Interview with Viktor Nersesov - digital transformation of businesses

Hello!

I’m Serhii Soloviov, CEO of Solve Marketing.

Today, I’m going to talk to Viktor Nersesov, the founder of amphibian, a digital business transformation company.

We will talk about:

digital transformation of businesses — what it is and why;
peculiarities of working with entrepreneurs during transformation;
how digital transformation saved the client USD 180 thousand per year;
how to determine whether you need digital transformation…

…and much more. So, read to the end!

— I want to start with my favorite question. You’re riding in an elevator with a cool investor or potential client you’d like to work with, and they ask: “So, tell me what you do?”

— I am engaged in digital transformation for business. I create a development strategy, new products, and business models that help generate added value for the company, achieve strategic goals, and reform it from within. The uniqueness of our model is that we do digital transformation by subscription. We don’t sell hours, we don’t sell projects, we don’t sell people — we have a fixed price, monthly or quarterly, which includes everything.

In our understanding, digital transformation is the process of systematically creating and implementing changes to a company’s products and business model to achieve strategic goals. For example, if you simply implement CRM and IRP systems or some kind of dashboard, this will not be a digital transformation in our understanding.

As an example, I would like to give a model of our digital transformation strategy, which consists of seven layers.

The top layer is the leader’s mindset or “Who am I?”.
“What do I do?” — the product and business model.
“How do I do it?” — management culture.
“Who is my team?” — organizational structure.
“What do they do?” — the structure of business processes.
“How do they do it?” — IT infrastructure.
“What is my strategic goal and where do I want to go?” — the result.

We are absolutely convinced that if there is a task to reform a company, it must be done through thinking. Reform can only be done by making the manager interested in creating new products and changing the business model. The model of negative motivation does not work here. No entrepreneur will sign up to be beaten with a stick and told that this is right or wrong. Creating something cool and new that meets their goals — this model works!

— It looks like a big complex product that takes a lot of time to implement. How long does it take to implement these seven layers?

— I don’t believe that digital transformation is a time-bound process. It can be divided into some quarterly or annual goals, it can be divided into subprojects, but it cannot be stopped completely. Let me explain what I mean.

When you start implementing changes in a medium or large business, you focus on something. It can be project management, sales, finance, or the actual creation and launch of a product. But the amount of work and changes is such that this process is actually continuous.

You achieve some tactical goals and move on to a new stage of development. The first results of creating new products and changes in the business model appear in 2-3 months, depending on the company. But I believe that this process should be done systematically.

If you have completed your digital transformation and said: “We’re okay, we’re doing well,” I would compare it to stopping paying salaries. I think this is the most accurate comparison, because salaries and business development are processes that are continuous.

— That is, you define a kind of roadmap for development and priorities together with the business owner. And it turns out that there will always be more work than time to do it or the capabilities of the business team. This is understandable. Who are your team members now?

— Our team consists of:

a project manager;
a business analyst;
a business developer;
integrators;
support managers.

There is also a product manager, which is currently me. We have identified support as a separate business unit whose task is to provide quality customer service. We didn’t want to disturb the project manager, integrators, and analysts, and simple issues were resolved with the help of support.

— Please explain in simple terms: what is digital transformation and who performs it? For example, a marketer is in charge of marketing, but who is in charge of digital transformation? What is it and who is responsible?

— You have a business, usually a medium or large business. It has products and business models: what it sells, how it sells, to whom it sells. Any business model has certain limitations. They usually interfere with the achievement of strategic goals. Most often, our strategic goals are much bigger than the current state of the business, even if it is already quite large.

And there are two ways to deal with a business in this situation. The first option is to endlessly tweak the limitations that already exist. The second option is to build new products and business models. They will have no restrictions that prevent you from achieving your strategic goals, or they will have other constraints that do not prevent you from achieving your goals.

For example, if a project is done manually by complex and expensive specialists, you can scale horizontally — hire 50 more people, train them, and manage them. Or you can create a product that doesn’t need to be maintained by most specialists. Product scaling and team scaling are not interconnected processes.

With such a product, you can achieve strategic goals much faster. Every business has its own goal: efficiency, scaling, and revenue. We first help to find the goal and formulate it, and then give an understanding of what needs to be changed in products and business models.

I don’t quite believe that you can just do everything as usual and grow 10-50-100 times organically. Perhaps if people lived for 200-300 years, it would work, but it doesn’t. Therefore, we need to get rid of restrictions and build something fundamentally new, based on existing experience.

— As I have understood it, this is a very large-scale work that sometimes requires revising many approaches to everything. How often do you have to disassemble everything that exists and then assemble something else from it?

— The answer is quite short — all the time. There are different approaches. There is a variant in which we have products and a business model that already exist, and we just tweak them. And there is an approach where, after an audit, we say: “The way it works is great, but we will create new products, new infrastruc.ure, new processes based on the company’s existing competence”.

The second option is much simpler. You get rid of mental limitations when you come to the owner and say: “Look, we have this approach, this business model, this type of product”.

Quite often, they say that this is not about them, they don’t work like that in this niche, their company doesn’t work like that.

— In fact, my previous question was a lead-in to this question. How do you work with the owner’s resistance, which you have already started to talk about?

— That’s a good question! I’ll start a little bit in advance. I have more than 5 years of experience in the IT field and in implementing changes for business. I started as a classic IT integrator. We implemented automation systems for sales, warehouse, finance, and logistics. Gradually, we scaled up from small businesses to medium, large, and then enterprise. We realized that if you want real change, then, strangely enough, the point is not in the software.

There are always some limitations — in people’s thinking or in a certain perception of themselves. I mostly worked directly with company owners, so I started asking myself: “How can I work with these limitations?”

I was sure that they definitely existed and that they needed to be changed. But you can’t come up and say it “in the forehead” because it will cause aggression and resistance. That’s how I realized that the best way to work through limitations is through positive motivation.

It is worth discussing the directions and goals of development frankly, describing all the positive aspects and risks, and suggesting the creation and development of a new product. This allows you to get rid of certain limitations in the way you think about yourself and your business.

Recently, I was given a very apt analogy. You have a tree, you want to strengthen it, so you graft a branch of another tree. For example, a plum tree to an apple tree. Gradually, it grows and gets stronger, helping this tree to renew and grow. In order to grow, this tree had to be renewed, and if left as it was, it would have dried up.

— Let’s look at your positioning from the outside. I’ll give you a comparison with us, our positioning is that we are a remote marketing department, which means that we fill the need for marketing. Working with us, the client gets, first of all, a marketing manager who takes care of all the headaches of building and implementing a strategy. You say that you are engaged in digital transformation, right?

— Digital transformation.

— From what I hear, you are more like a company that runs a business. It just comes in and says: “Give us the business management and just get your profit”.

I understand that digital transformation is a small part of your business. If we think together now and formulate a capacious definition of the general direction of activity, what will it sound like? And do we need to do it?

— If you put it this way, we are engaged in strategic consulting on a subscription basis. I separate operational processes and development. We are not involved in operations. That is, we do not take the business under external management.

We have an existing business infrastructure, model, and team. On this basis, we are developing a new business unit that will deal with new products and models. A separate infrastructure and organizational structure are being built for it, and other processes are underway. The main task of this unit is to achieve the company’s strategic goals and transform it. That is, to scale changes in the structure and processes of a single unit to the entire company. As you can see, this is not about operational management at all.

— So you are an external strategic development department?

— I believe that this is all part of digital transformation. Our fundamental goal is to change products and business models, and digital tools come next. We don’t deal with websites, branding, or anything else like that. We are about what is inside the company: IT infrastructure, processes, etc.

Usually, there is a perception that a business can transform itself. This happens especially often in big business. They have something like this mindset: “We’re going to hire a great specialist with experience, pay him well, and he will change the whole company for us”.

Unfortunately, it doesn’t work. This specialist will either become part of this corporate culture or leave the company because “something is wrong here”. As a third option, he may try to change something, but this is the exception.

— As an ordinary consumer, I always imagined digital transformation differently. You come to a company that works on paper, implement automation systems for them, and move their sales online. In my mind, that was the end of your work, and the culture, processes, and mindset of the company remained the same. I have to admit that when I read the description of your activities, this is how I imagined everything.

— Replacing “paperwork” with digital methods does not provide long-term and high-quality results for business. There are temporary improvements, the illusion of going digital. But this all happens while maintaining the corporate culture and the mindset of the manager.

I’ll give you a simple case study. The owner has paid for the digital transformation you imagine. But nothing has changed in his mindset, so he tells his employees: “First, bring me everything on paper, and then upload it to the system”. Do you think such a system will work?

— The company will either close or be left without employees. Or digital transformation will be shelved with a signature: “It doesn’t work…”.

— Yes! I have seen from my own experience that only positive motivation works. The question “Why is this being done?” will arise at all levels: from top managers to the last employee. And it is important to convey that this is not just for the sake of “transferring from paper”. Our mission is to change products and business models in the right way.

Transformation is a process of profound change, while “transferring from paper to digital” is digitalization. It is important to understand this difference.

If you have certain processes and transfer them to digital in the way they work, this is not digital transformation, but digitalization. It will not bring long-term qualitative changes in business, but only temporary and quantitative ones.

If you want long-term and qualitative changes, you need to change your products and business model.

— Thank you for explaining the difference. How do you find clients who are ready for change and understand that it is a difficult path?

— I even have a signature joke about this. I always tell my clients that they will first adore me, then hate me, and only in the end will they start to feel normal. This is a normal course of events.

Where do we find clients? Usually it’s direct sales. There have been cases when we came directly from the street, with absolutely no refusals. We just realized that we had to work with this project; we knew what we wanted to give them and felt that our goals coincided. At one time, we had recommendations.

I revised the marketing and sales system for myself. I stopped measuring our effectiveness by leads, clicks, or conversions. Now the main indicator is meetings and the quality of the target audience at them.

In fact, the key to our business is personal communication. We get to know the client and can understand how much the client’s position and vision coincide with ours.

— So you don’t wait for the client to come to you, but look for potential clients who are similar in description?

— Yes, either by recommendation or directly.

There was an interesting story with one of our largest clients ever. I was walking down the street with my business partner. We were discussing that we needed a large client who would share our vision and approaches. I saw an advertising banner on the street and said: “This should be our client!”. My partner said it was a crazy idea.

A little over six months later, we signed a contract. It wasn’t a nice Hollywood story where you come and take what you want. Of course, there were difficulties. But there was an understanding that this was definitely our client in terms of values and vision.

It is very cool when you understand what kind of client you want. One way or another, your marketing works to get this client. You can come to them yourself, or you can make them come to you. But in any case, you understand who you want to work with.

— Let’s move on to the cases. Tell us about a project you are proud of with figures.

— Okay, let’s go with the numbers, but without the brand. We were doing a digital transformation of project management for a large company. It is a full-cycle development company: they come up with a concept, look for land, build, renovate, sell, and manage the property after it is commissioned. Usually, such companies focus on one thing.

Our task was to completely redesign the approach to the project and its management. We did this and potentially saved the client about $180 thousand a year. It was a simple cost optimization.

But I believe that cost savings are not the key achievement. We have built a fundamentally new culture!

I believe that the new culture that they are now maintaining is much more important than potential savings in a year or two. Because this culture allows you to change the company from within. Project managers are interested in bringing the rest of the team into the new culture. In my opinion, this is much cooler and more important for the long-term development of the business.

— Do you think that in this situation, adopting a new culture is more important than saving money?

— Yes. Saving money will not give you long-term development of the company. This can be achieved through the seed that is planted in the minds of employees during a culture change. They are part of the corporate culture, and they are the ones who start to broadcast and scale it. Of course, this process needs to be supported and stimulated, because it can stop.

But I don’t believe that this culture change can happen for money or with a few brilliant specialists. It can only change through long-term, step-by-step, daily work. You can write beautiful documents with business processes and unique products, but if you don’t implement them on a daily basis, they will remain on paper.

— Okay, let’s get back to where it all starts — communication with the owner. What do you think prevents them from seeing the whole picture and developing?

— “Limits” is a better word. They are limited by their perception of themselves and their business. I have noticed that the bigger the company becomes, the less the owners associate themselves with it. But the bottom line is that any business is always you.

You wouldn’t hire a person who you frankly dislike. It’s the same with partners. That is, you involve people you are similar to and like in your business. Even if the company is huge, everything that happens in it is a consequence of your vision of yourself and your business.

I’m not saying that this is a bad thing. In the case of large and medium-sized businesses, it gives a certain result. But if you do everything exactly the same way you do it today for several years, the company will start to decline. From a management perspective, you need to move to a growth stage: startup, innovation, new products, hypotheses.

This way, you can restart the company’s development, rather than waiting for it to go down.

— What is the cost of your services?

— I have an ironclad rule: no offer before the brief. If you are interested in the price, we will be happy to talk and share our values. Only then we can name the price. Naming the price right away doesn’t work because you don’t understand the person’s needs.

— And if, after the brief and the price, the client says: “It’s too expensive!” — what do you do in such cases?

— We make a large complex product, and we are often compared to CRM integrators, consulting firms, etc. In such cases, I suggest taking the prices for their services, adding them up, and then dividing by the month of work and comparing what the cost is.

I also pay attention to the value of money for a particular business. For example, a budget of $2 million will be felt differently for businesses with a capitalization of $100 million and $10 million.

And of course, I try to find out whether the client understands the value of our product and is ready for long-term work, 3-5 years. In addition to strategic issues, we are ready to close some management issues.

It is important to understand that sometimes there are just not your clients, and this is absolutely normal. Sometimes it’s better to let a person go rather than prove your value and importance to them.

— Do you often have to turn down clients?

— Let’s just say that for a certain period of time, we mostly refused clients.

— Why?

— Sometimes we realized that the client was not ready for changes, risks, and long-term work. He had a scheme in his head: he gives money, everything is done quickly in 2-3 months, and the business takes off. Sometimes the owner thought that our services were needed to support the business, not to develop it. That’s why he didn’t consider it a priority spending area.

It’s just that clients are either yours or not. It’s normal. I think that in your field, there are also cases when you realize that you won’t be able to work with this client.

— That’s exactly right. We say “no” when we realize that our cultures and values do not match. Building and integrating a marketing department into the business also takes time, especially if the company has existed for 4-6 years without systematic marketing, it is impossible to launch all processes in 2-3 months. It’s an evolutionary process, so I understand what you’re saying very well.

If we are completely different, it’s okay, because each client has their own artist. We try to tell the client as politely as possible and say “goodbye” without any offense.

Let me ask you the last question for today. How can I become your client? At what stage should I contact you?

— First of all, there should be one of three requests: strategic project development, digital transformation, or digitalization. Mostly, we are approached by medium and large businesses — their owners or top management. It is important to note that companies do not turn to us in a state of crisis, but when everything is fine, they want to accelerate their development.

Of course, a person must be ready for change and risk. I always honestly say that digital transformation is a complex long-term process that will have crises. These transformational crises will be understandable and artificial.

Usually, crises in business are very unpredictable and incomprehensible. That is why we offer our clients to go through these problems with us, to create them artificially, rather than waiting for years. This way will help the company to enter a new vector of development.

Last but not least, the budget is important. Businesses should be ready to systematically budget for transformation over the years. This is where the subscription demonstrates its advantages: the cost of the service is stable and clear.

To summarize, businesses need to have a budget, a sustainable business model, and a willingness to take risks, change, and develop. And then we can talk.

— Now let me focus on the question a little more. I’m reading the interview and I want to understand whether I can be your client. What points do I have to answer?

— Three short points:

you are a business owner or top manager;
you have a company of 30-50 people with a sustainable business model;
there is a request for long-term changes, strategy or just IT infrastructure, digitization of processes.