Business transformation

Digital Transformation: Becoming a ‘Forgetting Organization

Many companies today are in various stages of digital transformation. But true digital transformation requires the courage to challenge entrenched beliefs within one’s organization. For example, insurance companies have always relied on a bedrock belief that insurance policies will always need human agents to sell them — until the Internet proved that consumers will buy them online. A company that wishes to stay one step ahead of competitors must learn to identify and question these entrenched “facts,” and discover how technology can disrupt them.
The first business transformation that Wharton is associated with is the training of managers for companies with more than one location. That’s a big deal. The invention of credit — that’s [another] big deal. Digital transformation is probably about as big a deal as the invention of credit. It changes the way we do everything.
That’s not to say there haven’t been digital transformations before. Database management transformed the way political campaigns are run, transformed the way direct marketing is done. Communications networks and high-velocity, high-frequency trading changed the securities industry. But those are localized.

What makes today’s modern, digital transformation different is that it’s almost all-pervasive. In other words, it’s not transforming a part of the business. It’s transforming the structure and the strategy of the entire business.
The insurance industry, again, is an example I like because when I was working for a team reporting to [an insurer’s] board, we had to drop all of the outdated ideas. I remember being told they were going to focus on cutting costs, and they were going to get rid of every bit of data that they no longer used. I was terrified, because insurance is a data intensive industry. I couldn’t get them to understand what was wrong with what they were doing. What I finally had to do was to say, “what are the things that everybody else knows that I don’t?” And the response was, insurance will always require an agent. Agents are stupid. Therefore, products have to be simple, which basically means you can’t change product or distribution, both of which are nonsense.

But the idea that you can’t change product and you can’t change distribution was totally ingrained. And first, you have to get that stated. You have to get it out on the table. And then, you have to design mechanisms to forget it.  It’s a really disruptive process. It’s not a good idea to do it entirely within the firm, or among firm leaders, because they’re going to be spectacularly unpopular by the time you get done. So, the idea is to create the forgetting organization with an individual whose contribution you can then forget later. But do it by finding the things that everyone knows can’t be changed, and then, seeing what happens if they were changed anyway.