Why is cultural change essential for a digital transformation? In her ELEVATE session, Anusha Dharmalingam (Executive Director and Senior Architect at Athenahealth) will discuss how cultural change is essential for digital transformation. She shares the importance of culture of a company when it goes through digital transformation, what “being innovative” means. She will reveal her ideas on how to build effective teams excited about transformation journey.
Anusha Dharmalingam emphasizes the need for a culture of innovation within companies and provides tips on how to foster such a culture. She explains that innovation is about putting creative ideas into practice and highlights the importance of desirability, feasibility, and viability in the innovation process.
Anusha Dharmalingam: Hope you can all see the screen and can hear me fine. So here I am to talk about what does being innovative mean in the digital transformation. So a few words about me… Thank you for the feedback. It’s really hard to know if everybody can hear me. So a few words about me. I’ve been in the industry for 23 years, primarily in the technology industry. So today I play a role of an executive director and a senior architect at Athena Health. So I have played different roles, as you can see over the pie chat, like a software engineer, a development manager, program manager, and architect. I have been in the consulting, banking, and high-tech, and healthcare industries. My expertise is in the cloud technologies, and I’m really very passionate about women leadership and especially in the technical leadership. I’ve led digital transformation projects over at various companies at different roles.
On a personal note, I am a mother of two boys and I love to spend time with them and to bike when I can. So with that, let’s move on to our topic for today.
So I would like to start this presentation with a small story, a story that would ground us all on the essence of innovation. At the same time, give us the significance on why the culture of innovation is important for the long-term success of a company. It’s a story about a Stanford graduate back in 1990. He was a computer science graduate who started a company named Pure Storage… Pure Software, sorry. It was a company that built diagnostic software for unique based applications. Back in those days in 1990, that was very rare. So the company gained quick in popularity and had revenue that doubled year over year. So finally they sold the company in 1996 to National Software and they were very successful at it.
So this founder of the company had a moment in his life which would change the movie watching experience for all of us down the line. So the incident goes like this. He basically rented a videocassette from Blockbuster for a movie named Apollo 13. Despite his wife’s continuous reminder to return the cassette, he actually misplaced it and returned six weeks late. This incurred him about $40 of late fee. He had a very embarrassing experience on this that he decided not to even share it with his wife, and was constantly thinking about this on why did he have to pay a late fee for just misplacing his video rental. So he misplaced it and he was not very happy about it. So later when he went to the gym, he realized that the gym’s model of working was far better than what he had experienced while renting his movie.
So in the gym, all he had to do was pay $30 per month and there was no limits on number of workouts that he could do on a monthly basis, and there was no late fee concept. So he wondered, what if he applied the same concept, a concept of a monthly rental for the movie rental business? And that’s exactly what he did. After selling the Pure Software to National Software, he started a company which we all cherish today as Netflix. So in 1997, Reed Hastings, along with Marc Randolph, started Netflix as a movie DVD rental that would be delivered to your doorstep. So as customers, all you had to do was log into the website, choose your movies that you would like to watch, and the movies would be delivered to you at your doorstep for no late fees, but for a monthly subscription fee. So this whole business model took a while to gain popularity, but around 2000 they started making profit.
So in 2000s they went to Blockbuster, at that time a $4 billion company with 6,000 brick and mortar stores, went to them and said that, “Hey, could we partner?” Could you buy us by taking 49.5% of our share so that we could become a digital arm for you? But Blockbuster rejected that offer, and so Netflix went back to the DVD rental business. But Netflix did not stop there. They observed the digital era that was picking up in 2000s, so Hastings went to his board and said that we are in a pivotal point for our company. We either choose to stick to what we have been doing, or we embrace the digital transformation that is going on in the industry and start moving on to the steaming services business. Very reluctant, the board slowly accepted Hastings proposal and they invested on that proposal. And thereby in 2007, Netflix started their streaming services.
And from then on we all know what happened. Netflix thrived and thrived. And they did not just stop there. That is not the only reason they thrived. They actually build the culture of innovation within their company and they continue to innovate on a day-to-day basis. Some of their innovations that we are all familiar of are their recommendation algorithm, which suggests movies for us when we watch Netflix, or the ability of being able to stream out of Netflix on either your movies or on your phones or on your DVD players when those things existed, on your iPad, whatever. In all possible devices. So they worked with hardware vendors to make sure that that is possible. And apart from that, Netflix also started producing their original content. So we have their series, their movies, and whatnot today. So with all these things, they have now made their name as a common household name, not just across the United States but across the world.
While along the same lines, Blockbuster on the other side stuck to their original model. They did not adapt to any transformation that was happening in the world and they had filed bankruptcy in 2010, and they do not exist anymore. So these two companies gives us a stark contrast of the power of innovation, the transformation that it could bring in any long-lasting business. So this clearly sets us on why the topic of discussion today is super important. So with that, let’s start talking about… There are two things I wanted to cover in this whole session. One is to understand deeply what does innovation mean. And number two, to give you all some tips based on my experience on how to build a culture of innovation at your workplace.
So when you talk about innovation, it has a slightly different meaning than creativity. Creativity is about an idea, right? You have an idea on how to do something. Innovation is about putting that to practice. It is about making change to something that’s already working, something that’s already established. You’re making a change to that. It does have some few characteristics that are being shown here, the desirability. So for you to do an innovation, that should be a need, that should be a customer demand. And this demand can be implicit or explicit. Sometimes the demands are implicit. That might not be an explicit need for that, but it is somewhere there. There’s an indirect need for it. So that is the desirability. And the next important thing is feasibility. You can have whatever desires you want and you can come up with ideas on how to implement the desire, but that implementation should be feasible. It should be on top of your current operational capabilities.
You can’t be a company doing a movie dental business and want to suddenly provide cargo for airplane, or something of that sort. It should be aligned to your business. And the third important thing is the viability. The cost for buying that product, or the cost for building it should make some business sense. It should be possible, it should mean something, or it should be delivered in a medium that is possible to be consumed. So those are the viability things. So when we innovate, it is important that it has characteristics of all these three things and it intersects to meet at a sweet spot, which will give us a successful innovation. So with that, let’s slowly talk about why do we innovate. What better way to explain that than the story we just talked about, that clearly showed the contrast of a company that innovated and the company that stuck back and what happened.
But all said, the main thing on why we innovate is to meet our customer needs. So we need to deeply understand our customers, empathize on what they actually would need, and build products or solutions for that. It also helps us to have a competitive advantage in the market. Of course, it’s for growth, for us to make money and reduce the cost of how we are doing things. And overall, it provides adaptability. You’re constantly in the lookout of what is happening in the industry in the world, and you’re able to adapt to what it is. And no one said that innovation is easy and it can be easily done. It really involves some thought process and some investment to kind of get this going and to keep it up and keep it running in your workplace and the company.
There are different types of innovation that could happen. Let’s start from the right corner over here. The radical innovation. This is the one which I was talking about earlier about implicit demand. So when smartphone came into the industry, none of us knew that we needed a phone which could do all in all everything, where we can watch movie and listen to music. We didn’t know that we needed it, but it did come. So somebody radicalized and they introduced it into market and we soon adapted to it. So that’s a radical innovation. A disruptive innovation is in an existence market. So radical innovation creates a new market, a disruptive innovation is on an existing market, a totally different way of doing business. Say for an example, an Airbnb. We already had a hoteling industry and a lot of hotels, but Airbnb came up with a new model which would disrupt that and do something different.
Same with Squire. We all knew how to use credit cards, but to enable to swipe credit cards on a mom-and-pop shop using just a smartphone, that was a disruptive innovation. If you move towards the left, the architectural innovations are one where in an existing product, in existing market, whatever you’re doing, you’re doing a significant improvement. Doing something drastically different that would strengthen your space in the market, like the GE’s Ecomagination products. These are products that already existed, but to adapt to the climate change and being concerned on the environment, GE came up with these new set of products that made them leaders in those kind of products. Incremental innovations are one which I’m sure most of the companies are doing on a day-to-day basis. For example, the new versions of Apple iOS versions, which comes with newer features, or even the Netflix recommendation algorithms that keeps changing constantly. I’m sure all of us are continuously evolving our products that we develop, and those are all part of incremental innovations.
So at a different point of time, the companies would play a different role in each of these quadrants. And like already mentioned, innovation is not a one-time thing. It’s very similar to the agile methodology that is being recommended for a development process. It’s very similar to that, but it does have its own differences. So as you can see, the cycle starts here, right? You challenge the status code that you are in today. You say that you want to move away from whatever you have and you want to do something different. That’s where the creativity idea sparks up. You take the idea and you build, what we call as a prototype, or a minimum viable product, and that’s when the cycle starts.
You take the product and then you apply it to your user base and see if the product has its feasibility and is it viable to build it. And once it is done, you measure the metrics out of it. It is always a data-driven decision. So you measure saying that how much impact did it make in terms of the users, in terms of the revenue that it generates, in terms of the metrics that it provides you, performance. Whatever makes sense to that particular idea, you want to evaluate those metrics. And if those metrics are great, you would want to continue invest more on that and start to build that as a product and evolve it again and again. What’s very different about innovation cycle is sometimes it could so happen that these metrics clearly indicate that the idea that you came up with does not work. It’s not going to work. It’s either not viable or it’s not feasible, or it is not exactly meeting the demand that your customer wanted.
So in those cases, you happily pivot. You celebrate failure. What it means is you basically learn from what happened. You learn from what was done and how was it different than what was asked, or how was it different in terms of the cause that involved and whatnot. So these things are compiled and that is what is applied in your next set of learning. So this cycle continues and this is what is the innovation cycle. And this is very important that it continues on and on, and it does not stop. To have such an environment where these innovation cycles continue, you need to make it a part of your culture. It does not happen like one-offs, it has to be part of the company’s culture to do that.
For that, I would like to quote this from Grace Hopper, which totally resonates on this theme, “The most dangerous phase in the language is, We have always done it this way.” If you all stick to saying that we have always done it this way, then there is no way we are going to innovate. We have to challenge the status quo, that’s the first step. So you need mechanisms within your company or within your group, whatever level you can operate in, to promote those creativity ideas. And how do you do that? You do that by creating a conscious environment where those ideas prop up.
So you need to have forums where you can listen to your customers, where you bring in all people from different levels, from different groups all together, and democratize the idea generation process. You talk about the problem that your customer had presented, or you talk about the problem that the company is facing and democratize the ideas. So create an innovation lab. Innovation lab is where again, you are throwing a problem space and you are having people come up with ideas, and you pick few ideas that might work and you try it out. That’s pretty much it.
In all these environments, the hierarchy of your company structure is super important. It has to be flat, but it has to be strong. It has to be flat in the sense that the participants of the innovation group or the members or the employees should feel very safe, courageous, and should not worry about what would happen and things like that. So it should be such a safe environment for them. We need to enable the environment to be experimental, but it should be highly disciplined. When I say highly disciplined, it means that you should have proper focus on the scope of what you’re trying to achieve and the metrics that will be measured as part of that.
It’s quite successful in the companies that I’ve worked on when the reward structure is very much aligned to these innovation impacts that you make. So it naturally encourages and motivates the members when your reward structure is aligned to that. And also, it’s important that we provide the training and the tools required, especially in the technology area, so they can learn the new technologies. Like now gen AI is a thing and everybody would like to learn it, so provide the training for that. And always encourage collaboration. So it is not one kind of role, it has to be collaborative across multiple teams.
The last, it’s important to learn from these failures and treat them as opportunities, and also very important to have some fun when you do all these things. So with that, I would like to leave this whole session with the simple innovation framework that you all remember, especially on this winter month of December, FROST. So let’s remember this FROST. FROST is nothing but being focused, so the innovation group should be focused on what they’re trying to do. It should be regular. It should not be like, “Oh, I have a escalation today. I have an emergency today, so I cannot do it.” It should happen at a regular cadence. It can be once a week or once a release or once a month, whatever makes sense for your organization. It has to be on a regular cadence.
It has to be open, like it said. You do not have to specify this is how we should be done, it’s more open. Just take the problem, the ideas flow, and you will try and implement it. Safe. Everyone should feel safe, and people should be ready to accept their mistakes and learn from it. They should be ready to take risks. It’s a trusting environment. Trust each other kind of an environment.
Angie Chang: [Inaudible 00:18:11] sorry.
Anusha Dharmalingam: The most important thing, the output of this whole thing should be tangible. It should be tangible and it should be put to use for building your product.
Angie Chang: Thank you.
Anusha Dharmalingam: I want leave with this note, that remember FROST. So you can build an innovation culture within your organization if you adopt these few techniques within the group.
Angie Chang: Thank you so much for sharing this-
Anusha Dharmalingam: And to conclude the session-
Angie Chang: We are out of time.
Anusha Dharmalingam: Thank you so much for listening to me. And this is my LinkedIn, feel free to reach out to me and I will share the-
Angie Chang: Thank you. Thank you so much.