I’m a self-confessed chess addict.
I learned to play the game three years ago when my son expressed a curiosity about a chessboard he had found.
As his interest in chess grew and he improved, I needed to practice just to give him a competitive game. Before long… I was completely hooked.
There is something particularly rewarding about learning a new skill as an adult. We are able to relate the newly acquired skills to our own life experience, in a way that our younger selves may not have appreciated.
The experience of learning to play chess, and observing how the chess industry has adapted to digital disruption, has provided an interesting lens to view the impact of Digital Transformation in a mature industry.
A blend of old and new
Every generation considers itself to be uniquely impacted by change and yet the ways that we interpret and react to change can be surprisingly predictable.
When an IBM computer first won a chess game against a world champion in 1996, many wondered if this was the ‘beginning of the end’ for the game of chess (Google’s AlphaGo produced a similar reaction last year).
However, despite many predictions, disruption in the guise of technologies such as Artificial Intelligence (AI) has not signaled the end for one of the world’s oldest games. Instead the Chess industry has been a strong adopter of technology and the game is thriving like never before.
Three lessons to guide Digital Transformation
Chess is a game of strategy and so it can be expected that a number of similarities exist between worlds of Chess and Digital Transformation. Obvious examples are – the dynamic nature of both domains, with the need to adapt and react at every turn. Both worlds use phases to manage complexity and time is a constraining factor for both.
Also, as referenced in the title above, incumbents in both the Chess and Digital Transformation arenas can be challenged and humbled by young and relatively inexperienced entrants (as this clip shows).
However, three lessons, in particular, have stood out for me as providing compelling insight into any Digital Transformation effort. 1. Ensuring sufficient synergy for your pieces so that they work together, 2. Playing to your strengths while avoiding competency traps and 3. Learning to balance opposing demands.
Lesson 1. Make sure your pieces work together
While many think of chess as an individual sport, it is, in fact, a team game. A chess player that sends his troops into enemy territory, unequipped or without support, will likely suffer quick defeat.
Focusing on any one part of the board in isolation is usually when you make a mistake and lose pieces. To succeed, you’ll need your entire team to participate and have each piece work together.
Driving Digital Transformation also requires the strategic alignment of capabilities across the entire organization. It is not about focusing on one project or program, nor are the opportunities limited to assets the organization already owns — a holistic view is necessary.
Meanwhile, the phenomenal pace of acceleration of technological innovations (AI, Robotics, 3D Printing, Mixed Reality) and degree of inter-connectedness is driving the need for profound enterprise-wide change in many industries.
Customers are expecting premium experiences as an outcome of digital interaction and those end-to-end experiences are now being created through a multitude of devices, services, and applications (as evidenced by the Internet of Things).
As the expectations of the customer are changing, a competitive landscape is being created where companies are collaborating and competing to gain the customer’s attention in an increasingly crowded ecosystem. Few single organizations are in a position to provide an end-to-end experience for the customer.
While the temptation is to react to the need to digitally transform their business by following a technology first approach, these efforts can fall short or become inwardly focused without a holistic business perspective behind them.
Getting a true understanding of the ways that your customers derive value from your products and services across a variety of contexts (through outcome focused techniques like Value Stream analysis) will create a solid foundation on which to base a digital transformation strategy.
This will also inform an organization’s ability to make choices about where to focus their existing capabilities to build synergies, identify where the gaps are and indicate where it makes sense to partner with others.
Lesson 2. Play to your strengths, but be aware of competency traps
Chess players tend to develop a style of play that fits their natural strengths. Some will seek to dominate with aggressive play, risking everything, while others are content to slowly push their pieces up the board, quietly building a spatial advantage.
The difficulty arises when you encounter an opponent that is very comfortable defending against your natural style, or you become over-reliant on one tactic and therefore limit your capacity to improve.
This concept of natural strengths and the risks associated with over-relying on them, can be extended to the capabilities that a firm develops over time.
Successful Digital Transformation will seek to leverage the core capabilities of a firm. However, it is also worth noting that an organization’s confidence in its core capabilities can also be a source of weakness. This can arise when an organization recognizes an outside threat but is slow to react to it (think Nokia or Blockbuster).
In many of these instances, the culture, beliefs and organizational structure created to support the existing direction of the firm (‘the way things are done around here’) means that they are simply unable to react to, or accept, the need to pivot.
This dynamic has been referred to as Architectural Innovation, which can require many changes to be made within the firm, not only to the product.
It is considered the most difficult threat that a firm can face, as it directly challenges the underlying assumptions which have been built up over time and are embedded in the practices, procedures and mental models of an organization.
Ensuring you have some pattern breaking initiatives in your portfolio of innovation investments can limit exposure to these risks.
Lesson 3. Learn to balance opposing demands
Chess requires that you have a parallel and simultaneous focus on offense and defense at all times. Focusing solely on one or the other can blind you to pending opportunities or threats.
This ambidextrous ability to support two dissonant mindsets, while working against the clock, takes practice but it is a powerful aid to strategic thinking.
Digital Transformation Leaders can face a similar challenge when balancing the tension between supporting the existing revenue generating aspects of their business (exploitation), while at the same time fostering an innovative culture that enables them to succeed in new domains (exploration).
This is easier said than done.
Many companies follow a model of separating out the innovation aspects of their businesses, by creating innovation labs. However, even this genuine desire to support an innovative culture can be undone, despite best intentions. The innovative side of the business can struggle to get buy-in from the more dominant ‘heads down’ core business leading to feelings of rejection and frustration.
This effect can be subtle and unwittingly reinforced by the organization. One compelling example is through incentive misalignments that favor the revenue-generating part of the business, creating situations where the reward structure completely undermines the transformation goal.
These leaders have the rare ability to improve their existing businesses through efficiency, control and incremental change, while also capturing new opportunities where flexibility, autonomy, and experimentation will be paramount.
Bringing it all together
We are living in an era of unprecedented technological change and innovation. But our ways of interpreting and reacting to change is somewhat more predictable.
The ability of the Chess industry to adapt to the digital age suggests that we need to be careful about predicting a similar ‘end game’ scenario for established organizations and industries.
In reality, digital transformation can rejuvenate existing assets and capabilities as a source of growth and competitive advantage.
“The paradigm is not displacement and replacement but connectivity and recombination… Incumbents can use their existing assets, dramatically increase their value, and defend against (or partner with) entrants.”
The chess industry has responded well to digital disruption. Chess.com, which allows players at all levels to play live games against each other, now boasts over 16 million members, by providing an experience for the customer that goes beyond that of merely playing a board game online.
“The biggest thing I have learned through this process is that if you give people tools to organize and express themselves, they will do it in ways you never imagined… the number of communities and sub-communities that have formed has been mindblowing. People making friends. Reuniting with estranged family. Getting married even!”
— Erik Allebest, Founder of Chess.com
Powerful Chess programs are also now easily accessible and have become essential training resources to help players prepare for competition and explore strategy development.
That is what makes a Digital Transformation effort such an exciting journey — despite all of the challenges that come with it, this blend of old and new can produce a compelling new offering.
Organizations that can identify synergies with existing assets, play to their strengths and bridge any capability gaps, while supporting a culture of innovation that can co-exist with their core business, will be best placed to leverage partnership opportunities in their ecosystem.
Finding ways to blend old and new. That is the challenge that awaits us. One that is worth taking some time to think about.