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Anthony Taylor: 0:02
Thanks for joining us for today's episode of the strategy and leadership podcast, I have an amazing conversation with Tim Bottke. We talk about digital transformation. We talk about what CEOs need to consider as they move forward with their teams, what is good enough in terms of resourcing? And ultimately, does digital transformation matter? Does it make a difference to invest in digital transformation? The answer will surprise you or might surprise you. So do check it out. I'm excited. This was such a great talk and I'm excited to have you listen to it.
Welcome to today's episode of the strategy and leadership Podcast. Today, I am joined by Tim Bottke, who is a senior partner at Deloitte in Germany and a professor at the Bocconi business school in Italy. Tim, how are you today?
Tim Bottke 0:53
I'm fine. Thank you. Thanks for the invitation. Excited to be here.
Anthony Taylor 0:56
Likewise, you've got such a cool experience. You recently wrote a book, I've got so many things to ask you about. But why don't you tell our listeners about who you are? And what excites you about the work that you do currently?
Tim Bottke 1:09
Yeah, look, I've always been interested in helping companies and clients and friends in businesses to just make the business a better place. And that's why I started in strategy consulting many years ago. And as we all know, everyone says strategy consulting, yeah, you've learned nothing proper. And it's true in many cases, but actually, I think over the years, when you see I've worked in 20, something countries in many different sectors, but mostly in telecom media, which is has always been a very much growth, digital-driven environment. So I learned many things. I've seen many things working, and I've seen many things not working. And that journey always excited me. And then you said look, yeah, yes, I wrote a book. And I wrote the book, not because I always wanted to write a book. Actually, the story was different. So I was asked by a client a question I couldn't answer. The client, executive level client more or less as look, Tim, you know, I have to transform my company, it will cost as we both know, half a billion or more. And to renovate all the old systems to transform everything, turn everything upside down, and make it agile and all these passwords, we all know. But I'll stay in this job for only two more years. Am I not better off just wearing jeans and trainers, you know, and then asking my investor relations people to paint our report in nice colors and put digital and agile all over the place? Is that not safer for my career? And I will only do the first journey if you tell me that you have proof that digital actually makes my stockholders happier and that my market value will grow. I'm sure you have proof from your consultant. And I didn't have any proof. And you know how consultants I didn't like not having an answer. So I couldn't make up one. Because the question was very precise. So they said, Look, I need to find a solution. And then a multi-year journey started where at first I tried all by myself, then I realized I cannot answer it quickly over the weekend. It's a really hard work journey. Then I went back to academia hoping that okay, in academia, with all the experts all the very advanced knowledge or get an easy answer, it also didn't work in the short term time. So I went back to research and after a few years, which were very painful, because I kept on working in parallel, I then found the answer he was looking for, funnily enough, by the time he had already left the company where he asked the question, he had the same problem again, just many times bigger. And that's then how this research then turned into a book. But that's the story behind why there is a book, the book was not the ultimate purpose, it was the end result of a tough question. Okay,
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Anthony Taylor 4:06
I know that sometimes the consultant's answer is it depends. But yes, when you have a direct question, you should give a direct answer, you know, at the risk of leaving everybody in suspense, what was the summation? Of course, the summation of your research is by the book, but if you're able, you know, tell me, you know, what was that experience like? Uncovering the answer to that question? And if you're willing to say what,
Tim Bottke 4:28
yeah, I think it was a roller coaster ride because at the beginning, when you look at this question, of whether the digital transformation really makes a difference on a very shallow level, everyone would say, yeah, it does. If you don't disrupt yourself, you will be disrupted and all these nonsense sentences, you know, which have a true heart. But they just paint over a big issue on a very high level, which doesn't really help anyone in practical life. Because what do you do if you sit in a company with 100,000 employees and someone tells you to disrupt yourself before you're disrupted. What do you do, then? There's no answer. So the real question in the end is, how do you really make a difference and research that roller coaster ride was, it could have been an outcome, that it doesn't make a difference. And there were times when I was pretty sure that there wouldn't be any proof that if you transform your market value would change. The good news is that then after analyzing 20,000 more reports, and all the financial data, etc, is that on average, becoming more digital makes difference, and it increased the value of a company. But on average, we all know the story, that if you put your head in the fridge and your feet in the oven, then on average, you feel fine, but you're still dead in the end. So it just means that it's a good message on a high level, but it doesn't help either. So, um, the roller coaster journey, as I mentioned, is really worse, how can I identify which companies do really make good strategy in terms of digital eBay's of their success, and others who are just suffering big time?
Anthony Taylor 6:22
Wow. Okay. So just before this, I was having a conversation with, you know, three very smart gentlemen who work at Amazon American Express, and also a professor about decision making. And as I hear your story, I think, well, you could have stopped your journey at it doesn't make a difference. So that's like, part of it is saying, What were those indicators that had you stopped at that point and not continue to research? Then they would have you would have been confirmed that it makes no difference? And then so that's one question I have. The other question I have is obviously as the story goes, you found the answer. The answer is it does make a difference. With sounds like an asterix, it depends, as in you could transform parts of your organization. And you could say we did digital transformation, and it didn't work. Or it sounds like the undertone is if you do digital transformation, and cultural transformation, lean in, create defensibility, you know, etc, etc, etc. That's the thing that ultimately drives the stock. So digital transformation in itself is not the thing. It's digital transformation plus, so thoughts on that I will just go with,
Tim Bottke 7:36
I think I like your term digital transformation. Plus, I would actually say, I could argue that it's digital transformation minus. Because the key term is transformation. And you could put whatever you want in front, I think the major issue I always see, and you see that in the book, and when you when I talk to everyone first read as senior executives, I think the key understanding always was that it's all about transforming your company. And transform, transforming your company doesn't mean as you mentioned, and it's also a concept in the book, what is the scope of your transformation, it can be just at the front key of your business or in adjacent business areas. Easy stuff, okay, you just put 100 people in one setting, you make them agile, and it all it's all running nicely, and you can pet your shoulder saying, Look, wow, how agile and digital have I become. And at some point, then someone realizes it's 100 people in an 80,000 People organization. And you will never be able to take that back to transform the core into a big real transformation where everyone is changing the way they work. So yes, it's digital transformation minus, which actually makes it bigger, because you need to do everything end to end to really make a change. And that's what you also can see when you look into the data. Just because you do I don't know robotic process automation is a tiny chunk of your business and you may be saved 10 FTE is in the process. That doesn't help you that doesn't make the CFO really see changes in the p&l. That may be the shareholders now you're in the after this hype cycle. You know, when everyone is saying I'm so digital, I'm so agile, I'm so lean, whatever. They all realize it's all on the same level. In the end, a company's strategy is all about winning in the marketplace. It's not about copying what others are doing. It's even worse. It's never about copying a high-level story you've heard from someone who's totally different compared to what you are, and then believing that this copy is enough to make you succeed. So that's why I think that's this mine This is key because digital for me, it's a tool, you know, it's nothing else, you need a good strategy. And if you're lucky, you can combine digital elements in a way that no other competitor can easily follow. And then you have a strategy, which could be the basis for the transformation of your company into something which will kill your competition, somewhere down the line. Just imagine everyone saying, Wow, now I'm digital, I have and then everyone in the segment, I don't know in the retail segment in the market. Everyone has the same CRM system from one or two vendors. Everyone uses the same hyperscale platforms, everyone uses one or one of the three cloud providers. And they're all different. But in the end, they're all combined in a way, which is not really differentiating. And then where do you end up?
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Anthony Taylor 10:55
At? That's kind of my question. So what I hear that and I love the conversation right here, you know, transformation as a project, or the difference between transformation as a project or a program, as in, did I transform part of my company? Did I transform all of my company, and once you get to the end, you just have to start over? So it's not a task. It's a cycle. I think a lot of our listeners, they're not concerned with market domination in a lot of ways. But you know, some of them are at a stage like, Hey, I just need to put in ERP, which for them is a digital transformation, to be able to just be optimized where they weren't before. And then yeah, like using it? What is the why behind the digital transformation? Are you trying to save a bit of money? Are you trying to scale up? Are you trying to increase your total market value and the like, it's not a zero-sum game or a race to the bottom because if everybody is going to be on the cutting edge or bleeding edge of automation, then what is the differentiation that you really put in place, and one would argue that it would be something we'd be non-duplicatable. So not technology is ultimately the thing that's going to get you that differentiation. But that might be a larger conversation. But
Tim Bottke 12:08
maybe you know that there's this funny fable, which, which I'm actually also using the book, which describes the so nicely, and it's about the rabbit and the hedgehog. I think I don't know whether you know that one. It's basically a rabbit and the hedgehog meeting and the rabid saying, Look, I'm so much faster than you are with your short legs. And then Hedrick says, No, I'm faster, I'll win. And then they make a bet on what the hedgehog then does, asking his wife to look exactly the same. And both position themselves at the same at the different sides of the woodwork with a race would happen. And then when they start, they run the hedgehog heights. The rabbit arrives on the other side, and before he arrives, the white pops up saying I'm already here. Okay, and they do the same on the way back. And they do that 100 times until the rabbit drops dead. And that's more or less the story of many digital transformations that people think just because they get longer legs of rabbit and they run as fast as they can, there will be no Hedgehog in their market. And there always is one. And that's, that's really something where you see, look, you need to decide what to do this or for otherwise, you end up in a position where you're Yeah, in the best case, saying in the same position, but I don't know half a billion euros in implementation, less than your pockets. And nothing changed.
Anthony Taylor 13:35
Unless you're a digital transformation consultant in life is great, because then you got that half a million euros. But I know that's not the point that you're making that ultimately, it's you know, you can move very, very fast. But there's always going to be someone there. So if I understand what you're saying, so that the intentionality piece of, of where you're going and moving that forward. So what let's say we have our listeners, whether they are, you know, multibillion-dollar euro companies or, you know, 3040 100 200 $500 million revenue companies, what are the questions that the executive leadership, what are the conversations, executive leadership members need to be having at their table to either beat the hedgehog or avoid being a rabbit?
Tim Bottke 14:21
Yeah. I think you know, consultants love frameworks. So that's why I'm always making a joke that I also had to put a framework into the book, but it's not about a framework. What I wanted to show with my framework is that you need to look into the story end to end. And you need to ask the question, as I said, the one we just discussed, so why do I do this? And where will it lead me to? And will that be a winning position, at least for a short period of time? We're no longer in this luxury. Where if you make the right choices, you're happy forever, but at least it needs to have some stability. Second, you need to understand What are the catalysts for this change to happen? Is it technology? And if yes, which technologies and you need to understand them? Is it your people? Is it different consumer patterns, different demand patterns, etc? Then you need to decide the question you asked before, where do I start? Okay, do I start somewhere at the frontier of my business where it's nice and easy? And? Or in smaller companies? That's even more critical. And do I start already from day one? In my core business? Do I have to because the catalysts force me or do I want to because I want to be first, then you have to decide, okay, how do I do that? Am I agile? Am I going to more traditional routes, and then you need to find the outcomes of the whole process? So I've had many discussions I don't know with, with senior executives, and also in big and small companies, and I'm always telling them to look, forget all this, sorry, to say, bullshit high-level password, the stuff of digital, it will not make any difference for you. Problem is, you need to understand the details, not on the deepest level of the technology. But if you really believe that technology is a catalyst for a winning position for your company in the future, it's easy to say that you need to understand technology. It's a hard thing to do. It's easy to show on PowerPoint, I now have the CRM in it that can do these three things, but it's not changing the way you behave. So very often, and I'm coaching senior executive secretaries on this, often I'm saying, Look, times are over where you can pretend that you can be a manager who doesn't understand what these technologies can do, and how you can combine them for winning. And it's often painful for them. It's a skill issue. Um, you're used to your CTO doing all the technical stuff. And you are used to outsourcing the thinking to a consultant or others bring me a strategy to win. But that's not if you ask any entrepreneur and have many friends who are intrapreneurs, if you ask them, they, in the end, their idea, which is the winning idea, not something copied or pasted, or high-level best practices from someone else. And that hasn't changed forever. It's the same for digital. The only difference is there are many more elements to understand.
Anthony Taylor 17:26
But it begs the question, as I hear it for executives, Leadership Team CEOs, that either they are being disrupted as in there's an external pressure, and then sometimes you react in the word I'll use sufficiently and you say, Oh, we're losing our position, therefore, it becomes a priority, we need to put the necessary resources. If you're being proactive, and you're saying, hey, I want to transform digitally, I want to put these processes in place. But I hear that there's like, and you could scratch the surface of it. And what I hear you say is, if you scratch the surface of it, it's not going to get you anything, you can't just like, you know, okay, so you really need to get deep. What have you seen as a consultant? And as through your research? What is just not good enough? As in? I'll say it a different way. If you spend an hour a week on it and say, oh, yeah, you're transforming your business from the side of your desk. Is that going to work? Or are the teams and organizations that you've seen do this, you know, allocate sufficient resources and time Tiger Teams priorities, like what did they need to do to get it from fledgling to actually impactful?
Tim Bottke 18:40
That's what I'm Yes. Yes. So I think I just had just before our call, I had a long discussion with a Chief Digital Officer of a leading global company. And he had read the book and he was more or less saying, look, it's was a bit frustrating to see that you're more or less saying that my job, my job doesn't make a difference? And I said, No, that's not what I meant. What I meant was that it all depends, again, that the interesting consultant's answer but I was saying you can see and there's a lot of research out there for x. And that's a nice example that Chief Digital Officers can make a difference. But in the end, it all is related to what is the real purpose behind putting them in the job. There are a lot of talks today about greenwashing in companies. But actually, the major trend before that was digital washing companies and digital offices and tiger teams and whatever you call them at some frontier of your business in some corner, and that digital washing and that was the question my client remember as before, can I digitally wash for 20 million jeans, trainers? You know T-shirts, am some pilots. What do I do the real thing as it Turns out, we've gone through this hype wave. And not nowadays, more and more investors and also employees understand that it's all about the bigger overall thing. It's not about some niche, having an assistant of an assistant who is responsible for digital or digital officer who doesn't really have any say in anything major, who can just innovate it at some in some corner of the business and be on stage in the investor relations meetings to show how cool you are. These times are over.
Anthony Taylor 20:40
I think that's just really interesting. And I think the question if we make more jokes about Consultants is that they will just repeat back what you said to them, and charge you a whole bunch of money for it. And or, as my friend says, you know, they will borrow your watch to tell you the time. But what I hear out of that is, you know, as an organization, you need to look and say, Hey, Are we committed in terms of action, to make our digital transformation to success, whatever it is for your business? Now, again, if you're an SME, which we see a lot of that, you know, what is it? Is it installing software? And that's your digital transformation? Or is it committing throughout and having everybody, you know, kind of be responsible? And you can tell yourself that as in you can be the person who says, Are we doing enough, I think it takes a lot of courage, because most people don't want to highlight negativity, like I say, Hey, this is not enough folks, like it's not going to get us to where we want to go. And it's really hard to do as an external person, one of the reasons consultants come in is to be able to call bullshit when they see it, and say, That's bullshit. Like you guys are saying you want this digital transformation. Meanwhile, you know, it's your executive assistant, no disrespect, who's leading a digital transformation, it's not enough, you need everybody in the organization. So
Tim Bottke 21:59
I strongly believe that the transformation, no matter what the size of the companies needs to be led from the top, from the very top. And you need a team approach to everything in the end, not a single person, either in some smaller companies can do it. But in the end, it needs to be clear that it's a top priority. Otherwise, you can you just don't call it digital transformation. You call it I have this little digital project experiment, you know. And I see what the outcome is. And if I like it, maybe I do something, but it will never scale like this. And the beauty about digital is that you can scale it if you do it, right. The downside is, if you don't think about scaling from day one, it more or less, I've never seen it working. And interesting. And back to the consultants, you're fully right that there are many uses for consultants. And often you see them implementing that's where it's often very helpful when just because you need the skills, the technology skills, etc. But where I believe we're consultants really can add value, it's very early in the thought process. And that is the strategy part. And that's all about then finding a creative winning strategy, which can use digital. And I look, if I don't have answers, creative answers for a business, then either I don't go there or I wouldn't be ashamed. And if the client says, Look, I don't need you here, you don't bring anything new, and new doesn't mean a copy from someone else. It needs to be something unique in combination to put you into a winning position. Absolutely,
Anthony Taylor 23:42
I know that you have to do the same thing for yourself, you need to be able to bring value to the client. Okay, I've got one question. One more question before we finish up. And it goes back earlier, and we touched on it. And you said in your research, as you're going through, you got to a point where you were using the word disheartened to say digital transformation makes no difference. What was the leading indicator? What was the leading kind of piece of information that suggested or implied that digital transformation didn't make a difference? And I know we've talked about it in undertones, but what was the like, you're sitting at your desk and you're like, oh, shit, I just wasted a couple of years doing this research because it makes no point. What was that Aha realization or the reflection? Yeah,
Tim Bottke 24:23
I think the aha moment was so the data showed that it makes some difference. But I was looking when you do this, in real life with all these stories, there's always black and white, you know, you say, Wow, this is this great success story. They've done everything right. And then you look into it, you talk to people, and then you find out that very often, it's a bit of after the fact you know, there's a mix of luck and people making the right decisions, experimenting, and all these things happening. So my expectation, my hope was that the data would be Very clear. But as I said, it was just showing that on average, it somehow helps. Yeah, look at that. So boring. So why so at least there's proof that it's not a value destruction game. But then when you look deeper into the financials and try to understand what companies are made of, then you could actually see big differences. So interesting learnings like, I don't know, companies with a very high spending CAPEX envelope, paying high dividends, for example, there, but how digital they became didn't really have that much of an impact. Because shareholders apparently based on the data, they value more stable cash flows than any fantasies on whatever it's done digitally. On the other hand, when you look into companies with very low net income or even negative net income, you could see a very high variance, meaning that some companies then became more digital, and they had a huge value boost. And there's no rational explanation behind that the explanation from a shareholders perspective, when you look into this data is that there is so much more hope, in the stock price, versus real numbers, like the high dividend companies, that actually if you do things right, in digital, people just based on the belief, look, put a higher value on your company. On the other hand, the downside is for these companies, the variance is high. So if you are in that range, low net income, negative net income, it can mean you can have a lucky shot, and you will be the winner. But it can also be the worst disaster you've seen in your life and all these than going through all the different financials, understanding even how companies communicate, etc. That's when the research became fun, again, because there are so many cool learnings. And you just need to understand who you are as a company. Also, for some sectors, you know, in some sectors, it makes almost no difference. If you are more digital, just because it's such a traditional sector, maybe it's just not yet the time. And in other sectors, if you don't do a lot of digital, then you are actually punished by the market. Because you are not only a follower, you are the loser in the game from that perspective. So really understanding where you are is key. And that's where the data really helps. And that also helps to fight some frustration. I've seen in many interviews, were saying, Look, I do work so hard. I'm so digital, I'm so agile, and no one cares. Why? That's it. Yeah. Maybe you need to understand your starting position better. And then maybe you're too early, maybe you're too late. Maybe you have the wrong cash flow profile for real appreciation. And these are all the things where I could talk for hours and I do now with client's rates on the book.
Anthony Taylor 27:59
You know, the answer invariably comes down to it depends. Hire a consultant, I'll let you know. But I really do think it's it's must have been fascinating work. I'm fascinated talking about it. You know, just the stories about it. So for our listeners, you know, pick up the book, digital transformation payday. If you don't think it's relevant to you now, it will be it's just a matter of when. And I think that organizations, and leaders who can be prepared for this won't be surprised. And I do think that that's very interesting that the perception of what people see as valuable when it is valuable. And that balance between like big winners, big losers, losers, you never said that. But it's in some part, the innovator's dilemma, you know, doing the short-term things, the long-term things, are you thinking 1020 years down the road and how to adjust that. So, Tim, I know we can talk for hours, but I'd love to have another conversation about this. Where can people connect with you? Where can they get your book? Where can they learn more? And where can they listen to you for hours, if they're interested?
Tim Bottke 28:56
We are launching on December 13. So very soon, just a few days. And the book is available in every in retailer or you can just if you want to know more go to www digital transformation payday.com. That's our website. And then you know more there you can also reach out to me directly if you have any questions.
Anthony Taylor 29:17
Fantastic. So my guest today Tim bucket, who is the senior partner at Deloitte in Germany, a professor at Bocconi business school in Italy, and the author of digital transformation paid a dunker Shin to him as well. Pleasure and dank Anthony, it
Tim Bottke 29:33
was a pleasure. Yeah,
Anthony Taylor 29:34
thank you so much. And folks, check out the book. If anything, have a conversation as you go through your strategy to reflect on the possibility of digital transformation. It doesn't hurt you to talk about it. It doesn't hurt you to look to see here what is possible but at the end of the day, no matter what you do, don't half asset. Half asset will just have you being frustrated. So if you do commit your transformation, what is not good, but good enough? What is enough to get you where you want to go? Because if you're under resourced it, you're going to be annoyed with yourself and everybody's gonna say digital transformation doesn't work. Why the heck did I buy Tim's book? But ultimately, they didn't read the book because they need to say, hey, we need to sufficiently resource it to get us across the line. So Tim, again, thank you so much me. Yeah, absolutely. I got it from you. So I appreciate that. Folks, thanks for being here. Thanks for watching. Connect with us again, tell us your stories. Drop us a chat in in YouTube or whatever. I hope you guys just have an amazing rest of the day. Once again. My name is Anthony strategy and leadership podcast. Thanks again, Tim. And we'll see everybody next time. Bye for now. Thank you