much easier, and whichever framework we use could do the work. But one thing’s for sure; better prepared CEOs, leaders who learn about digital and inspire change, will dramatically increase the probability of success. Let’s not forget that employees undoubtedly expect the CEO’s pay to include the capacity to solve wicked problems.