Sustaining digital transformation in organizations after the pandemic

Featuring:

Log in to watch this video

To watch keynotes and sessions, you need to sign up for a free On Demand account.

Sustaining digital transformation post-2020

The pandemic has propelled digital transformation at lightning speed. But even now, digital transformation is people transformation—to maintain those gains and keep moving forward, companies need to change how they engage their people. Transformation expert Greg Satell shares the secrets to making it happen.

Video Transcript

Greg Satell:

As you come in, feel free to answer the discussion question that’s up on the slide. What’s the most important change your organization plans to make in the next 12 months? Which seems maybe a little bit of a tough question because we’ve all been through so much change in the last 12 months. And Andrew said, “Growth in our people and hiring quite a bit onboarding in a virtual world.” That’s a really interesting one.

Andrew:

Yeah. As I said, I think, we’re planning to grow quite a bit this year and doing that in what will ultimately be a completely virtual way as it pose a lot of challenges. How do you break into the culture? How do you actually get deep inside the organization and understand, even as Gladwell said this morning, understanding the network that exists in that organization, how to navigate that? It’s hard to do when you’re not in person, you don’t have those moments of event interaction.

Greg Satell:

That is tough. And I welcome anybody else. Everybody, as you’re coming in, if you’d like to answer the discussion question, what’s the most important change your organization plans to make in the next 12 months? What I’m interested in, as you’re looking at a lot of hiring over the next 12 months, Andy, has geography changed? I mean, are you looking at people from more diverse geographies or are you eventually planning to bring everybody back to the office? What are you planning to do with that?

Andrew:

We’ve been fortunate because, I mean, we have been distributed as an organization primarily for many years now. So, we’ve already kind of set up going into what ended up being the COVID reality, based on, I think, the majority of our people were not localized in our headquarters. And we’ve always taken the approach of finding the best people wherever they are and bring them onto the team. So, it was really a limiting factor for us in that way.

This just really, I think, exacerbated that reality based on there was no more headquarters. There were no more getting togethers type of things that could speed up that engagement, speed up that onboarding process. So, that has been one of our focus areas is how to onboard people the right way and give them the tools they need to be successful.

Greg Satell:

And Stephanie said something similar, she says coming back to the office is going to be a big change and figuring out the future of work. And Morgan Grantley says something similar, advisory work in a virtual world or in a hybrid world. And I think it’s so interesting that we had this one transition forced on us to remote work.

And then this next transition, everybody seems to be really excited about that everybody seems to be excited about the potential. It’s sort of like people who like the office, it seems to me like when there’s a bunch of people who really liked the office and can’t wait to get back to the office. And there’s other people who like to be at the office sometime and sort of like remote work. And they’re really looking forward to sort of being more flexible or at least having the kids back at school.

But we are already past the half hour. So, I think, we should go ahead and get started. Thanks for those answers, everybody. They were really interesting.

Our focus for this session will be digital transformation is human transformation. And you know, Andy, I think this is something that is overlooked so often. When we talk about digital transformation, we usually don’t mean the technology itself, that’s not the real bottleneck. There’s no shortage of capable vendors that can implement technology for you.

The real bottleneck is really the humans who use the technology and making sure that they adapt to it and that they can use it productively. And they’re excited about the new possibilities, rather than fearful. And that really gets to the crux of it, I think.

And I want to start off with a data point that I think is very telling. So, back in 1975, more than 80% of corporate assets were tangible assets. So, these are things like factories and equipment and real estate. Real physical objects that people could touch. And today, that situation has absolutely flipped and more than 80% of assets are intangible assets. So, things like licenses and patents and know-how and processes.

So, when we talk about change today, it’s really that latter kind of change. Changes in people, changes in mental models, changes in behaviors, changes in actions. That’s a lot different from that earlier kind of change. And it’s really significant, because when the practice of change management first arose in the early 1980s, it was that first change that it was designed to address.

And so, it shouldn’t be surprising that research from McKinsey suggests that only about 26% of transformation efforts succeed, which means that three quarters fail. That’s obviously not a good situation and one that we really want to improve. And it shouldn’t be a surprise because our change models were mostly designed for that old type of change, not this new type of change.

So, to give you an idea of why this type of change is so difficult, I want to share with you this case study from Experian, which we’re going to go into much greater depth a little bit later. But I just want to give you a sort of surface view now.

And as it turns out, it all started when the company hired a new CIO, a guy named Barry Libenson. And like a lot of new senior executives, he spent the first couple of months with customers, finding out what they really wanted. And what he found out is what they really wanted was real time access to data. So, on the surface, his task was a pretty straightforward business transformation from batch process credit reports to real time access to data.

But as a technology guy, he understood that to achieve that business transformation, the organization would have to undergo a technology transformation from on premise to cloud computing. And he also understood to achieve that transformation, his organization would have to undergo a skills-based transformation from waterfall to agile.

So, what on the surface may have looked like an ordinary business transformation was, in fact, three transformations stacked on top of each other. And just to make things a little bit more difficult, people had reasons to hate each and every one of these transformations.

For the business transformation, people were worried about losing control of the business model. Experian had made good money for a long, long time selling batch credit reports. So, switching to a new business model, that wasn’t an unreasonable concern.

For the technology transformation, people were concerned about cybersecurity. Again, considering that during this transformation, Experian’s direct competitor had one of the biggest data breaches in history, Equifax. That, again, was not an unreasonable concern.

And finally, for this skills-based transformation, people were saying, “You know what, I know my job. And I take a lot of pride in my job and I think I do a good job. And I don’t want people telling me, I need to do it in a completely different way.” So, there was any number of ways that this could all go sideways very, very quickly.

But because Barry treated it less like a traditional exercise in change management and more something akin to a social movement, he was able to achieve that transformation in less than three years. And then, use those same transformation muscles that he built in the organization to embark on a new transformation with respect to AI.

So, to just go into a little further about why change in digital transformation can be difficult, I want to do a little exercise based on the historical case of Blockbuster Video, which I think everybody knows. And what I want to do is ask you and just be feel free to put your answer in the chat box. But what would you do if you were the Blockbuster CEO in 2004, and you understood that Netflix represents a disruptive threat to your business? Knowing everything what you know now, what would you do if you were the Blockbuster CEO in 2004?

And feel free to just put your answers in the chat box. I can see we have a bit of a shy group. But just take a minute to think about it and feel free, anything that comes to mind.

So, somebody says, “Streaming technology.” So that’s a good one. “Explore technologies that would keep them competitive.” So, this is interesting. “Geographical segmentation. Where would customers most likely switch to Netflix?” That’s a really interesting one. Thanks for that, Margo.

Any others? Oh somebody, Jason says, “Merge with Netflix while we were large and they were small.” “Pilot a streaming service to compete with Netflix.” Any others? “Digital subscriptions. Look at how technology is evolving.” So basically, build a platform to compete with Netflix.

Any others? “How Netflix arrived at their strategy and how we can build on their insights.” That is a very insightful answer, Julie. “Be open to innovation in general.” And, I think, Lina meant to say and not in denial. So, these are a lot of really, really good, good answers. I think we have a pretty smart audience. I want to just jump. Oh, “Yes, not in denial.” So, I did have that right, Lina.

So, I just want to jump ahead a little bit. And let’s look at what Blockbuster actually did. So streaming, first investments in streaming video were actually done way back in 2000. Unfortunately, those investments were into a joint venture with Enron. And anybody who saw Nicole speak this morning could probably figure out why well that might not have gone the way that they had planned. Enron got themselves into some serious trouble.

February 2004, it was announced that Blockbuster would be spun off from Viacom, its parent company. So that was really the starting point. Viacom wasn’t interested in making any investments, any long-term investments in a company they were planning on selling.

August 2004, Blockbuster Online launched the online platform to compete with Netflix. So, they did that in six months. And I don’t know about you, Andy, but I think that’s pretty fast. I mean, considering it’s not just a website they were building, right, but an entire business with staffing and logistics and everything else.

And January 2005, nobody mentioned this, but at that time, one of the things, a big bone of contention was late fees. So, they took those off, that took a little bit more time because they wanted to run pilot projects in a few key markets.

November 2006, Total Access launches. This was a business model innovation that allowed people to rent online and return in the store or vice versa. Basically, use the virtual and physical world as one platform. Customers love this. So, within three weeks, Blockbuster surpassed Netflix in new subscriber adds.

In fact, and this is pretty dramatic, Andy, before Total Access, Netflix was beating Blockbuster 70 to 30 in new subscriber adds. After Total Access, that had flipped. And now, it was 70, 30 in Blockbuster’s favor. So now they were really rolling. They were beating Netflix. And September 2010, Blockbuster files for bankruptcy.

So, that’s not how things are supposed to go, right? I mean, if we have the right strategy and we execute it well, good things are supposed to happen. We’re supposed to succeed. The business gods are supposed to smile on us. We are not supposed to fail miserably.

So, what happened? As it turns out, what happened was, the problem wasn’t so much the strategy or the execution, but the failure to align that strategy. Align stakeholder networks behind that strategy. So, in particular, the franchisees who really, really didn’t like the idea of an online platform to compete with them, they only had about 20% of the store.

So, maybe they couldn’t really do anything about it, but they can make a lot of noise. And that combined with some other factors really spook the stakeholder network in the investor community and the analyst community that brought the stock price down. The low stock price attracted Carl Icahn, the corporate raider, and he comes in. He can be an overbearing guy.

January 2007, he tells the CEO, a guy named John Antioco, “We’re not going to pay the bonus that you’re promising in your contract. John, as he put it to me,” he said, “You know what? I was in a point personally, professionally, financially, I didn’t need this anymore.” So, he leaves the company. They bring in a new CEO who was determined to reverse all of the changes, brought back late fees, reduced investment in the online platform. And three years later, Blockbuster was bankrupt.

So, it’s not just about strategy and execution, but aligning networks behind transformation and change. You know, Andy, I still remember the first time I really began to understand how important networks are for transformation and change. I’ll never forget it. It was the fall of 2004. It was early one Saturday morning and I woke up to find that my fiancé, who is not an early riser, normally. She was already awake and headed out the door.

So, I asked her, “Where are you going?” And she says, “Oh, I’m going to a political demonstration.” And I said, “But you don’t care about politics.” “Well, I didn’t. But you know, it’s enough already and we have to do something about it.” And just like that, like somebody flipped a switch somewhere. It was like the entire country changed overnight. And everybody we knew, all of a sudden, we’re going out to political demonstrations on a regular basis, behavior that would have seemed very, very strange just a short time before.

And that’s what led just a few months later, to the events we now know as the Orange Revolution. And I experienced these events from a fairly unusual position. As a foreigner, I was maybe considered something less than a full participant. But in my role managing the leading news organization in the country, I was certainly something more than a casual bystander. And what I remember most about those times was this feeling of profound confusion. Nobody seemed to know what was really going on or what would happen next.

There was just this mysterious force that nobody could describe, but nobody could deny that it was moving things along. And there were just thousands upon thousands of people who would ordinarily be doing very different things, all of a sudden, would stop what they were doing, and start doing the same thing in nearly perfect unison and it was amazing.

And I just remember thinking to myself, “You know, I’d like to bottle that force, right? I’d like to be able to do that, right?” I mean, here I was running this big company with thousands upon thousands of potential customers all buying very different things. I wanted them to unify on the one thing I was trying to sell them. And I had hundreds and hundreds of employees, all bright, ambitious people with their own ideas, but I wanted them to embrace in one or two initiatives that I thought we needed to prioritize. But I had no idea how to do that.

But that’s what led to my 15-year long journey that led to my book Cascades. And what I found was this, that scientists for centuries had known about this mysterious force that I had encountered on the street in Kyiv. And even had a name for it. It was called a network cascade, which is where the name for my book comes from.

And due to some breakthroughs in network science in the late ’90s, we now know exactly how these things work. So, I just want to very quickly go through at a high level the science behind Cascades.

So, this is the first principle of Cascades and it comes from a famous series of experiments done by a guy named Solomon Asch back in the 1950s and replicated many times since then. And I want to recreate it here. So, yes, just which line on the right best matches the line on the left? And if everybody could just go to the chat and just put the answer, what do you think the right answer is? Is it A, B, or C? I see that there seems to be some sort of consensus building around C.

Okay. But what if I were to tell you? And Andy, I noticed you answered C as well, what if I were to tell you that the correct answer was actually A, and everybody around you agreed that the correct answer was A. Would you still be so sure? That’s what they did in this experiment, which was really quite ingenious.

They brought people in, showed them cards like these, and they brought them in groups of eight. And they went around the group, the first seven people all gave the same wrong answer. And the last person who was truly the only real subject, the rest were confederates. The vast majority of the time would conform to the majority opinion, even if it was obviously wrong, something as obvious as this.

So, the point is, is that majorities don’t just rule, they also influence. If people around us adopt an idea or partake in a particular action, we’re much more likely to do so ourselves, especially because very few issues are this clear cut. So, that’s the first principle of Cascades. Majorities don’t just rule, they also influence.

So, the second principle of Cascades is called the Threshold Model of Collective Behavior. And this comes from a famous sociologist named Mark Granovetter. And the basic idea is that people have different thresholds of resistance for adapting an idea, or partaking in a particular action.

So, Granovetter asks us to imagine two groups of people milling around in two separate town squares somewhere. And in the example on the left, they all have different thresholds of resistance to, let’s say, violent or antisocial behavior. So, that guy at the top there, he has zero resistance. He’s always ready to start trouble. So, he gets up and throws a rock through a window.

The guy next to him only needs like 10%. Once 10% of the crowd goes, or one out of 10, he’s ready. So, his buddy goes, he joins in. The guy next to him, he only needs two people. So, his threshold is met, and he goes as well. And you go around the circle, the cluster is supersaturating, even the relatively solid citizens at the other end of the spectrum, they’re all joining in and a full-scale riot ensues.

In the example on the right, it’s almost identical. You still have the same knucklehead with zero resistance, and his two buddies next to him. But after that, there’s nobody with a low enough resistance threshold to join in. So, the thing just fizzles out and nothing really much is spoken of it.

The point being, it makes a really big difference where you start. If you start with people with very high thresholds, who are skeptical and not very enthusiastic at all, it’s going to be really hard to gain traction. If you start with people who are enthusiastic about the change, you’re going to be able to gain momentum much easier. It’s a very, very simple, simple principle. But it’s amazing how often it’s violated. So, that’s the second principle, the Threshold Model of Collective Behavior. And it’s really important where you start.

The third principle is called, the Strength of Weak Ties. Also, comes to us from Mark Granovetter. And basically just what that means is that, different groups influence each other. So, if one group supersaturates, it could help another group meet its resistance threshold. And when this happens, when clusters of nodes supersaturate together, and begin to infect each other, it undergoes a process physicists call percolation. And that’s what drives Cascades.

So, when we look at the science of what drives transformation and Cascades, what we find is small groups loosely connected, united by a shared purpose. So, whenever we see those huge chains of synchronized activity, what we find is small groups loosely connected and united by a shared purpose. And that’s really interesting, because that’s what the science says. But the change consultants for years have been telling us something very different.

They say that we should start by with a mass communication campaign, and create a sense of urgency. And what we found in our research is, that can be effective in riling people up who want to change, but it’s just as effective as to inspire people who hate the change and don’t want it to happen, and want to undermine it in ways that are dishonest, and underhanded and deceptive.

So that can actually be counterproductive if we’re trying to start with a big bang, and a mass communication campaign. So, I just want to take a minute to reflect here and ask, when have you personally experienced a Cascade? And just, again, put your answer into the chat box there. And how about you, Andy, have you ever personally experienced a Cascade?

Andrew:

That’s a good question. I was trying to think about this beforehand. I don’t know if I have a direct relationship to that, like the way that I had hoped I would, actually. It’s like a …

Greg Satell:

Oh, surely. You’ve been part of a wave at a stadium, right?

Andrew:

Yeah, I guess, things that are, yeah, very much of a benign type of thing. Yeah, absolutely.

Greg Satell:

Or applause at a theater or something like this.

Andrew:

That’s fair, yeah.

Greg Satell:

And so, Julie says, “Threshold Model sounds like pure behavior.” There was a walkout in high school that Linda experienced. Early days of sales automation picked a few advocates in each office to kick off adaption. So, that’s really a standing ovation. Linda, that is a great example of standing ovation. Maybe we can get a few more before we? Black Lives Matter Movements, had a walkout over a controversial publication, sports crowd chant.

All right. So, we have a great crowd. I’m going to move on. Deleting Uber app. I’m going to move on, so that we have some time for some questions at the end. We’ve been talking to this point, mainly more theoretically about chant. But I want to use the rest of our time together to talk to very practically about five principles of digital transformation that you will be able to put to work in your organization immediately, as soon as you go back to the office, so to speak.

So, hopefully, by the end of the session, we’ll have you a little bit closer to that digital transformation that you want to drive forward. So, five principles, defining a business vision, a keystone change, making a plan, weaving a network, and finally surviving victory.

So, the first principle is defining a business vision. And we’re going to go back to our Experian case study here, but also add another one. It’s a movement, an internal movement at Procter & Gamble called, PxG. So, every transformation, digital or otherwise, every change effort starts with a grievance. There’s something that people don’t like, and they want it to be different. They want it changed. In Experian, as we already discussed, customers wanted real time access to data.

So, the first step is to transform that grievance into a positive vision for tomorrow. So, in the case of Barry Levinson, it was a cloud enabled agile organization. At Procter & Gamble, this was a very different transformation in at least one respect.

The guys who started this, they weren’t big shots like Barry Levinson. They were just normal, sort of middle manager types. But they saw that sluggish processes were limiting the ability to serve customers, and they had a vision to streamline every single process in Procter & Gamble’s global organization. So, really aspirational vision. And visions should be aspirational and inspiring.

So, principle number two is called a keystone change. And this is related to the vision because it’s the keystone change that forms the bridge from that initial grievance to that big inspiring vision. Keystone changes have three criterias. They have a concrete and tangible goal.

So, while a vision generally shouldn’t have metrics attached to it, keystone changes very often do. Good keystone change should involve multiple stakeholders and should pave the way for future change. So, back to our examples, in Experian, the keystone change for the cloud transformation there was to implement internal APIs. What you need is the same as stakeholders is basically the same thing as external APIs. But it’s much less risky.

So, once they started developing a suite of internal APIs, they were able to show what was possible, and that paved the way for future change. In the case of Procter & Gamble, these three guys, they worked for months to reduce the time of one key process from weeks down to hours. So, what had been a bottleneck, all of a sudden became no big deal. Again, involved multiple stakeholders, and showed what was possible and paved the way for future change.

So, the third principle is called making a plan. So, this, I’m going to introduce two tools that have been literally battle tested for decades. Political activists have used these to overthrow countries for a very, very long time. So, the first tool is called the spectrum of allies. And very much like a military leader might want to map the terrain upon which the military battle will be fought.

As a change leader, you’re going to want to map the terrain upon which the battle for transformation will be fought. So, you want to identify who are your most active allies? Who are your passive allies? Who’s neutral? Who’s passively opposed? Who’s actively opposed? Couple important points here. Generally speaking, you don’t want to directly engage with your active opposition.

And I love Malcolm Gladwell’s example of Bull Connor. There was no way that they were going to convince Bull Connor about the wisdom of their position. That wouldn’t have been an honest conversation. But what they did find, and we found this as well, it’s amazing how consistent this behavior is. If you leave them alone, once they see you gaining traction, they will tend to lash out and overreach, and send people your way, which is exactly what happened in the Bull Connor case. And what we find very much in our transformation work.

So, instead of trying to convince those skeptics, you’re much better off, as somebody mentioned, starting with your active ally. Somebody mentioned with their sales software, they started with a few enthusiasts in each office. And then, the way you bring others in, is you focus on shared values. And one of the most interesting things we do in our transformation work is get people to shift from differentiating values, which make people passionate about an idea to share values that help bring people in.

For instance, when we do agile transformations, the agile people, they always want to talk about the agile manifesto, because that’s what they’re so passionate about and what they love about agile. So, people outside the agile community, unfortunately, that agile manifesto can sound a little bit crazy. That’s probably the best way to sell it. But if you focus on shared values, things like better projects, done faster and cheaper, or becoming a high performing organization. You’ll be able to bring people in.

Interestingly enough, what we find often is one of the best ways to identify shared values is to listen to that active opposition. Listen to the people who hate your idea. First of all, they’re often able to point out flaws that you haven’t realized yourself. Second of all, they’re trying to convince a lot of the same people you are. So, if you listen to them, and you’re able to identify a shared value, it’s often a great way to move change forward.

So, in our two examples, Experian and Procter & Gamble, they were able to identify people across the spectrum of allies. But they were also able to identify shared values, values shared by all of these groups, or at least four out of the five.

So, for Experian, it was serving customers better. That’s always a great argument. Nobody is going to argue, when you say, our goal is to serve customers better, that’s pretty hard to attack. With Procter & Gamble, it was all about efficiency. And not only efficiency, but morale. Because systems that don’t work, they make people sad and frustrated. And you don’t want that either.

So, by focusing on the shared values of increasing efficiency and morale, rather than any particular technology, they were able to bring a lot of people in. And in fact, the PxG movement in Procter & Gamble grew to more than 2,500 people in 18 months.

The second tool is called the pillars of support. The best way to understand this is think of an all-powerful dictator somewhere, someone like Kim Jong-un, or Saddam Hussein, someone really horrible. And now, imagine what happens if all the janitors decide not to come into work one day. All of a sudden, that all powerful dictator is almost powerless to get the trash picked up. The point is, is that every regime or every status quo depends on institutions to carry out its will.

So, if you want to drive change, you need to identify those, not to knock them out, but to pull them in. So, in a typical political revolution, there’ll be things like the police, the military, the justice system, media, business leaders, organized religion, and if you can influence all those institutions, your chances of changing a society go way, way up.

Same thing in the case of Experian and Procter & Gamble. They were able to identify who they needed to influence, very, very different in both cases. I think there was one overlap with business unit leaders, but same principle. You need to identify who you need to influence to make this change happen. And then, when you’re designing tactics, you always want to be mobilizing constituencies in the spectrum of allies to influence institutions in the pillars of support.

So, you always want to be mobilizing somebody to influence something. And those are the two questions you want to ask about each and every action, who are you mobilizing, and to influence what.

So, the fourth principle is called weaving the network. This is how you scale change, how you get beyond those one or two advocates for the sale software, to get beyond those initial enthusiasts, and actually scale this change. And the way you do that is through cooptability or what we call cooptable resources. And my favorite example, and one I’m sure everybody immediately recognizes, is TEDx.

They give people resources to go out and promote the TED brand, for their own reasons, right? They take ownership of the TED brand themselves and thousands upon thousands of people spend hundreds and hundreds of hours to put together these events, because they want to for their own purposes. But in doing so, they promote the TED brand.

Similar in both the Experian and Procter & Gamble cases, they created cooptable resources. In the case of Experian, they create an API Center of Excellence. This was like an internal consultancy that would help people solve their problems for free.

So, any product manager who wanted to build cloud based products, they could get help for free. There was also workshops that were opt in. They weren’t mandated. They would help people build the skills to create successful cloud products. With Procter & Gamble, PxG Garage is similar idea to API Center of Excellence, helps people solve their problems for free. Also, Yammer groups where people can help each other, and they do these really cool weekly videos.

So, that’s how you build scale is through cooptable resources, giving people resources that they can take ownership of and use for their own purposes. And finally, surviving victory. The most frustrating thing and I’m sure everybody has experienced this before. That when we have a program, and we think once we get that first big initial victory, once we get that executive sponsorship, or once we get our plan budgeted, that everything will be downhill from there, and we’ll be on easy street.

And usually what we find is just the opposite, if that’s the point at which somebody throws sand in the gears, and everything sort of grinds to a halt. And the reason is those people hate this idea for change. They don’t just disappear because you feel like you won your initial victory. In fact, they’re probably redoubling their efforts, because now they can see that the change is really possible.

That’s exactly what happened to us in the Orange Revolution, we thought we had one, it turns out, we didn’t, which is why there was another revolution in 2013, and ’14. But this time, they were smarter than we were. Instead of focusing their revolution on a particular political party or politician or program or policy, they based their change in values, because change is always … Lasting change is always about real values.

And the 2013 and ’14 protests were about adopting universal values. It was called the Revolution of Dignity. So, you want to think about how you’re going to survive victory right from the start? Because you know you’re going to hit that resistance and that opposition. So, we ask these three questions. First, how would an evil person seek to undermine this change? Not a reasonable person, but an evil person.

We find that really gets the imagination going. And where are you vulnerable? Where are they most likely to attack you? And then finally, how could you use shared values to overcome that opposition? You don’t like cloud technologies? Yes, but our customers want us to deliver these capabilities.

So, it all comes back to shared values. And I’m going to end here with this quote from a man I like very, very much. He was one of Lou Gerstner’s key lieutenants during the IBM transformation in the 1990s. And when I was interviewing him for my book, he kept on saying how it was never … The Gerstner Revolution was never about technology or strategy. It was always about … And he continually used this phrase, he said, “It was always about bringing the culture and values back into harmony with the market.”

And he said because the transformation was about values first, and technology second, that they were able to continue to embrace those values, as the technology and marketplace continued to evolve. So, that’s my final message. Don’t make your digital transformation about any one technology. It’s always about values. So, if you want to learn more, you can always find more at either of my two books, Mapping Innovation, and Cascades, or either my websites, Gregsattel.com, or Digitaltonto.com.

Now, I think, we have a little time for Q&A. And I’d be happy to stay a little later as well, because I think we’re going a little bit over. But I’m happy to answer any question you might want to ask. So, starting with Andy, did I leave anything out? You have anything you’d like to ask?

Andrew:

Yeah, I think, that going back to the kind of people transformation aspect, what’s interesting to me is that, I think, particularly for this audience here, as they think about being able to identify those initial advocacy groups that can be the right audience to start the change or start the conversation. How do they identify the right people? How do they cut? Do they self-select somehow? Like, how does that …

Greg Satell:

So, that’s a great question. There’s a Jedi mind trick that I find a lot of … I mean, first of all, there’s people who know fellow travelers. But one way to do it, let’s say, in like a global transformation or especially now, in kind of a virtual world, where you’re not kind of running into people at the water cooler.

One way you can do it is through workshops. And there’ll be people who mill around after the workshops are over or you ask people, if anybody. And that’s a great place to find those initial advocates. And that phrase, we will help you solve your problem for free, is a great one, right? And that’s also a great way to start identifying those keystone changes.

You can go around and offer workshops. It’s important not to make them mandates to make them opt in. And then the people who choose them, you know they have some interest, and the people who stay around after actually have a problem that needs to be solved. So, if you can solve some of those initial problems, that’s a great way to gain traction.

Andrew:

Yeah. I guess to follow up on that too. I mean, on the flip side of that, at what point do you stop trying to sway the naysayers or win them over? You talked about kind of the fallacy of trying to focus too much on them. But at what point do you kind of cut your loss there and just focus strictly on that, even if it’s only 60% or 50% of the population that is really connected into the change that you want to drive?

Greg Satell:

Well, I would say the percentage is much lower. It tends to be 10% to 20% that are the diehards.

Andrew:

Okay.

Greg Satell:

The issue was usually with success, if you can make the change successful, then … And that’s why it’s so important to find those initial advocates because they want it to work, right? You don’t want to go and mandate this change with people who are skeptical and don’t really care if it works, or doesn’t work, or whatever. You want to start with people who really want it to work.

So, in the case of Experian, where there was a lot of initial resistance, because not only do you have something as security conscious as a credit bureau, moving to a cloud architecture in a very, very traditional organization, and probably one of the most highly regulated industries on earth, you could see how there was a lot of pushback.

But he started just with these workshops, just with product managers, who liked the idea of the cloud. So, the first six months was just sort of going around and seeing who was enthusiastic and getting those first … And helping those first few advocates become successful. And then after like six months or so, if things go well, you get into that middle crowd where it starts becoming, like more of a performance issue.

We see this a lot in the diversity transformations we do, where it’s sort of like, yeah, that guy over there, he’s doing a lot with these cloud transformation. They’re doing pretty well with that. And success kind of breeds success. And then like between year one and year two, that suggestion becomes more of a nudge. And then eventually, you get to the point where it’s like, “Listen, this is what we’re doing.” And people either leave themselves or get fired.

But you don’t want to get to that level. You don’t want to mandate something like that, until first, you’ve proven this change can be successful. And second, you get people on board. So, you deal with those people. And again, it’s amazing how consistent this behavior is, whenever I talk to transformation and change professionals, whenever I mentioned this, leave them alone.

They will discredit themselves. And when I say that, just leave them alone. When they see you gain traction, they will overreach, and they will lash out. And it’s almost like, and I think we’ve all had this experience, where we’ve been in a meeting, in a conference room, and everything is sort of, moving slowly towards a consensus. And then finally, somebody who hadn’t said a word the entire meeting, all of a sudden throws a hissy fit, and then completely discredits themselves. Same thing happens on a larger scale.

And the Bull Connor example is a great one. In the second Ukrainian revolution, Mustafa Nayyem, who was one of the key leaders of it, he told me, he’s like, “We were dead. I mean, people were leaving. And then they sent the police to beat us. And then after that it was over.” Same thing, it’s amazing how consistent that behavior is, that once you start gaining traction, they sort of … Because often, you don’t know who the diehard ones are. They tend to keep quiet and sort of try and discredit you quietly outside of meetings, when meeting is over or something. They sort of quiet grumbling.

Only when they see it starting to be successful, they start coming out of the woodwork. So, that’s how you can deal with that. And I know we’re coming to the end of time, but if anybody … It seems like we have a little bit of a shy group, but if anybody has one last question they’d like me to answer, I’d be happy to. Well.

Andrew:

All right.

Greg Satell:

All right.

Andrew:

It is a quiet group today.

Greg Satell:

Yeah, it is a quiet group. Okay. So, we can start winding down. But thanks so much for having me. I think this has been a great group and I hope it was helpful to everybody.

Andrew:

Great. So, we are headed to break now. There’s another set of breakouts, three to choose from at 3:00 P.M. Eastern, 12:00 P.M. Pacific. That’ll be up in about 40 minutes. So, check back then, and we’ll see you soon. Thank you.

Greg Satell:

Yeah. And I encourage everybody to connect with me on LinkedIn, if you’d like, and on Clubhouse. But thank you very much for having me.

Andrew:

Thanks for being here, Greg.

Greg Satell:

Bye-bye.

Dan:

All righty. That was great.

Greg Satell:

Are we still on? Okay. Yeah, it seemed … Are we still live?

Dan:

I believe so. Yes.

Greg Satell:

Okay. Well, then we’ll go. Thank you very much for all your help, Dan.

Dan:

Sure. No problem.

 

Expand Transcript

Video Transcript

Greg Satell:

As you come in, feel free to answer the discussion question that’s up on the slide. What’s the most important change your organization plans to make in the next 12 months? Which seems maybe a little bit of a tough question because we’ve all been through so much change in the last 12 months. And Andrew said, “Growth in our people and hiring quite a bit onboarding in a virtual world.” That’s a really interesting one.

Andrew:

Yeah. As I said, I think, we’re planning to grow quite a bit this year and doing that in what will ultimately be a completely virtual way as it pose a lot of challenges. How do you break into the culture? How do you actually get deep inside the organization and understand, even as Gladwell said this morning, understanding the network that exists in that organization, how to navigate that? It’s hard to do when you’re not in person, you don’t have those moments of event interaction.

Greg Satell:

That is tough. And I welcome anybody else. Everybody, as you’re coming in, if you’d like to answer the discussion question, what’s the most important change your organization plans to make in the next 12 months? What I’m interested in, as you’re looking at a lot of hiring over the next 12 months, Andy, has geography changed? I mean, are you looking at people from more diverse geographies or are you eventually planning to bring everybody back to the office? What are you planning to do with that?

Andrew:

We’ve been fortunate because, I mean, we have been distributed as an organization primarily for many years now. So, we’ve already kind of set up going into what ended up being the COVID reality, based on, I think, the majority of our people were not localized in our headquarters. And we’ve always taken the approach of finding the best people wherever they are and bring them onto the team. So, it was really a limiting factor for us in that way.

This just really, I think, exacerbated that reality based on there was no more headquarters. There were no more getting togethers type of things that could speed up that engagement, speed up that onboarding process. So, that has been one of our focus areas is how to onboard people the right way and give them the tools they need to be successful.

Greg Satell:

And Stephanie said something similar, she says coming back to the office is going to be a big change and figuring out the future of work. And Morgan Grantley says something similar, advisory work in a virtual world or in a hybrid world. And I think it’s so interesting that we had this one transition forced on us to remote work.

And then this next transition, everybody seems to be really excited about that everybody seems to be excited about the potential. It’s sort of like people who like the office, it seems to me like when there’s a bunch of people who really liked the office and can’t wait to get back to the office. And there’s other people who like to be at the office sometime and sort of like remote work. And they’re really looking forward to sort of being more flexible or at least having the kids back at school.

But we are already past the half hour. So, I think, we should go ahead and get started. Thanks for those answers, everybody. They were really interesting.

Our focus for this session will be digital transformation is human transformation. And you know, Andy, I think this is something that is overlooked so often. When we talk about digital transformation, we usually don’t mean the technology itself, that’s not the real bottleneck. There’s no shortage of capable vendors that can implement technology for you.

The real bottleneck is really the humans who use the technology and making sure that they adapt to it and that they can use it productively. And they’re excited about the new possibilities, rather than fearful. And that really gets to the crux of it, I think.

And I want to start off with a data point that I think is very telling. So, back in 1975, more than 80% of corporate assets were tangible assets. So, these are things like factories and equipment and real estate. Real physical objects that people could touch. And today, that situation has absolutely flipped and more than 80% of assets are intangible assets. So, things like licenses and patents and know-how and processes.

So, when we talk about change today, it’s really that latter kind of change. Changes in people, changes in mental models, changes in behaviors, changes in actions. That’s a lot different from that earlier kind of change. And it’s really significant, because when the practice of change management first arose in the early 1980s, it was that first change that it was designed to address.

And so, it shouldn’t be surprising that research from McKinsey suggests that only about 26% of transformation efforts succeed, which means that three quarters fail. That’s obviously not a good situation and one that we really want to improve. And it shouldn’t be a surprise because our change models were mostly designed for that old type of change, not this new type of change.

So, to give you an idea of why this type of change is so difficult, I want to share with you this case study from Experian, which we’re going to go into much greater depth a little bit later. But I just want to give you a sort of surface view now.

And as it turns out, it all started when the company hired a new CIO, a guy named Barry Libenson. And like a lot of new senior executives, he spent the first couple of months with customers, finding out what they really wanted. And what he found out is what they really wanted was real time access to data. So, on the surface, his task was a pretty straightforward business transformation from batch process credit reports to real time access to data.

But as a technology guy, he understood that to achieve that business transformation, the organization would have to undergo a technology transformation from on premise to cloud computing. And he also understood to achieve that transformation, his organization would have to undergo a skills-based transformation from waterfall to agile.

So, what on the surface may have looked like an ordinary business transformation was, in fact, three transformations stacked on top of each other. And just to make things a little bit more difficult, people had reasons to hate each and every one of these transformations.

For the business transformation, people were worried about losing control of the business model. Experian had made good money for a long, long time selling batch credit reports. So, switching to a new business model, that wasn’t an unreasonable concern.

For the technology transformation, people were concerned about cybersecurity. Again, considering that during this transformation, Experian’s direct competitor had one of the biggest data breaches in history, Equifax. That, again, was not an unreasonable concern.

And finally, for this skills-based transformation, people were saying, “You know what, I know my job. And I take a lot of pride in my job and I think I do a good job. And I don’t want people telling me, I need to do it in a completely different way.” So, there was any number of ways that this could all go sideways very, very quickly.

But because Barry treated it less like a traditional exercise in change management and more something akin to a social movement, he was able to achieve that transformation in less than three years. And then, use those same transformation muscles that he built in the organization to embark on a new transformation with respect to AI.

So, to just go into a little further about why change in digital transformation can be difficult, I want to do a little exercise based on the historical case of Blockbuster Video, which I think everybody knows. And what I want to do is ask you and just be feel free to put your answer in the chat box. But what would you do if you were the Blockbuster CEO in 2004, and you understood that Netflix represents a disruptive threat to your business? Knowing everything what you know now, what would you do if you were the Blockbuster CEO in 2004?

And feel free to just put your answers in the chat box. I can see we have a bit of a shy group. But just take a minute to think about it and feel free, anything that comes to mind.

So, somebody says, “Streaming technology.” So that’s a good one. “Explore technologies that would keep them competitive.” So, this is interesting. “Geographical segmentation. Where would customers most likely switch to Netflix?” That’s a really interesting one. Thanks for that, Margo.

Any others? Oh somebody, Jason says, “Merge with Netflix while we were large and they were small.” “Pilot a streaming service to compete with Netflix.” Any others? “Digital subscriptions. Look at how technology is evolving.” So basically, build a platform to compete with Netflix.

Any others? “How Netflix arrived at their strategy and how we can build on their insights.” That is a very insightful answer, Julie. “Be open to innovation in general.” And, I think, Lina meant to say and not in denial. So, these are a lot of really, really good, good answers. I think we have a pretty smart audience. I want to just jump. Oh, “Yes, not in denial.” So, I did have that right, Lina.

So, I just want to jump ahead a little bit. And let’s look at what Blockbuster actually did. So streaming, first investments in streaming video were actually done way back in 2000. Unfortunately, those investments were into a joint venture with Enron. And anybody who saw Nicole speak this morning could probably figure out why well that might not have gone the way that they had planned. Enron got themselves into some serious trouble.

February 2004, it was announced that Blockbuster would be spun off from Viacom, its parent company. So that was really the starting point. Viacom wasn’t interested in making any investments, any long-term investments in a company they were planning on selling.

August 2004, Blockbuster Online launched the online platform to compete with Netflix. So, they did that in six months. And I don’t know about you, Andy, but I think that’s pretty fast. I mean, considering it’s not just a website they were building, right, but an entire business with staffing and logistics and everything else.

And January 2005, nobody mentioned this, but at that time, one of the things, a big bone of contention was late fees. So, they took those off, that took a little bit more time because they wanted to run pilot projects in a few key markets.

November 2006, Total Access launches. This was a business model innovation that allowed people to rent online and return in the store or vice versa. Basically, use the virtual and physical world as one platform. Customers love this. So, within three weeks, Blockbuster surpassed Netflix in new subscriber adds.

In fact, and this is pretty dramatic, Andy, before Total Access, Netflix was beating Blockbuster 70 to 30 in new subscriber adds. After Total Access, that had flipped. And now, it was 70, 30 in Blockbuster’s favor. So now they were really rolling. They were beating Netflix. And September 2010, Blockbuster files for bankruptcy.

So, that’s not how things are supposed to go, right? I mean, if we have the right strategy and we execute it well, good things are supposed to happen. We’re supposed to succeed. The business gods are supposed to smile on us. We are not supposed to fail miserably.

So, what happened? As it turns out, what happened was, the problem wasn’t so much the strategy or the execution, but the failure to align that strategy. Align stakeholder networks behind that strategy. So, in particular, the franchisees who really, really didn’t like the idea of an online platform to compete with them, they only had about 20% of the store.

So, maybe they couldn’t really do anything about it, but they can make a lot of noise. And that combined with some other factors really spook the stakeholder network in the investor community and the analyst community that brought the stock price down. The low stock price attracted Carl Icahn, the corporate raider, and he comes in. He can be an overbearing guy.

January 2007, he tells the CEO, a guy named John Antioco, “We’re not going to pay the bonus that you’re promising in your contract. John, as he put it to me,” he said, “You know what? I was in a point personally, professionally, financially, I didn’t need this anymore.” So, he leaves the company. They bring in a new CEO who was determined to reverse all of the changes, brought back late fees, reduced investment in the online platform. And three years later, Blockbuster was bankrupt.

So, it’s not just about strategy and execution, but aligning networks behind transformation and change. You know, Andy, I still remember the first time I really began to understand how important networks are for transformation and change. I’ll never forget it. It was the fall of 2004. It was early one Saturday morning and I woke up to find that my fiancé, who is not an early riser, normally. She was already awake and headed out the door.

So, I asked her, “Where are you going?” And she says, “Oh, I’m going to a political demonstration.” And I said, “But you don’t care about politics.” “Well, I didn’t. But you know, it’s enough already and we have to do something about it.” And just like that, like somebody flipped a switch somewhere. It was like the entire country changed overnight. And everybody we knew, all of a sudden, we’re going out to political demonstrations on a regular basis, behavior that would have seemed very, very strange just a short time before.

And that’s what led just a few months later, to the events we now know as the Orange Revolution. And I experienced these events from a fairly unusual position. As a foreigner, I was maybe considered something less than a full participant. But in my role managing the leading news organization in the country, I was certainly something more than a casual bystander. And what I remember most about those times was this feeling of profound confusion. Nobody seemed to know what was really going on or what would happen next.

There was just this mysterious force that nobody could describe, but nobody could deny that it was moving things along. And there were just thousands upon thousands of people who would ordinarily be doing very different things, all of a sudden, would stop what they were doing, and start doing the same thing in nearly perfect unison and it was amazing.

And I just remember thinking to myself, “You know, I’d like to bottle that force, right? I’d like to be able to do that, right?” I mean, here I was running this big company with thousands upon thousands of potential customers all buying very different things. I wanted them to unify on the one thing I was trying to sell them. And I had hundreds and hundreds of employees, all bright, ambitious people with their own ideas, but I wanted them to embrace in one or two initiatives that I thought we needed to prioritize. But I had no idea how to do that.

But that’s what led to my 15-year long journey that led to my book Cascades. And what I found was this, that scientists for centuries had known about this mysterious force that I had encountered on the street in Kyiv. And even had a name for it. It was called a network cascade, which is where the name for my book comes from.

And due to some breakthroughs in network science in the late ’90s, we now know exactly how these things work. So, I just want to very quickly go through at a high level the science behind Cascades.

So, this is the first principle of Cascades and it comes from a famous series of experiments done by a guy named Solomon Asch back in the 1950s and replicated many times since then. And I want to recreate it here. So, yes, just which line on the right best matches the line on the left? And if everybody could just go to the chat and just put the answer, what do you think the right answer is? Is it A, B, or C? I see that there seems to be some sort of consensus building around C.

Okay. But what if I were to tell you? And Andy, I noticed you answered C as well, what if I were to tell you that the correct answer was actually A, and everybody around you agreed that the correct answer was A. Would you still be so sure? That’s what they did in this experiment, which was really quite ingenious.

They brought people in, showed them cards like these, and they brought them in groups of eight. And they went around the group, the first seven people all gave the same wrong answer. And the last person who was truly the only real subject, the rest were confederates. The vast majority of the time would conform to the majority opinion, even if it was obviously wrong, something as obvious as this.

So, the point is, is that majorities don’t just rule, they also influence. If people around us adopt an idea or partake in a particular action, we’re much more likely to do so ourselves, especially because very few issues are this clear cut. So, that’s the first principle of Cascades. Majorities don’t just rule, they also influence.

So, the second principle of Cascades is called the Threshold Model of Collective Behavior. And this comes from a famous sociologist named Mark Granovetter. And the basic idea is that people have different thresholds of resistance for adapting an idea, or partaking in a particular action.

So, Granovetter asks us to imagine two groups of people milling around in two separate town squares somewhere. And in the example on the left, they all have different thresholds of resistance to, let’s say, violent or antisocial behavior. So, that guy at the top there, he has zero resistance. He’s always ready to start trouble. So, he gets up and throws a rock through a window.

The guy next to him only needs like 10%. Once 10% of the crowd goes, or one out of 10, he’s ready. So, his buddy goes, he joins in. The guy next to him, he only needs two people. So, his threshold is met, and he goes as well. And you go around the circle, the cluster is supersaturating, even the relatively solid citizens at the other end of the spectrum, they’re all joining in and a full-scale riot ensues.

In the example on the right, it’s almost identical. You still have the same knucklehead with zero resistance, and his two buddies next to him. But after that, there’s nobody with a low enough resistance threshold to join in. So, the thing just fizzles out and nothing really much is spoken of it.

The point being, it makes a really big difference where you start. If you start with people with very high thresholds, who are skeptical and not very enthusiastic at all, it’s going to be really hard to gain traction. If you start with people who are enthusiastic about the change, you’re going to be able to gain momentum much easier. It’s a very, very simple, simple principle. But it’s amazing how often it’s violated. So, that’s the second principle, the Threshold Model of Collective Behavior. And it’s really important where you start.

The third principle is called, the Strength of Weak Ties. Also, comes to us from Mark Granovetter. And basically just what that means is that, different groups influence each other. So, if one group supersaturates, it could help another group meet its resistance threshold. And when this happens, when clusters of nodes supersaturate together, and begin to infect each other, it undergoes a process physicists call percolation. And that’s what drives Cascades.

So, when we look at the science of what drives transformation and Cascades, what we find is small groups loosely connected, united by a shared purpose. So, whenever we see those huge chains of synchronized activity, what we find is small groups loosely connected and united by a shared purpose. And that’s really interesting, because that’s what the science says. But the change consultants for years have been telling us something very different.

They say that we should start by with a mass communication campaign, and create a sense of urgency. And what we found in our research is, that can be effective in riling people up who want to change, but it’s just as effective as to inspire people who hate the change and don’t want it to happen, and want to undermine it in ways that are dishonest, and underhanded and deceptive.

So that can actually be counterproductive if we’re trying to start with a big bang, and a mass communication campaign. So, I just want to take a minute to reflect here and ask, when have you personally experienced a Cascade? And just, again, put your answer into the chat box there. And how about you, Andy, have you ever personally experienced a Cascade?

Andrew:

That’s a good question. I was trying to think about this beforehand. I don’t know if I have a direct relationship to that, like the way that I had hoped I would, actually. It’s like a …

Greg Satell:

Oh, surely. You’ve been part of a wave at a stadium, right?

Andrew:

Yeah, I guess, things that are, yeah, very much of a benign type of thing. Yeah, absolutely.

Greg Satell:

Or applause at a theater or something like this.

Andrew:

That’s fair, yeah.

Greg Satell:

And so, Julie says, “Threshold Model sounds like pure behavior.” There was a walkout in high school that Linda experienced. Early days of sales automation picked a few advocates in each office to kick off adaption. So, that’s really a standing ovation. Linda, that is a great example of standing ovation. Maybe we can get a few more before we? Black Lives Matter Movements, had a walkout over a controversial publication, sports crowd chant.

All right. So, we have a great crowd. I’m going to move on. Deleting Uber app. I’m going to move on, so that we have some time for some questions at the end. We’ve been talking to this point, mainly more theoretically about chant. But I want to use the rest of our time together to talk to very practically about five principles of digital transformation that you will be able to put to work in your organization immediately, as soon as you go back to the office, so to speak.

So, hopefully, by the end of the session, we’ll have you a little bit closer to that digital transformation that you want to drive forward. So, five principles, defining a business vision, a keystone change, making a plan, weaving a network, and finally surviving victory.

So, the first principle is defining a business vision. And we’re going to go back to our Experian case study here, but also add another one. It’s a movement, an internal movement at Procter & Gamble called, PxG. So, every transformation, digital or otherwise, every change effort starts with a grievance. There’s something that people don’t like, and they want it to be different. They want it changed. In Experian, as we already discussed, customers wanted real time access to data.

So, the first step is to transform that grievance into a positive vision for tomorrow. So, in the case of Barry Levinson, it was a cloud enabled agile organization. At Procter & Gamble, this was a very different transformation in at least one respect.

The guys who started this, they weren’t big shots like Barry Levinson. They were just normal, sort of middle manager types. But they saw that sluggish processes were limiting the ability to serve customers, and they had a vision to streamline every single process in Procter & Gamble’s global organization. So, really aspirational vision. And visions should be aspirational and inspiring.

So, principle number two is called a keystone change. And this is related to the vision because it’s the keystone change that forms the bridge from that initial grievance to that big inspiring vision. Keystone changes have three criterias. They have a concrete and tangible goal.

So, while a vision generally shouldn’t have metrics attached to it, keystone changes very often do. Good keystone change should involve multiple stakeholders and should pave the way for future change. So, back to our examples, in Experian, the keystone change for the cloud transformation there was to implement internal APIs. What you need is the same as stakeholders is basically the same thing as external APIs. But it’s much less risky.

So, once they started developing a suite of internal APIs, they were able to show what was possible, and that paved the way for future change. In the case of Procter & Gamble, these three guys, they worked for months to reduce the time of one key process from weeks down to hours. So, what had been a bottleneck, all of a sudden became no big deal. Again, involved multiple stakeholders, and showed what was possible and paved the way for future change.

So, the third principle is called making a plan. So, this, I’m going to introduce two tools that have been literally battle tested for decades. Political activists have used these to overthrow countries for a very, very long time. So, the first tool is called the spectrum of allies. And very much like a military leader might want to map the terrain upon which the military battle will be fought.

As a change leader, you’re going to want to map the terrain upon which the battle for transformation will be fought. So, you want to identify who are your most active allies? Who are your passive allies? Who’s neutral? Who’s passively opposed? Who’s actively opposed? Couple important points here. Generally speaking, you don’t want to directly engage with your active opposition.

And I love Malcolm Gladwell’s example of Bull Connor. There was no way that they were going to convince Bull Connor about the wisdom of their position. That wouldn’t have been an honest conversation. But what they did find, and we found this as well, it’s amazing how consistent this behavior is. If you leave them alone, once they see you gaining traction, they will tend to lash out and overreach, and send people your way, which is exactly what happened in the Bull Connor case. And what we find very much in our transformation work.

So, instead of trying to convince those skeptics, you’re much better off, as somebody mentioned, starting with your active ally. Somebody mentioned with their sales software, they started with a few enthusiasts in each office. And then, the way you bring others in, is you focus on shared values. And one of the most interesting things we do in our transformation work is get people to shift from differentiating values, which make people passionate about an idea to share values that help bring people in.

For instance, when we do agile transformations, the agile people, they always want to talk about the agile manifesto, because that’s what they’re so passionate about and what they love about agile. So, people outside the agile community, unfortunately, that agile manifesto can sound a little bit crazy. That’s probably the best way to sell it. But if you focus on shared values, things like better projects, done faster and cheaper, or becoming a high performing organization. You’ll be able to bring people in.

Interestingly enough, what we find often is one of the best ways to identify shared values is to listen to that active opposition. Listen to the people who hate your idea. First of all, they’re often able to point out flaws that you haven’t realized yourself. Second of all, they’re trying to convince a lot of the same people you are. So, if you listen to them, and you’re able to identify a shared value, it’s often a great way to move change forward.

So, in our two examples, Experian and Procter & Gamble, they were able to identify people across the spectrum of allies. But they were also able to identify shared values, values shared by all of these groups, or at least four out of the five.

So, for Experian, it was serving customers better. That’s always a great argument. Nobody is going to argue, when you say, our goal is to serve customers better, that’s pretty hard to attack. With Procter & Gamble, it was all about efficiency. And not only efficiency, but morale. Because systems that don’t work, they make people sad and frustrated. And you don’t want that either.

So, by focusing on the shared values of increasing efficiency and morale, rather than any particular technology, they were able to bring a lot of people in. And in fact, the PxG movement in Procter & Gamble grew to more than 2,500 people in 18 months.

The second tool is called the pillars of support. The best way to understand this is think of an all-powerful dictator somewhere, someone like Kim Jong-un, or Saddam Hussein, someone really horrible. And now, imagine what happens if all the janitors decide not to come into work one day. All of a sudden, that all powerful dictator is almost powerless to get the trash picked up. The point is, is that every regime or every status quo depends on institutions to carry out its will.

So, if you want to drive change, you need to identify those, not to knock them out, but to pull them in. So, in a typical political revolution, there’ll be things like the police, the military, the justice system, media, business leaders, organized religion, and if you can influence all those institutions, your chances of changing a society go way, way up.

Same thing in the case of Experian and Procter & Gamble. They were able to identify who they needed to influence, very, very different in both cases. I think there was one overlap with business unit leaders, but same principle. You need to identify who you need to influence to make this change happen. And then, when you’re designing tactics, you always want to be mobilizing constituencies in the spectrum of allies to influence institutions in the pillars of support.

So, you always want to be mobilizing somebody to influence something. And those are the two questions you want to ask about each and every action, who are you mobilizing, and to influence what.

So, the fourth principle is called weaving the network. This is how you scale change, how you get beyond those one or two advocates for the sale software, to get beyond those initial enthusiasts, and actually scale this change. And the way you do that is through cooptability or what we call cooptable resources. And my favorite example, and one I’m sure everybody immediately recognizes, is TEDx.

They give people resources to go out and promote the TED brand, for their own reasons, right? They take ownership of the TED brand themselves and thousands upon thousands of people spend hundreds and hundreds of hours to put together these events, because they want to for their own purposes. But in doing so, they promote the TED brand.

Similar in both the Experian and Procter & Gamble cases, they created cooptable resources. In the case of Experian, they create an API Center of Excellence. This was like an internal consultancy that would help people solve their problems for free.

So, any product manager who wanted to build cloud based products, they could get help for free. There was also workshops that were opt in. They weren’t mandated. They would help people build the skills to create successful cloud products. With Procter & Gamble, PxG Garage is similar idea to API Center of Excellence, helps people solve their problems for free. Also, Yammer groups where people can help each other, and they do these really cool weekly videos.

So, that’s how you build scale is through cooptable resources, giving people resources that they can take ownership of and use for their own purposes. And finally, surviving victory. The most frustrating thing and I’m sure everybody has experienced this before. That when we have a program, and we think once we get that first big initial victory, once we get that executive sponsorship, or once we get our plan budgeted, that everything will be downhill from there, and we’ll be on easy street.

And usually what we find is just the opposite, if that’s the point at which somebody throws sand in the gears, and everything sort of grinds to a halt. And the reason is those people hate this idea for change. They don’t just disappear because you feel like you won your initial victory. In fact, they’re probably redoubling their efforts, because now they can see that the change is really possible.

That’s exactly what happened to us in the Orange Revolution, we thought we had one, it turns out, we didn’t, which is why there was another revolution in 2013, and ’14. But this time, they were smarter than we were. Instead of focusing their revolution on a particular political party or politician or program or policy, they based their change in values, because change is always … Lasting change is always about real values.

And the 2013 and ’14 protests were about adopting universal values. It was called the Revolution of Dignity. So, you want to think about how you’re going to survive victory right from the start? Because you know you’re going to hit that resistance and that opposition. So, we ask these three questions. First, how would an evil person seek to undermine this change? Not a reasonable person, but an evil person.

We find that really gets the imagination going. And where are you vulnerable? Where are they most likely to attack you? And then finally, how could you use shared values to overcome that opposition? You don’t like cloud technologies? Yes, but our customers want us to deliver these capabilities.

So, it all comes back to shared values. And I’m going to end here with this quote from a man I like very, very much. He was one of Lou Gerstner’s key lieutenants during the IBM transformation in the 1990s. And when I was interviewing him for my book, he kept on saying how it was never … The Gerstner Revolution was never about technology or strategy. It was always about … And he continually used this phrase, he said, “It was always about bringing the culture and values back into harmony with the market.”

And he said because the transformation was about values first, and technology second, that they were able to continue to embrace those values, as the technology and marketplace continued to evolve. So, that’s my final message. Don’t make your digital transformation about any one technology. It’s always about values. So, if you want to learn more, you can always find more at either of my two books, Mapping Innovation, and Cascades, or either my websites, Gregsattel.com, or Digitaltonto.com.

Now, I think, we have a little time for Q&A. And I’d be happy to stay a little later as well, because I think we’re going a little bit over. But I’m happy to answer any question you might want to ask. So, starting with Andy, did I leave anything out? You have anything you’d like to ask?

Andrew:

Yeah, I think, that going back to the kind of people transformation aspect, what’s interesting to me is that, I think, particularly for this audience here, as they think about being able to identify those initial advocacy groups that can be the right audience to start the change or start the conversation. How do they identify the right people? How do they cut? Do they self-select somehow? Like, how does that …

Greg Satell:

So, that’s a great question. There’s a Jedi mind trick that I find a lot of … I mean, first of all, there’s people who know fellow travelers. But one way to do it, let’s say, in like a global transformation or especially now, in kind of a virtual world, where you’re not kind of running into people at the water cooler.

One way you can do it is through workshops. And there’ll be people who mill around after the workshops are over or you ask people, if anybody. And that’s a great place to find those initial advocates. And that phrase, we will help you solve your problem for free, is a great one, right? And that’s also a great way to start identifying those keystone changes.

You can go around and offer workshops. It’s important not to make them mandates to make them opt in. And then the people who choose them, you know they have some interest, and the people who stay around after actually have a problem that needs to be solved. So, if you can solve some of those initial problems, that’s a great way to gain traction.

Andrew:

Yeah. I guess to follow up on that too. I mean, on the flip side of that, at what point do you stop trying to sway the naysayers or win them over? You talked about kind of the fallacy of trying to focus too much on them. But at what point do you kind of cut your loss there and just focus strictly on that, even if it’s only 60% or 50% of the population that is really connected into the change that you want to drive?

Greg Satell:

Well, I would say the percentage is much lower. It tends to be 10% to 20% that are the diehards.

Andrew:

Okay.

Greg Satell:

The issue was usually with success, if you can make the change successful, then … And that’s why it’s so important to find those initial advocates because they want it to work, right? You don’t want to go and mandate this change with people who are skeptical and don’t really care if it works, or doesn’t work, or whatever. You want to start with people who really want it to work.

So, in the case of Experian, where there was a lot of initial resistance, because not only do you have something as security conscious as a credit bureau, moving to a cloud architecture in a very, very traditional organization, and probably one of the most highly regulated industries on earth, you could see how there was a lot of pushback.

But he started just with these workshops, just with product managers, who liked the idea of the cloud. So, the first six months was just sort of going around and seeing who was enthusiastic and getting those first … And helping those first few advocates become successful. And then after like six months or so, if things go well, you get into that middle crowd where it starts becoming, like more of a performance issue.

We see this a lot in the diversity transformations we do, where it’s sort of like, yeah, that guy over there, he’s doing a lot with these cloud transformation. They’re doing pretty well with that. And success kind of breeds success. And then like between year one and year two, that suggestion becomes more of a nudge. And then eventually, you get to the point where it’s like, “Listen, this is what we’re doing.” And people either leave themselves or get fired.

But you don’t want to get to that level. You don’t want to mandate something like that, until first, you’ve proven this change can be successful. And second, you get people on board. So, you deal with those people. And again, it’s amazing how consistent this behavior is, whenever I talk to transformation and change professionals, whenever I mentioned this, leave them alone.

They will discredit themselves. And when I say that, just leave them alone. When they see you gain traction, they will overreach, and they will lash out. And it’s almost like, and I think we’ve all had this experience, where we’ve been in a meeting, in a conference room, and everything is sort of, moving slowly towards a consensus. And then finally, somebody who hadn’t said a word the entire meeting, all of a sudden throws a hissy fit, and then completely discredits themselves. Same thing happens on a larger scale.

And the Bull Connor example is a great one. In the second Ukrainian revolution, Mustafa Nayyem, who was one of the key leaders of it, he told me, he’s like, “We were dead. I mean, people were leaving. And then they sent the police to beat us. And then after that it was over.” Same thing, it’s amazing how consistent that behavior is, that once you start gaining traction, they sort of … Because often, you don’t know who the diehard ones are. They tend to keep quiet and sort of try and discredit you quietly outside of meetings, when meeting is over or something. They sort of quiet grumbling.

Only when they see it starting to be successful, they start coming out of the woodwork. So, that’s how you can deal with that. And I know we’re coming to the end of time, but if anybody … It seems like we have a little bit of a shy group, but if anybody has one last question they’d like me to answer, I’d be happy to. Well.

Andrew:

All right.

Greg Satell:

All right.

Andrew:

It is a quiet group today.

Greg Satell:

Yeah, it is a quiet group. Okay. So, we can start winding down. But thanks so much for having me. I think this has been a great group and I hope it was helpful to everybody.

Andrew:

Great. So, we are headed to break now. There’s another set of breakouts, three to choose from at 3:00 P.M. Eastern, 12:00 P.M. Pacific. That’ll be up in about 40 minutes. So, check back then, and we’ll see you soon. Thank you.

Greg Satell:

Yeah. And I encourage everybody to connect with me on LinkedIn, if you’d like, and on Clubhouse. But thank you very much for having me.

Andrew:

Thanks for being here, Greg.

Greg Satell:

Bye-bye.

Dan:

All righty. That was great.

Greg Satell:

Are we still on? Okay. Yeah, it seemed … Are we still live?

Dan:

I believe so. Yes.

Greg Satell:

Okay. Well, then we’ll go. Thank you very much for all your help, Dan.

Dan:

Sure. No problem.

 

Video Transcript

Greg Satell:

As you come in, feel free to answer the discussion question that’s up on the slide. What’s the most important change your organization plans to make in the next 12 months? Which seems maybe a little bit of a tough question because we’ve all been through so much change in the last 12 months. And Andrew said, “Growth in our people and hiring quite a bit onboarding in a virtual world.” That’s a really interesting one.

Andrew:

Yeah. As I said, I think, we’re planning to grow quite a bit this year and doing that in what will ultimately be a completely virtual way as it pose a lot of challenges. How do you break into the culture? How do you actually get deep inside the organization and understand, even as Gladwell said this morning, understanding the network that exists in that organization, how to navigate that? It’s hard to do when you’re not in person, you don’t have those moments of event interaction.

Greg Satell:

That is tough. And I welcome anybody else. Everybody, as you’re coming in, if you’d like to answer the discussion question, what’s the most important change your organization plans to make in the next 12 months? What I’m interested in, as you’re looking at a lot of hiring over the next 12 months, Andy, has geography changed? I mean, are you looking at people from more diverse geographies or are you eventually planning to bring everybody back to the office? What are you planning to do with that?

Andrew:

We’ve been fortunate because, I mean, we have been distributed as an organization primarily for many years now. So, we’ve already kind of set up going into what ended up being the COVID reality, based on, I think, the majority of our people were not localized in our headquarters. And we’ve always taken the approach of finding the best people wherever they are and bring them onto the team. So, it was really a limiting factor for us in that way.

This just really, I think, exacerbated that reality based on there was no more headquarters. There were no more getting togethers type of things that could speed up that engagement, speed up that onboarding process. So, that has been one of our focus areas is how to onboard people the right way and give them the tools they need to be successful.

Greg Satell:

And Stephanie said something similar, she says coming back to the office is going to be a big change and figuring out the future of work. And Morgan Grantley says something similar, advisory work in a virtual world or in a hybrid world. And I think it’s so interesting that we had this one transition forced on us to remote work.

And then this next transition, everybody seems to be really excited about that everybody seems to be excited about the potential. It’s sort of like people who like the office, it seems to me like when there’s a bunch of people who really liked the office and can’t wait to get back to the office. And there’s other people who like to be at the office sometime and sort of like remote work. And they’re really looking forward to sort of being more flexible or at least having the kids back at school.

But we are already past the half hour. So, I think, we should go ahead and get started. Thanks for those answers, everybody. They were really interesting.

Our focus for this session will be digital transformation is human transformation. And you know, Andy, I think this is something that is overlooked so often. When we talk about digital transformation, we usually don’t mean the technology itself, that’s not the real bottleneck. There’s no shortage of capable vendors that can implement technology for you.

The real bottleneck is really the humans who use the technology and making sure that they adapt to it and that they can use it productively. And they’re excited about the new possibilities, rather than fearful. And that really gets to the crux of it, I think.

And I want to start off with a data point that I think is very telling. So, back in 1975, more than 80% of corporate assets were tangible assets. So, these are things like factories and equipment and real estate. Real physical objects that people could touch. And today, that situation has absolutely flipped and more than 80% of assets are intangible assets. So, things like licenses and patents and know-how and processes.

So, when we talk about change today, it’s really that latter kind of change. Changes in people, changes in mental models, changes in behaviors, changes in actions. That’s a lot different from that earlier kind of change. And it’s really significant, because when the practice of change management first arose in the early 1980s, it was that first change that it was designed to address.

And so, it shouldn’t be surprising that research from McKinsey suggests that only about 26% of transformation efforts succeed, which means that three quarters fail. That’s obviously not a good situation and one that we really want to improve. And it shouldn’t be a surprise because our change models were mostly designed for that old type of change, not this new type of change.

So, to give you an idea of why this type of change is so difficult, I want to share with you this case study from Experian, which we’re going to go into much greater depth a little bit later. But I just want to give you a sort of surface view now.

And as it turns out, it all started when the company hired a new CIO, a guy named Barry Libenson. And like a lot of new senior executives, he spent the first couple of months with customers, finding out what they really wanted. And what he found out is what they really wanted was real time access to data. So, on the surface, his task was a pretty straightforward business transformation from batch process credit reports to real time access to data.

But as a technology guy, he understood that to achieve that business transformation, the organization would have to undergo a technology transformation from on premise to cloud computing. And he also understood to achieve that transformation, his organization would have to undergo a skills-based transformation from waterfall to agile.

So, what on the surface may have looked like an ordinary business transformation was, in fact, three transformations stacked on top of each other. And just to make things a little bit more difficult, people had reasons to hate each and every one of these transformations.

For the business transformation, people were worried about losing control of the business model. Experian had made good money for a long, long time selling batch credit reports. So, switching to a new business model, that wasn’t an unreasonable concern.

For the technology transformation, people were concerned about cybersecurity. Again, considering that during this transformation, Experian’s direct competitor had one of the biggest data breaches in history, Equifax. That, again, was not an unreasonable concern.

And finally, for this skills-based transformation, people were saying, “You know what, I know my job. And I take a lot of pride in my job and I think I do a good job. And I don’t want people telling me, I need to do it in a completely different way.” So, there was any number of ways that this could all go sideways very, very quickly.

But because Barry treated it less like a traditional exercise in change management and more something akin to a social movement, he was able to achieve that transformation in less than three years. And then, use those same transformation muscles that he built in the organization to embark on a new transformation with respect to AI.

So, to just go into a little further about why change in digital transformation can be difficult, I want to do a little exercise based on the historical case of Blockbuster Video, which I think everybody knows. And what I want to do is ask you and just be feel free to put your answer in the chat box. But what would you do if you were the Blockbuster CEO in 2004, and you understood that Netflix represents a disruptive threat to your business? Knowing everything what you know now, what would you do if you were the Blockbuster CEO in 2004?

And feel free to just put your answers in the chat box. I can see we have a bit of a shy group. But just take a minute to think about it and feel free, anything that comes to mind.

So, somebody says, “Streaming technology.” So that’s a good one. “Explore technologies that would keep them competitive.” So, this is interesting. “Geographical segmentation. Where would customers most likely switch to Netflix?” That’s a really interesting one. Thanks for that, Margo.

Any others? Oh somebody, Jason says, “Merge with Netflix while we were large and they were small.” “Pilot a streaming service to compete with Netflix.” Any others? “Digital subscriptions. Look at how technology is evolving.” So basically, build a platform to compete with Netflix.

Any others? “How Netflix arrived at their strategy and how we can build on their insights.” That is a very insightful answer, Julie. “Be open to innovation in general.” And, I think, Lina meant to say and not in denial. So, these are a lot of really, really good, good answers. I think we have a pretty smart audience. I want to just jump. Oh, “Yes, not in denial.” So, I did have that right, Lina.

So, I just want to jump ahead a little bit. And let’s look at what Blockbuster actually did. So streaming, first investments in streaming video were actually done way back in 2000. Unfortunately, those investments were into a joint venture with Enron. And anybody who saw Nicole speak this morning could probably figure out why well that might not have gone the way that they had planned. Enron got themselves into some serious trouble.

February 2004, it was announced that Blockbuster would be spun off from Viacom, its parent company. So that was really the starting point. Viacom wasn’t interested in making any investments, any long-term investments in a company they were planning on selling.

August 2004, Blockbuster Online launched the online platform to compete with Netflix. So, they did that in six months. And I don’t know about you, Andy, but I think that’s pretty fast. I mean, considering it’s not just a website they were building, right, but an entire business with staffing and logistics and everything else.

And January 2005, nobody mentioned this, but at that time, one of the things, a big bone of contention was late fees. So, they took those off, that took a little bit more time because they wanted to run pilot projects in a few key markets.

November 2006, Total Access launches. This was a business model innovation that allowed people to rent online and return in the store or vice versa. Basically, use the virtual and physical world as one platform. Customers love this. So, within three weeks, Blockbuster surpassed Netflix in new subscriber adds.

In fact, and this is pretty dramatic, Andy, before Total Access, Netflix was beating Blockbuster 70 to 30 in new subscriber adds. After Total Access, that had flipped. And now, it was 70, 30 in Blockbuster’s favor. So now they were really rolling. They were beating Netflix. And September 2010, Blockbuster files for bankruptcy.

So, that’s not how things are supposed to go, right? I mean, if we have the right strategy and we execute it well, good things are supposed to happen. We’re supposed to succeed. The business gods are supposed to smile on us. We are not supposed to fail miserably.

So, what happened? As it turns out, what happened was, the problem wasn’t so much the strategy or the execution, but the failure to align that strategy. Align stakeholder networks behind that strategy. So, in particular, the franchisees who really, really didn’t like the idea of an online platform to compete with them, they only had about 20% of the store.

So, maybe they couldn’t really do anything about it, but they can make a lot of noise. And that combined with some other factors really spook the stakeholder network in the investor community and the analyst community that brought the stock price down. The low stock price attracted Carl Icahn, the corporate raider, and he comes in. He can be an overbearing guy.

January 2007, he tells the CEO, a guy named John Antioco, “We’re not going to pay the bonus that you’re promising in your contract. John, as he put it to me,” he said, “You know what? I was in a point personally, professionally, financially, I didn’t need this anymore.” So, he leaves the company. They bring in a new CEO who was determined to reverse all of the changes, brought back late fees, reduced investment in the online platform. And three years later, Blockbuster was bankrupt.

So, it’s not just about strategy and execution, but aligning networks behind transformation and change. You know, Andy, I still remember the first time I really began to understand how important networks are for transformation and change. I’ll never forget it. It was the fall of 2004. It was early one Saturday morning and I woke up to find that my fiancé, who is not an early riser, normally. She was already awake and headed out the door.

So, I asked her, “Where are you going?” And she says, “Oh, I’m going to a political demonstration.” And I said, “But you don’t care about politics.” “Well, I didn’t. But you know, it’s enough already and we have to do something about it.” And just like that, like somebody flipped a switch somewhere. It was like the entire country changed overnight. And everybody we knew, all of a sudden, we’re going out to political demonstrations on a regular basis, behavior that would have seemed very, very strange just a short time before.

And that’s what led just a few months later, to the events we now know as the Orange Revolution. And I experienced these events from a fairly unusual position. As a foreigner, I was maybe considered something less than a full participant. But in my role managing the leading news organization in the country, I was certainly something more than a casual bystander. And what I remember most about those times was this feeling of profound confusion. Nobody seemed to know what was really going on or what would happen next.

There was just this mysterious force that nobody could describe, but nobody could deny that it was moving things along. And there were just thousands upon thousands of people who would ordinarily be doing very different things, all of a sudden, would stop what they were doing, and start doing the same thing in nearly perfect unison and it was amazing.

And I just remember thinking to myself, “You know, I’d like to bottle that force, right? I’d like to be able to do that, right?” I mean, here I was running this big company with thousands upon thousands of potential customers all buying very different things. I wanted them to unify on the one thing I was trying to sell them. And I had hundreds and hundreds of employees, all bright, ambitious people with their own ideas, but I wanted them to embrace in one or two initiatives that I thought we needed to prioritize. But I had no idea how to do that.

But that’s what led to my 15-year long journey that led to my book Cascades. And what I found was this, that scientists for centuries had known about this mysterious force that I had encountered on the street in Kyiv. And even had a name for it. It was called a network cascade, which is where the name for my book comes from.

And due to some breakthroughs in network science in the late ’90s, we now know exactly how these things work. So, I just want to very quickly go through at a high level the science behind Cascades.

So, this is the first principle of Cascades and it comes from a famous series of experiments done by a guy named Solomon Asch back in the 1950s and replicated many times since then. And I want to recreate it here. So, yes, just which line on the right best matches the line on the left? And if everybody could just go to the chat and just put the answer, what do you think the right answer is? Is it A, B, or C? I see that there seems to be some sort of consensus building around C.

Okay. But what if I were to tell you? And Andy, I noticed you answered C as well, what if I were to tell you that the correct answer was actually A, and everybody around you agreed that the correct answer was A. Would you still be so sure? That’s what they did in this experiment, which was really quite ingenious.

They brought people in, showed them cards like these, and they brought them in groups of eight. And they went around the group, the first seven people all gave the same wrong answer. And the last person who was truly the only real subject, the rest were confederates. The vast majority of the time would conform to the majority opinion, even if it was obviously wrong, something as obvious as this.

So, the point is, is that majorities don’t just rule, they also influence. If people around us adopt an idea or partake in a particular action, we’re much more likely to do so ourselves, especially because very few issues are this clear cut. So, that’s the first principle of Cascades. Majorities don’t just rule, they also influence.

So, the second principle of Cascades is called the Threshold Model of Collective Behavior. And this comes from a famous sociologist named Mark Granovetter. And the basic idea is that people have different thresholds of resistance for adapting an idea, or partaking in a particular action.

So, Granovetter asks us to imagine two groups of people milling around in two separate town squares somewhere. And in the example on the left, they all have different thresholds of resistance to, let’s say, violent or antisocial behavior. So, that guy at the top there, he has zero resistance. He’s always ready to start trouble. So, he gets up and throws a rock through a window.

The guy next to him only needs like 10%. Once 10% of the crowd goes, or one out of 10, he’s ready. So, his buddy goes, he joins in. The guy next to him, he only needs two people. So, his threshold is met, and he goes as well. And you go around the circle, the cluster is supersaturating, even the relatively solid citizens at the other end of the spectrum, they’re all joining in and a full-scale riot ensues.

In the example on the right, it’s almost identical. You still have the same knucklehead with zero resistance, and his two buddies next to him. But after that, there’s nobody with a low enough resistance threshold to join in. So, the thing just fizzles out and nothing really much is spoken of it.

The point being, it makes a really big difference where you start. If you start with people with very high thresholds, who are skeptical and not very enthusiastic at all, it’s going to be really hard to gain traction. If you start with people who are enthusiastic about the change, you’re going to be able to gain momentum much easier. It’s a very, very simple, simple principle. But it’s amazing how often it’s violated. So, that’s the second principle, the Threshold Model of Collective Behavior. And it’s really important where you start.

The third principle is called, the Strength of Weak Ties. Also, comes to us from Mark Granovetter. And basically just what that means is that, different groups influence each other. So, if one group supersaturates, it could help another group meet its resistance threshold. And when this happens, when clusters of nodes supersaturate together, and begin to infect each other, it undergoes a process physicists call percolation. And that’s what drives Cascades.

So, when we look at the science of what drives transformation and Cascades, what we find is small groups loosely connected, united by a shared purpose. So, whenever we see those huge chains of synchronized activity, what we find is small groups loosely connected and united by a shared purpose. And that’s really interesting, because that’s what the science says. But the change consultants for years have been telling us something very different.

They say that we should start by with a mass communication campaign, and create a sense of urgency. And what we found in our research is, that can be effective in riling people up who want to change, but it’s just as effective as to inspire people who hate the change and don’t want it to happen, and want to undermine it in ways that are dishonest, and underhanded and deceptive.

So that can actually be counterproductive if we’re trying to start with a big bang, and a mass communication campaign. So, I just want to take a minute to reflect here and ask, when have you personally experienced a Cascade? And just, again, put your answer into the chat box there. And how about you, Andy, have you ever personally experienced a Cascade?

Andrew:

That’s a good question. I was trying to think about this beforehand. I don’t know if I have a direct relationship to that, like the way that I had hoped I would, actually. It’s like a …

Greg Satell:

Oh, surely. You’ve been part of a wave at a stadium, right?

Andrew:

Yeah, I guess, things that are, yeah, very much of a benign type of thing. Yeah, absolutely.

Greg Satell:

Or applause at a theater or something like this.

Andrew:

That’s fair, yeah.

Greg Satell:

And so, Julie says, “Threshold Model sounds like pure behavior.” There was a walkout in high school that Linda experienced. Early days of sales automation picked a few advocates in each office to kick off adaption. So, that’s really a standing ovation. Linda, that is a great example of standing ovation. Maybe we can get a few more before we? Black Lives Matter Movements, had a walkout over a controversial publication, sports crowd chant.

All right. So, we have a great crowd. I’m going to move on. Deleting Uber app. I’m going to move on, so that we have some time for some questions at the end. We’ve been talking to this point, mainly more theoretically about chant. But I want to use the rest of our time together to talk to very practically about five principles of digital transformation that you will be able to put to work in your organization immediately, as soon as you go back to the office, so to speak.

So, hopefully, by the end of the session, we’ll have you a little bit closer to that digital transformation that you want to drive forward. So, five principles, defining a business vision, a keystone change, making a plan, weaving a network, and finally surviving victory.

So, the first principle is defining a business vision. And we’re going to go back to our Experian case study here, but also add another one. It’s a movement, an internal movement at Procter & Gamble called, PxG. So, every transformation, digital or otherwise, every change effort starts with a grievance. There’s something that people don’t like, and they want it to be different. They want it changed. In Experian, as we already discussed, customers wanted real time access to data.

So, the first step is to transform that grievance into a positive vision for tomorrow. So, in the case of Barry Levinson, it was a cloud enabled agile organization. At Procter & Gamble, this was a very different transformation in at least one respect.

The guys who started this, they weren’t big shots like Barry Levinson. They were just normal, sort of middle manager types. But they saw that sluggish processes were limiting the ability to serve customers, and they had a vision to streamline every single process in Procter & Gamble’s global organization. So, really aspirational vision. And visions should be aspirational and inspiring.

So, principle number two is called a keystone change. And this is related to the vision because it’s the keystone change that forms the bridge from that initial grievance to that big inspiring vision. Keystone changes have three criterias. They have a concrete and tangible goal.

So, while a vision generally shouldn’t have metrics attached to it, keystone changes very often do. Good keystone change should involve multiple stakeholders and should pave the way for future change. So, back to our examples, in Experian, the keystone change for the cloud transformation there was to implement internal APIs. What you need is the same as stakeholders is basically the same thing as external APIs. But it’s much less risky.

So, once they started developing a suite of internal APIs, they were able to show what was possible, and that paved the way for future change. In the case of Procter & Gamble, these three guys, they worked for months to reduce the time of one key process from weeks down to hours. So, what had been a bottleneck, all of a sudden became no big deal. Again, involved multiple stakeholders, and showed what was possible and paved the way for future change.

So, the third principle is called making a plan. So, this, I’m going to introduce two tools that have been literally battle tested for decades. Political activists have used these to overthrow countries for a very, very long time. So, the first tool is called the spectrum of allies. And very much like a military leader might want to map the terrain upon which the military battle will be fought.

As a change leader, you’re going to want to map the terrain upon which the battle for transformation will be fought. So, you want to identify who are your most active allies? Who are your passive allies? Who’s neutral? Who’s passively opposed? Who’s actively opposed? Couple important points here. Generally speaking, you don’t want to directly engage with your active opposition.

And I love Malcolm Gladwell’s example of Bull Connor. There was no way that they were going to convince Bull Connor about the wisdom of their position. That wouldn’t have been an honest conversation. But what they did find, and we found this as well, it’s amazing how consistent this behavior is. If you leave them alone, once they see you gaining traction, they will tend to lash out and overreach, and send people your way, which is exactly what happened in the Bull Connor case. And what we find very much in our transformation work.

So, instead of trying to convince those skeptics, you’re much better off, as somebody mentioned, starting with your active ally. Somebody mentioned with their sales software, they started with a few enthusiasts in each office. And then, the way you bring others in, is you focus on shared values. And one of the most interesting things we do in our transformation work is get people to shift from differentiating values, which make people passionate about an idea to share values that help bring people in.

For instance, when we do agile transformations, the agile people, they always want to talk about the agile manifesto, because that’s what they’re so passionate about and what they love about agile. So, people outside the agile community, unfortunately, that agile manifesto can sound a little bit crazy. That’s probably the best way to sell it. But if you focus on shared values, things like better projects, done faster and cheaper, or becoming a high performing organization. You’ll be able to bring people in.

Interestingly enough, what we find often is one of the best ways to identify shared values is to listen to that active opposition. Listen to the people who hate your idea. First of all, they’re often able to point out flaws that you haven’t realized yourself. Second of all, they’re trying to convince a lot of the same people you are. So, if you listen to them, and you’re able to identify a shared value, it’s often a great way to move change forward.

So, in our two examples, Experian and Procter & Gamble, they were able to identify people across the spectrum of allies. But they were also able to identify shared values, values shared by all of these groups, or at least four out of the five.

So, for Experian, it was serving customers better. That’s always a great argument. Nobody is going to argue, when you say, our goal is to serve customers better, that’s pretty hard to attack. With Procter & Gamble, it was all about efficiency. And not only efficiency, but morale. Because systems that don’t work, they make people sad and frustrated. And you don’t want that either.

So, by focusing on the shared values of increasing efficiency and morale, rather than any particular technology, they were able to bring a lot of people in. And in fact, the PxG movement in Procter & Gamble grew to more than 2,500 people in 18 months.

The second tool is called the pillars of support. The best way to understand this is think of an all-powerful dictator somewhere, someone like Kim Jong-un, or Saddam Hussein, someone really horrible. And now, imagine what happens if all the janitors decide not to come into work one day. All of a sudden, that all powerful dictator is almost powerless to get the trash picked up. The point is, is that every regime or every status quo depends on institutions to carry out its will.

So, if you want to drive change, you need to identify those, not to knock them out, but to pull them in. So, in a typical political revolution, there’ll be things like the police, the military, the justice system, media, business leaders, organized religion, and if you can influence all those institutions, your chances of changing a society go way, way up.

Same thing in the case of Experian and Procter & Gamble. They were able to identify who they needed to influence, very, very different in both cases. I think there was one overlap with business unit leaders, but same principle. You need to identify who you need to influence to make this change happen. And then, when you’re designing tactics, you always want to be mobilizing constituencies in the spectrum of allies to influence institutions in the pillars of support.

So, you always want to be mobilizing somebody to influence something. And those are the two questions you want to ask about each and every action, who are you mobilizing, and to influence what.

So, the fourth principle is called weaving the network. This is how you scale change, how you get beyond those one or two advocates for the sale software, to get beyond those initial enthusiasts, and actually scale this change. And the way you do that is through cooptability or what we call cooptable resources. And my favorite example, and one I’m sure everybody immediately recognizes, is TEDx.

They give people resources to go out and promote the TED brand, for their own reasons, right? They take ownership of the TED brand themselves and thousands upon thousands of people spend hundreds and hundreds of hours to put together these events, because they want to for their own purposes. But in doing so, they promote the TED brand.

Similar in both the Experian and Procter & Gamble cases, they created cooptable resources. In the case of Experian, they create an API Center of Excellence. This was like an internal consultancy that would help people solve their problems for free.

So, any product manager who wanted to build cloud based products, they could get help for free. There was also workshops that were opt in. They weren’t mandated. They would help people build the skills to create successful cloud products. With Procter & Gamble, PxG Garage is similar idea to API Center of Excellence, helps people solve their problems for free. Also, Yammer groups where people can help each other, and they do these really cool weekly videos.

So, that’s how you build scale is through cooptable resources, giving people resources that they can take ownership of and use for their own purposes. And finally, surviving victory. The most frustrating thing and I’m sure everybody has experienced this before. That when we have a program, and we think once we get that first big initial victory, once we get that executive sponsorship, or once we get our plan budgeted, that everything will be downhill from there, and we’ll be on easy street.

And usually what we find is just the opposite, if that’s the point at which somebody throws sand in the gears, and everything sort of grinds to a halt. And the reason is those people hate this idea for change. They don’t just disappear because you feel like you won your initial victory. In fact, they’re probably redoubling their efforts, because now they can see that the change is really possible.

That’s exactly what happened to us in the Orange Revolution, we thought we had one, it turns out, we didn’t, which is why there was another revolution in 2013, and ’14. But this time, they were smarter than we were. Instead of focusing their revolution on a particular political party or politician or program or policy, they based their change in values, because change is always … Lasting change is always about real values.

And the 2013 and ’14 protests were about adopting universal values. It was called the Revolution of Dignity. So, you want to think about how you’re going to survive victory right from the start? Because you know you’re going to hit that resistance and that opposition. So, we ask these three questions. First, how would an evil person seek to undermine this change? Not a reasonable person, but an evil person.

We find that really gets the imagination going. And where are you vulnerable? Where are they most likely to attack you? And then finally, how could you use shared values to overcome that opposition? You don’t like cloud technologies? Yes, but our customers want us to deliver these capabilities.

So, it all comes back to shared values. And I’m going to end here with this quote from a man I like very, very much. He was one of Lou Gerstner’s key lieutenants during the IBM transformation in the 1990s. And when I was interviewing him for my book, he kept on saying how it was never … The Gerstner Revolution was never about technology or strategy. It was always about … And he continually used this phrase, he said, “It was always about bringing the culture and values back into harmony with the market.”

And he said because the transformation was about values first, and technology second, that they were able to continue to embrace those values, as the technology and marketplace continued to evolve. So, that’s my final message. Don’t make your digital transformation about any one technology. It’s always about values. So, if you want to learn more, you can always find more at either of my two books, Mapping Innovation, and Cascades, or either my websites, Gregsattel.com, or Digitaltonto.com.

Now, I think, we have a little time for Q&A. And I’d be happy to stay a little later as well, because I think we’re going a little bit over. But I’m happy to answer any question you might want to ask. So, starting with Andy, did I leave anything out? You have anything you’d like to ask?

Andrew:

Yeah, I think, that going back to the kind of people transformation aspect, what’s interesting to me is that, I think, particularly for this audience here, as they think about being able to identify those initial advocacy groups that can be the right audience to start the change or start the conversation. How do they identify the right people? How do they cut? Do they self-select somehow? Like, how does that …

Greg Satell:

So, that’s a great question. There’s a Jedi mind trick that I find a lot of … I mean, first of all, there’s people who know fellow travelers. But one way to do it, let’s say, in like a global transformation or especially now, in kind of a virtual world, where you’re not kind of running into people at the water cooler.

One way you can do it is through workshops. And there’ll be people who mill around after the workshops are over or you ask people, if anybody. And that’s a great place to find those initial advocates. And that phrase, we will help you solve your problem for free, is a great one, right? And that’s also a great way to start identifying those keystone changes.

You can go around and offer workshops. It’s important not to make them mandates to make them opt in. And then the people who choose them, you know they have some interest, and the people who stay around after actually have a problem that needs to be solved. So, if you can solve some of those initial problems, that’s a great way to gain traction.

Andrew:

Yeah. I guess to follow up on that too. I mean, on the flip side of that, at what point do you stop trying to sway the naysayers or win them over? You talked about kind of the fallacy of trying to focus too much on them. But at what point do you kind of cut your loss there and just focus strictly on that, even if it’s only 60% or 50% of the population that is really connected into the change that you want to drive?

Greg Satell:

Well, I would say the percentage is much lower. It tends to be 10% to 20% that are the diehards.

Andrew:

Okay.

Greg Satell:

The issue was usually with success, if you can make the change successful, then … And that’s why it’s so important to find those initial advocates because they want it to work, right? You don’t want to go and mandate this change with people who are skeptical and don’t really care if it works, or doesn’t work, or whatever. You want to start with people who really want it to work.

So, in the case of Experian, where there was a lot of initial resistance, because not only do you have something as security conscious as a credit bureau, moving to a cloud architecture in a very, very traditional organization, and probably one of the most highly regulated industries on earth, you could see how there was a lot of pushback.

But he started just with these workshops, just with product managers, who liked the idea of the cloud. So, the first six months was just sort of going around and seeing who was enthusiastic and getting those first … And helping those first few advocates become successful. And then after like six months or so, if things go well, you get into that middle crowd where it starts becoming, like more of a performance issue.

We see this a lot in the diversity transformations we do, where it’s sort of like, yeah, that guy over there, he’s doing a lot with these cloud transformation. They’re doing pretty well with that. And success kind of breeds success. And then like between year one and year two, that suggestion becomes more of a nudge. And then eventually, you get to the point where it’s like, “Listen, this is what we’re doing.” And people either leave themselves or get fired.

But you don’t want to get to that level. You don’t want to mandate something like that, until first, you’ve proven this change can be successful. And second, you get people on board. So, you deal with those people. And again, it’s amazing how consistent this behavior is, whenever I talk to transformation and change professionals, whenever I mentioned this, leave them alone.

They will discredit themselves. And when I say that, just leave them alone. When they see you gain traction, they will overreach, and they will lash out. And it’s almost like, and I think we’ve all had this experience, where we’ve been in a meeting, in a conference room, and everything is sort of, moving slowly towards a consensus. And then finally, somebody who hadn’t said a word the entire meeting, all of a sudden throws a hissy fit, and then completely discredits themselves. Same thing happens on a larger scale.

And the Bull Connor example is a great one. In the second Ukrainian revolution, Mustafa Nayyem, who was one of the key leaders of it, he told me, he’s like, “We were dead. I mean, people were leaving. And then they sent the police to beat us. And then after that it was over.” Same thing, it’s amazing how consistent that behavior is, that once you start gaining traction, they sort of … Because often, you don’t know who the diehard ones are. They tend to keep quiet and sort of try and discredit you quietly outside of meetings, when meeting is over or something. They sort of quiet grumbling.

Only when they see it starting to be successful, they start coming out of the woodwork. So, that’s how you can deal with that. And I know we’re coming to the end of time, but if anybody … It seems like we have a little bit of a shy group, but if anybody has one last question they’d like me to answer, I’d be happy to. Well.

Andrew:

All right.

Greg Satell:

All right.

Andrew:

It is a quiet group today.

Greg Satell:

Yeah, it is a quiet group. Okay. So, we can start winding down. But thanks so much for having me. I think this has been a great group and I hope it was helpful to everybody.

Andrew:

Great. So, we are headed to break now. There’s another set of breakouts, three to choose from at 3:00 P.M. Eastern, 12:00 P.M. Pacific. That’ll be up in about 40 minutes. So, check back then, and we’ll see you soon. Thank you.

Greg Satell:

Yeah. And I encourage everybody to connect with me on LinkedIn, if you’d like, and on Clubhouse. But thank you very much for having me.

Andrew:

Thanks for being here, Greg.

Greg Satell:

Bye-bye.

Dan:

All righty. That was great.

Greg Satell:

Are we still on? Okay. Yeah, it seemed … Are we still live?

Dan:

I believe so. Yes.

Greg Satell:

Okay. Well, then we’ll go. Thank you very much for all your help, Dan.

Dan:

Sure. No problem.

 

Expand Transcript

Video Transcript

Greg Satell:

As you come in, feel free to answer the discussion question that’s up on the slide. What’s the most important change your organization plans to make in the next 12 months? Which seems maybe a little bit of a tough question because we’ve all been through so much change in the last 12 months. And Andrew said, “Growth in our people and hiring quite a bit onboarding in a virtual world.” That’s a really interesting one.

Andrew:

Yeah. As I said, I think, we’re planning to grow quite a bit this year and doing that in what will ultimately be a completely virtual way as it pose a lot of challenges. How do you break into the culture? How do you actually get deep inside the organization and understand, even as Gladwell said this morning, understanding the network that exists in that organization, how to navigate that? It’s hard to do when you’re not in person, you don’t have those moments of event interaction.

Greg Satell:

That is tough. And I welcome anybody else. Everybody, as you’re coming in, if you’d like to answer the discussion question, what’s the most important change your organization plans to make in the next 12 months? What I’m interested in, as you’re looking at a lot of hiring over the next 12 months, Andy, has geography changed? I mean, are you looking at people from more diverse geographies or are you eventually planning to bring everybody back to the office? What are you planning to do with that?

Andrew:

We’ve been fortunate because, I mean, we have been distributed as an organization primarily for many years now. So, we’ve already kind of set up going into what ended up being the COVID reality, based on, I think, the majority of our people were not localized in our headquarters. And we’ve always taken the approach of finding the best people wherever they are and bring them onto the team. So, it was really a limiting factor for us in that way.

This just really, I think, exacerbated that reality based on there was no more headquarters. There were no more getting togethers type of things that could speed up that engagement, speed up that onboarding process. So, that has been one of our focus areas is how to onboard people the right way and give them the tools they need to be successful.

Greg Satell:

And Stephanie said something similar, she says coming back to the office is going to be a big change and figuring out the future of work. And Morgan Grantley says something similar, advisory work in a virtual world or in a hybrid world. And I think it’s so interesting that we had this one transition forced on us to remote work.

And then this next transition, everybody seems to be really excited about that everybody seems to be excited about the potential. It’s sort of like people who like the office, it seems to me like when there’s a bunch of people who really liked the office and can’t wait to get back to the office. And there’s other people who like to be at the office sometime and sort of like remote work. And they’re really looking forward to sort of being more flexible or at least having the kids back at school.

But we are already past the half hour. So, I think, we should go ahead and get started. Thanks for those answers, everybody. They were really interesting.

Our focus for this session will be digital transformation is human transformation. And you know, Andy, I think this is something that is overlooked so often. When we talk about digital transformation, we usually don’t mean the technology itself, that’s not the real bottleneck. There’s no shortage of capable vendors that can implement technology for you.

The real bottleneck is really the humans who use the technology and making sure that they adapt to it and that they can use it productively. And they’re excited about the new possibilities, rather than fearful. And that really gets to the crux of it, I think.

And I want to start off with a data point that I think is very telling. So, back in 1975, more than 80% of corporate assets were tangible assets. So, these are things like factories and equipment and real estate. Real physical objects that people could touch. And today, that situation has absolutely flipped and more than 80% of assets are intangible assets. So, things like licenses and patents and know-how and processes.

So, when we talk about change today, it’s really that latter kind of change. Changes in people, changes in mental models, changes in behaviors, changes in actions. That’s a lot different from that earlier kind of change. And it’s really significant, because when the practice of change management first arose in the early 1980s, it was that first change that it was designed to address.

And so, it shouldn’t be surprising that research from McKinsey suggests that only about 26% of transformation efforts succeed, which means that three quarters fail. That’s obviously not a good situation and one that we really want to improve. And it shouldn’t be a surprise because our change models were mostly designed for that old type of change, not this new type of change.

So, to give you an idea of why this type of change is so difficult, I want to share with you this case study from Experian, which we’re going to go into much greater depth a little bit later. But I just want to give you a sort of surface view now.

And as it turns out, it all started when the company hired a new CIO, a guy named Barry Libenson. And like a lot of new senior executives, he spent the first couple of months with customers, finding out what they really wanted. And what he found out is what they really wanted was real time access to data. So, on the surface, his task was a pretty straightforward business transformation from batch process credit reports to real time access to data.

But as a technology guy, he understood that to achieve that business transformation, the organization would have to undergo a technology transformation from on premise to cloud computing. And he also understood to achieve that transformation, his organization would have to undergo a skills-based transformation from waterfall to agile.

So, what on the surface may have looked like an ordinary business transformation was, in fact, three transformations stacked on top of each other. And just to make things a little bit more difficult, people had reasons to hate each and every one of these transformations.

For the business transformation, people were worried about losing control of the business model. Experian had made good money for a long, long time selling batch credit reports. So, switching to a new business model, that wasn’t an unreasonable concern.

For the technology transformation, people were concerned about cybersecurity. Again, considering that during this transformation, Experian’s direct competitor had one of the biggest data breaches in history, Equifax. That, again, was not an unreasonable concern.

And finally, for this skills-based transformation, people were saying, “You know what, I know my job. And I take a lot of pride in my job and I think I do a good job. And I don’t want people telling me, I need to do it in a completely different way.” So, there was any number of ways that this could all go sideways very, very quickly.

But because Barry treated it less like a traditional exercise in change management and more something akin to a social movement, he was able to achieve that transformation in less than three years. And then, use those same transformation muscles that he built in the organization to embark on a new transformation with respect to AI.

So, to just go into a little further about why change in digital transformation can be difficult, I want to do a little exercise based on the historical case of Blockbuster Video, which I think everybody knows. And what I want to do is ask you and just be feel free to put your answer in the chat box. But what would you do if you were the Blockbuster CEO in 2004, and you understood that Netflix represents a disruptive threat to your business? Knowing everything what you know now, what would you do if you were the Blockbuster CEO in 2004?

And feel free to just put your answers in the chat box. I can see we have a bit of a shy group. But just take a minute to think about it and feel free, anything that comes to mind.

So, somebody says, “Streaming technology.” So that’s a good one. “Explore technologies that would keep them competitive.” So, this is interesting. “Geographical segmentation. Where would customers most likely switch to Netflix?” That’s a really interesting one. Thanks for that, Margo.

Any others? Oh somebody, Jason says, “Merge with Netflix while we were large and they were small.” “Pilot a streaming service to compete with Netflix.” Any others? “Digital subscriptions. Look at how technology is evolving.” So basically, build a platform to compete with Netflix.

Any others? “How Netflix arrived at their strategy and how we can build on their insights.” That is a very insightful answer, Julie. “Be open to innovation in general.” And, I think, Lina meant to say and not in denial. So, these are a lot of really, really good, good answers. I think we have a pretty smart audience. I want to just jump. Oh, “Yes, not in denial.” So, I did have that right, Lina.

So, I just want to jump ahead a little bit. And let’s look at what Blockbuster actually did. So streaming, first investments in streaming video were actually done way back in 2000. Unfortunately, those investments were into a joint venture with Enron. And anybody who saw Nicole speak this morning could probably figure out why well that might not have gone the way that they had planned. Enron got themselves into some serious trouble.

February 2004, it was announced that Blockbuster would be spun off from Viacom, its parent company. So that was really the starting point. Viacom wasn’t interested in making any investments, any long-term investments in a company they were planning on selling.

August 2004, Blockbuster Online launched the online platform to compete with Netflix. So, they did that in six months. And I don’t know about you, Andy, but I think that’s pretty fast. I mean, considering it’s not just a website they were building, right, but an entire business with staffing and logistics and everything else.

And January 2005, nobody mentioned this, but at that time, one of the things, a big bone of contention was late fees. So, they took those off, that took a little bit more time because they wanted to run pilot projects in a few key markets.

November 2006, Total Access launches. This was a business model innovation that allowed people to rent online and return in the store or vice versa. Basically, use the virtual and physical world as one platform. Customers love this. So, within three weeks, Blockbuster surpassed Netflix in new subscriber adds.

In fact, and this is pretty dramatic, Andy, before Total Access, Netflix was beating Blockbuster 70 to 30 in new subscriber adds. After Total Access, that had flipped. And now, it was 70, 30 in Blockbuster’s favor. So now they were really rolling. They were beating Netflix. And September 2010, Blockbuster files for bankruptcy.

So, that’s not how things are supposed to go, right? I mean, if we have the right strategy and we execute it well, good things are supposed to happen. We’re supposed to succeed. The business gods are supposed to smile on us. We are not supposed to fail miserably.

So, what happened? As it turns out, what happened was, the problem wasn’t so much the strategy or the execution, but the failure to align that strategy. Align stakeholder networks behind that strategy. So, in particular, the franchisees who really, really didn’t like the idea of an online platform to compete with them, they only had about 20% of the store.

So, maybe they couldn’t really do anything about it, but they can make a lot of noise. And that combined with some other factors really spook the stakeholder network in the investor community and the analyst community that brought the stock price down. The low stock price attracted Carl Icahn, the corporate raider, and he comes in. He can be an overbearing guy.

January 2007, he tells the CEO, a guy named John Antioco, “We’re not going to pay the bonus that you’re promising in your contract. John, as he put it to me,” he said, “You know what? I was in a point personally, professionally, financially, I didn’t need this anymore.” So, he leaves the company. They bring in a new CEO who was determined to reverse all of the changes, brought back late fees, reduced investment in the online platform. And three years later, Blockbuster was bankrupt.

So, it’s not just about strategy and execution, but aligning networks behind transformation and change. You know, Andy, I still remember the first time I really began to understand how important networks are for transformation and change. I’ll never forget it. It was the fall of 2004. It was early one Saturday morning and I woke up to find that my fiancé, who is not an early riser, normally. She was already awake and headed out the door.

So, I asked her, “Where are you going?” And she says, “Oh, I’m going to a political demonstration.” And I said, “But you don’t care about politics.” “Well, I didn’t. But you know, it’s enough already and we have to do something about it.” And just like that, like somebody flipped a switch somewhere. It was like the entire country changed overnight. And everybody we knew, all of a sudden, we’re going out to political demonstrations on a regular basis, behavior that would have seemed very, very strange just a short time before.

And that’s what led just a few months later, to the events we now know as the Orange Revolution. And I experienced these events from a fairly unusual position. As a foreigner, I was maybe considered something less than a full participant. But in my role managing the leading news organization in the country, I was certainly something more than a casual bystander. And what I remember most about those times was this feeling of profound confusion. Nobody seemed to know what was really going on or what would happen next.

There was just this mysterious force that nobody could describe, but nobody could deny that it was moving things along. And there were just thousands upon thousands of people who would ordinarily be doing very different things, all of a sudden, would stop what they were doing, and start doing the same thing in nearly perfect unison and it was amazing.

And I just remember thinking to myself, “You know, I’d like to bottle that force, right? I’d like to be able to do that, right?” I mean, here I was running this big company with thousands upon thousands of potential customers all buying very different things. I wanted them to unify on the one thing I was trying to sell them. And I had hundreds and hundreds of employees, all bright, ambitious people with their own ideas, but I wanted them to embrace in one or two initiatives that I thought we needed to prioritize. But I had no idea how to do that.

But that’s what led to my 15-year long journey that led to my book Cascades. And what I found was this, that scientists for centuries had known about this mysterious force that I had encountered on the street in Kyiv. And even had a name for it. It was called a network cascade, which is where the name for my book comes from.

And due to some breakthroughs in network science in the late ’90s, we now know exactly how these things work. So, I just want to very quickly go through at a high level the science behind Cascades.

So, this is the first principle of Cascades and it comes from a famous series of experiments done by a guy named Solomon Asch back in the 1950s and replicated many times since then. And I want to recreate it here. So, yes, just which line on the right best matches the line on the left? And if everybody could just go to the chat and just put the answer, what do you think the right answer is? Is it A, B, or C? I see that there seems to be some sort of consensus building around C.

Okay. But what if I were to tell you? And Andy, I noticed you answered C as well, what if I were to tell you that the correct answer was actually A, and everybody around you agreed that the correct answer was A. Would you still be so sure? That’s what they did in this experiment, which was really quite ingenious.

They brought people in, showed them cards like these, and they brought them in groups of eight. And they went around the group, the first seven people all gave the same wrong answer. And the last person who was truly the only real subject, the rest were confederates. The vast majority of the time would conform to the majority opinion, even if it was obviously wrong, something as obvious as this.

So, the point is, is that majorities don’t just rule, they also influence. If people around us adopt an idea or partake in a particular action, we’re much more likely to do so ourselves, especially because very few issues are this clear cut. So, that’s the first principle of Cascades. Majorities don’t just rule, they also influence.

So, the second principle of Cascades is called the Threshold Model of Collective Behavior. And this comes from a famous sociologist named Mark Granovetter. And the basic idea is that people have different thresholds of resistance for adapting an idea, or partaking in a particular action.

So, Granovetter asks us to imagine two groups of people milling around in two separate town squares somewhere. And in the example on the left, they all have different thresholds of resistance to, let’s say, violent or antisocial behavior. So, that guy at the top there, he has zero resistance. He’s always ready to start trouble. So, he gets up and throws a rock through a window.

The guy next to him only needs like 10%. Once 10% of the crowd goes, or one out of 10, he’s ready. So, his buddy goes, he joins in. The guy next to him, he only needs two people. So, his threshold is met, and he goes as well. And you go around the circle, the cluster is supersaturating, even the relatively solid citizens at the other end of the spectrum, they’re all joining in and a full-scale riot ensues.

In the example on the right, it’s almost identical. You still have the same knucklehead with zero resistance, and his two buddies next to him. But after that, there’s nobody with a low enough resistance threshold to join in. So, the thing just fizzles out and nothing really much is spoken of it.

The point being, it makes a really big difference where you start. If you start with people with very high thresholds, who are skeptical and not very enthusiastic at all, it’s going to be really hard to gain traction. If you start with people who are enthusiastic about the change, you’re going to be able to gain momentum much easier. It’s a very, very simple, simple principle. But it’s amazing how often it’s violated. So, that’s the second principle, the Threshold Model of Collective Behavior. And it’s really important where you start.

The third principle is called, the Strength of Weak Ties. Also, comes to us from Mark Granovetter. And basically just what that means is that, different groups influence each other. So, if one group supersaturates, it could help another group meet its resistance threshold. And when this happens, when clusters of nodes supersaturate together, and begin to infect each other, it undergoes a process physicists call percolation. And that’s what drives Cascades.

So, when we look at the science of what drives transformation and Cascades, what we find is small groups loosely connected, united by a shared purpose. So, whenever we see those huge chains of synchronized activity, what we find is small groups loosely connected and united by a shared purpose. And that’s really interesting, because that’s what the science says. But the change consultants for years have been telling us something very different.

They say that we should start by with a mass communication campaign, and create a sense of urgency. And what we found in our research is, that can be effective in riling people up who want to change, but it’s just as effective as to inspire people who hate the change and don’t want it to happen, and want to undermine it in ways that are dishonest, and underhanded and deceptive.

So that can actually be counterproductive if we’re trying to start with a big bang, and a mass communication campaign. So, I just want to take a minute to reflect here and ask, when have you personally experienced a Cascade? And just, again, put your answer into the chat box there. And how about you, Andy, have you ever personally experienced a Cascade?

Andrew:

That’s a good question. I was trying to think about this beforehand. I don’t know if I have a direct relationship to that, like the way that I had hoped I would, actually. It’s like a …

Greg Satell:

Oh, surely. You’ve been part of a wave at a stadium, right?

Andrew:

Yeah, I guess, things that are, yeah, very much of a benign type of thing. Yeah, absolutely.

Greg Satell:

Or applause at a theater or something like this.

Andrew:

That’s fair, yeah.

Greg Satell:

And so, Julie says, “Threshold Model sounds like pure behavior.” There was a walkout in high school that Linda experienced. Early days of sales automation picked a few advocates in each office to kick off adaption. So, that’s really a standing ovation. Linda, that is a great example of standing ovation. Maybe we can get a few more before we? Black Lives Matter Movements, had a walkout over a controversial publication, sports crowd chant.

All right. So, we have a great crowd. I’m going to move on. Deleting Uber app. I’m going to move on, so that we have some time for some questions at the end. We’ve been talking to this point, mainly more theoretically about chant. But I want to use the rest of our time together to talk to very practically about five principles of digital transformation that you will be able to put to work in your organization immediately, as soon as you go back to the office, so to speak.

So, hopefully, by the end of the session, we’ll have you a little bit closer to that digital transformation that you want to drive forward. So, five principles, defining a business vision, a keystone change, making a plan, weaving a network, and finally surviving victory.

So, the first principle is defining a business vision. And we’re going to go back to our Experian case study here, but also add another one. It’s a movement, an internal movement at Procter & Gamble called, PxG. So, every transformation, digital or otherwise, every change effort starts with a grievance. There’s something that people don’t like, and they want it to be different. They want it changed. In Experian, as we already discussed, customers wanted real time access to data.

So, the first step is to transform that grievance into a positive vision for tomorrow. So, in the case of Barry Levinson, it was a cloud enabled agile organization. At Procter & Gamble, this was a very different transformation in at least one respect.

The guys who started this, they weren’t big shots like Barry Levinson. They were just normal, sort of middle manager types. But they saw that sluggish processes were limiting the ability to serve customers, and they had a vision to streamline every single process in Procter & Gamble’s global organization. So, really aspirational vision. And visions should be aspirational and inspiring.

So, principle number two is called a keystone change. And this is related to the vision because it’s the keystone change that forms the bridge from that initial grievance to that big inspiring vision. Keystone changes have three criterias. They have a concrete and tangible goal.

So, while a vision generally shouldn’t have metrics attached to it, keystone changes very often do. Good keystone change should involve multiple stakeholders and should pave the way for future change. So, back to our examples, in Experian, the keystone change for the cloud transformation there was to implement internal APIs. What you need is the same as stakeholders is basically the same thing as external APIs. But it’s much less risky.

So, once they started developing a suite of internal APIs, they were able to show what was possible, and that paved the way for future change. In the case of Procter & Gamble, these three guys, they worked for months to reduce the time of one key process from weeks down to hours. So, what had been a bottleneck, all of a sudden became no big deal. Again, involved multiple stakeholders, and showed what was possible and paved the way for future change.

So, the third principle is called making a plan. So, this, I’m going to introduce two tools that have been literally battle tested for decades. Political activists have used these to overthrow countries for a very, very long time. So, the first tool is called the spectrum of allies. And very much like a military leader might want to map the terrain upon which the military battle will be fought.

As a change leader, you’re going to want to map the terrain upon which the battle for transformation will be fought. So, you want to identify who are your most active allies? Who are your passive allies? Who’s neutral? Who’s passively opposed? Who’s actively opposed? Couple important points here. Generally speaking, you don’t want to directly engage with your active opposition.

And I love Malcolm Gladwell’s example of Bull Connor. There was no way that they were going to convince Bull Connor about the wisdom of their position. That wouldn’t have been an honest conversation. But what they did find, and we found this as well, it’s amazing how consistent this behavior is. If you leave them alone, once they see you gaining traction, they will tend to lash out and overreach, and send people your way, which is exactly what happened in the Bull Connor case. And what we find very much in our transformation work.

So, instead of trying to convince those skeptics, you’re much better off, as somebody mentioned, starting with your active ally. Somebody mentioned with their sales software, they started with a few enthusiasts in each office. And then, the way you bring others in, is you focus on shared values. And one of the most interesting things we do in our transformation work is get people to shift from differentiating values, which make people passionate about an idea to share values that help bring people in.

For instance, when we do agile transformations, the agile people, they always want to talk about the agile manifesto, because that’s what they’re so passionate about and what they love about agile. So, people outside the agile community, unfortunately, that agile manifesto can sound a little bit crazy. That’s probably the best way to sell it. But if you focus on shared values, things like better projects, done faster and cheaper, or becoming a high performing organization. You’ll be able to bring people in.

Interestingly enough, what we find often is one of the best ways to identify shared values is to listen to that active opposition. Listen to the people who hate your idea. First of all, they’re often able to point out flaws that you haven’t realized yourself. Second of all, they’re trying to convince a lot of the same people you are. So, if you listen to them, and you’re able to identify a shared value, it’s often a great way to move change forward.

So, in our two examples, Experian and Procter & Gamble, they were able to identify people across the spectrum of allies. But they were also able to identify shared values, values shared by all of these groups, or at least four out of the five.

So, for Experian, it was serving customers better. That’s always a great argument. Nobody is going to argue, when you say, our goal is to serve customers better, that’s pretty hard to attack. With Procter & Gamble, it was all about efficiency. And not only efficiency, but morale. Because systems that don’t work, they make people sad and frustrated. And you don’t want that either.

So, by focusing on the shared values of increasing efficiency and morale, rather than any particular technology, they were able to bring a lot of people in. And in fact, the PxG movement in Procter & Gamble grew to more than 2,500 people in 18 months.

The second tool is called the pillars of support. The best way to understand this is think of an all-powerful dictator somewhere, someone like Kim Jong-un, or Saddam Hussein, someone really horrible. And now, imagine what happens if all the janitors decide not to come into work one day. All of a sudden, that all powerful dictator is almost powerless to get the trash picked up. The point is, is that every regime or every status quo depends on institutions to carry out its will.

So, if you want to drive change, you need to identify those, not to knock them out, but to pull them in. So, in a typical political revolution, there’ll be things like the police, the military, the justice system, media, business leaders, organized religion, and if you can influence all those institutions, your chances of changing a society go way, way up.

Same thing in the case of Experian and Procter & Gamble. They were able to identify who they needed to influence, very, very different in both cases. I think there was one overlap with business unit leaders, but same principle. You need to identify who you need to influence to make this change happen. And then, when you’re designing tactics, you always want to be mobilizing constituencies in the spectrum of allies to influence institutions in the pillars of support.

So, you always want to be mobilizing somebody to influence something. And those are the two questions you want to ask about each and every action, who are you mobilizing, and to influence what.

So, the fourth principle is called weaving the network. This is how you scale change, how you get beyond those one or two advocates for the sale software, to get beyond those initial enthusiasts, and actually scale this change. And the way you do that is through cooptability or what we call cooptable resources. And my favorite example, and one I’m sure everybody immediately recognizes, is TEDx.

They give people resources to go out and promote the TED brand, for their own reasons, right? They take ownership of the TED brand themselves and thousands upon thousands of people spend hundreds and hundreds of hours to put together these events, because they want to for their own purposes. But in doing so, they promote the TED brand.

Similar in both the Experian and Procter & Gamble cases, they created cooptable resources. In the case of Experian, they create an API Center of Excellence. This was like an internal consultancy that would help people solve their problems for free.

So, any product manager who wanted to build cloud based products, they could get help for free. There was also workshops that were opt in. They weren’t mandated. They would help people build the skills to create successful cloud products. With Procter & Gamble, PxG Garage is similar idea to API Center of Excellence, helps people solve their problems for free. Also, Yammer groups where people can help each other, and they do these really cool weekly videos.

So, that’s how you build scale is through cooptable resources, giving people resources that they can take ownership of and use for their own purposes. And finally, surviving victory. The most frustrating thing and I’m sure everybody has experienced this before. That when we have a program, and we think once we get that first big initial victory, once we get that executive sponsorship, or once we get our plan budgeted, that everything will be downhill from there, and we’ll be on easy street.

And usually what we find is just the opposite, if that’s the point at which somebody throws sand in the gears, and everything sort of grinds to a halt. And the reason is those people hate this idea for change. They don’t just disappear because you feel like you won your initial victory. In fact, they’re probably redoubling their efforts, because now they can see that the change is really possible.

That’s exactly what happened to us in the Orange Revolution, we thought we had one, it turns out, we didn’t, which is why there was another revolution in 2013, and ’14. But this time, they were smarter than we were. Instead of focusing their revolution on a particular political party or politician or program or policy, they based their change in values, because change is always … Lasting change is always about real values.

And the 2013 and ’14 protests were about adopting universal values. It was called the Revolution of Dignity. So, you want to think about how you’re going to survive victory right from the start? Because you know you’re going to hit that resistance and that opposition. So, we ask these three questions. First, how would an evil person seek to undermine this change? Not a reasonable person, but an evil person.

We find that really gets the imagination going. And where are you vulnerable? Where are they most likely to attack you? And then finally, how could you use shared values to overcome that opposition? You don’t like cloud technologies? Yes, but our customers want us to deliver these capabilities.

So, it all comes back to shared values. And I’m going to end here with this quote from a man I like very, very much. He was one of Lou Gerstner’s key lieutenants during the IBM transformation in the 1990s. And when I was interviewing him for my book, he kept on saying how it was never … The Gerstner Revolution was never about technology or strategy. It was always about … And he continually used this phrase, he said, “It was always about bringing the culture and values back into harmony with the market.”

And he said because the transformation was about values first, and technology second, that they were able to continue to embrace those values, as the technology and marketplace continued to evolve. So, that’s my final message. Don’t make your digital transformation about any one technology. It’s always about values. So, if you want to learn more, you can always find more at either of my two books, Mapping Innovation, and Cascades, or either my websites, Gregsattel.com, or Digitaltonto.com.

Now, I think, we have a little time for Q&A. And I’d be happy to stay a little later as well, because I think we’re going a little bit over. But I’m happy to answer any question you might want to ask. So, starting with Andy, did I leave anything out? You have anything you’d like to ask?

Andrew:

Yeah, I think, that going back to the kind of people transformation aspect, what’s interesting to me is that, I think, particularly for this audience here, as they think about being able to identify those initial advocacy groups that can be the right audience to start the change or start the conversation. How do they identify the right people? How do they cut? Do they self-select somehow? Like, how does that …

Greg Satell:

So, that’s a great question. There’s a Jedi mind trick that I find a lot of … I mean, first of all, there’s people who know fellow travelers. But one way to do it, let’s say, in like a global transformation or especially now, in kind of a virtual world, where you’re not kind of running into people at the water cooler.

One way you can do it is through workshops. And there’ll be people who mill around after the workshops are over or you ask people, if anybody. And that’s a great place to find those initial advocates. And that phrase, we will help you solve your problem for free, is a great one, right? And that’s also a great way to start identifying those keystone changes.

You can go around and offer workshops. It’s important not to make them mandates to make them opt in. And then the people who choose them, you know they have some interest, and the people who stay around after actually have a problem that needs to be solved. So, if you can solve some of those initial problems, that’s a great way to gain traction.

Andrew:

Yeah. I guess to follow up on that too. I mean, on the flip side of that, at what point do you stop trying to sway the naysayers or win them over? You talked about kind of the fallacy of trying to focus too much on them. But at what point do you kind of cut your loss there and just focus strictly on that, even if it’s only 60% or 50% of the population that is really connected into the change that you want to drive?

Greg Satell:

Well, I would say the percentage is much lower. It tends to be 10% to 20% that are the diehards.

Andrew:

Okay.

Greg Satell:

The issue was usually with success, if you can make the change successful, then … And that’s why it’s so important to find those initial advocates because they want it to work, right? You don’t want to go and mandate this change with people who are skeptical and don’t really care if it works, or doesn’t work, or whatever. You want to start with people who really want it to work.

So, in the case of Experian, where there was a lot of initial resistance, because not only do you have something as security conscious as a credit bureau, moving to a cloud architecture in a very, very traditional organization, and probably one of the most highly regulated industries on earth, you could see how there was a lot of pushback.

But he started just with these workshops, just with product managers, who liked the idea of the cloud. So, the first six months was just sort of going around and seeing who was enthusiastic and getting those first … And helping those first few advocates become successful. And then after like six months or so, if things go well, you get into that middle crowd where it starts becoming, like more of a performance issue.

We see this a lot in the diversity transformations we do, where it’s sort of like, yeah, that guy over there, he’s doing a lot with these cloud transformation. They’re doing pretty well with that. And success kind of breeds success. And then like between year one and year two, that suggestion becomes more of a nudge. And then eventually, you get to the point where it’s like, “Listen, this is what we’re doing.” And people either leave themselves or get fired.

But you don’t want to get to that level. You don’t want to mandate something like that, until first, you’ve proven this change can be successful. And second, you get people on board. So, you deal with those people. And again, it’s amazing how consistent this behavior is, whenever I talk to transformation and change professionals, whenever I mentioned this, leave them alone.

They will discredit themselves. And when I say that, just leave them alone. When they see you gain traction, they will overreach, and they will lash out. And it’s almost like, and I think we’ve all had this experience, where we’ve been in a meeting, in a conference room, and everything is sort of, moving slowly towards a consensus. And then finally, somebody who hadn’t said a word the entire meeting, all of a sudden throws a hissy fit, and then completely discredits themselves. Same thing happens on a larger scale.

And the Bull Connor example is a great one. In the second Ukrainian revolution, Mustafa Nayyem, who was one of the key leaders of it, he told me, he’s like, “We were dead. I mean, people were leaving. And then they sent the police to beat us. And then after that it was over.” Same thing, it’s amazing how consistent that behavior is, that once you start gaining traction, they sort of … Because often, you don’t know who the diehard ones are. They tend to keep quiet and sort of try and discredit you quietly outside of meetings, when meeting is over or something. They sort of quiet grumbling.

Only when they see it starting to be successful, they start coming out of the woodwork. So, that’s how you can deal with that. And I know we’re coming to the end of time, but if anybody … It seems like we have a little bit of a shy group, but if anybody has one last question they’d like me to answer, I’d be happy to. Well.

Andrew:

All right.

Greg Satell:

All right.

Andrew:

It is a quiet group today.

Greg Satell:

Yeah, it is a quiet group. Okay. So, we can start winding down. But thanks so much for having me. I think this has been a great group and I hope it was helpful to everybody.

Andrew:

Great. So, we are headed to break now. There’s another set of breakouts, three to choose from at 3:00 P.M. Eastern, 12:00 P.M. Pacific. That’ll be up in about 40 minutes. So, check back then, and we’ll see you soon. Thank you.

Greg Satell:

Yeah. And I encourage everybody to connect with me on LinkedIn, if you’d like, and on Clubhouse. But thank you very much for having me.

Andrew:

Thanks for being here, Greg.

Greg Satell:

Bye-bye.

Dan:

All righty. That was great.

Greg Satell:

Are we still on? Okay. Yeah, it seemed … Are we still live?

Dan:

I believe so. Yes.

Greg Satell:

Okay. Well, then we’ll go. Thank you very much for all your help, Dan.

Dan:

Sure. No problem.

 

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

Attune On Demand

Want to catch up on our full 2 days of thought-leading sessions?

© 2021 Firstup, All Rights Reserved.