There are generally four types of digital transformation: The most common is process transformation. He’s the easiest and easiest type because he’s the least unknown. The digital transformation can also be associated with a business model. Netflix was a DVD mail-order company before evolving into the Software-as-a-Service (SaaS) company it is today, offering video-on-demand under license. There is also a transformation of the business area, the more difficult of the four. It’s a place where companies can discover the blue basin and pierce their current red ocean. Schneider Electric uses big data, the Industrial Internet of Things (IIoT), and artificial intelligence to provide its customers with predictive maintenance information to improve the overall transparency and reliability of service management and the life of the plant. The last one is organizational/cultural transformation, it’s about putting people at the center of every change.
According to reports from Harvard Business Review, McKinsey, EY, and others, up to 70-80% of digital transformation and innovation programs have not delivered the expected benefits and results. But when it comes to real innovation, a 10-20% success rate is pretty high considering it took Thomas Edison 10,000 experiments to invest in the world’s first lightbulb. The success rate was 0.01%. When he didn’t like his misconceptions, Thomas was disrespectful once and said, “I’ve never failed 10,000 times – I’ve managed to find 10,000 ways that don’t work.”
I was recently asked to highlight the top causes of digital transformation failure in a business forum with over 100 Malaysian entrepreneurs. Having demonstrated my experience leading and collaborating with others on various organizational changes with varying degrees of success, I have identified five key areas that support and sustain the fate of the program.
Ask the wrong questions
If you start in the wrong place, you end up in the wrong place.
“How can I increase my income? “
“How can I sell and resell my products and services? “
Customers don’t care about your income and get frustrated when you bombard them with irrelevant information. Some companies solve the customer’s problem. A better place to start is to ask these questions again and put yourself in their shoes. Why would someone buy your product and pay you?
It’s not my job
Transformation is an evolutionary journey. To make it sustainable, a top-down and bottom-up endpoint is required within an organization. Everyone has to be on the same page from top to bottom, speaking the same language. There are several ways to introduce and structure a digital function within an organization and you can do this internally by centralizing or decentralizing and layering the function and/or externally. However, companies that assume responsibility for change from an isolated team without having the path of change are at great risk.
A destructive culture of innovation
The quickest way to kill any kind of creativity and innovation in a company is to blame and blame. Instead, companies need to focus on creating a culture where people want to question the status quo because it’s the right thing to do, they are psychologically confident they have a voice and something new. Not only do companies have to fail and encourage failure, but we also have to celebrate and reward people who try. Failure is part of the discovery and a way forward. Imagine Thomas Edison being reprimanded for his previous experience.
In a meeting convened by Netflix CEO Reed Hastings, he shared his concern with his team that the success rate was too high. The cancellation rate of shows should be higher if you run the risk of catching up on new shows and content. James Quincey urged his managers to despise the stigma of the failed “New Coca-Cola” campaign that plagued the company for more than three decades. “If we don’t make mistakes, we don’t make any efforts.”
Lack of clarity and metrics
FOMO, or fear of failure, often occurs when companies pass the test of their competitors. “Our competitors are implementing a new CRM, ERP, a new loyalty program, let’s review it and create our own.” Instead, I think companies should think about why they want to change, what their purpose is to transform. Once they know why they can start thinking about the ecosystem, hardware, and software they need to support change (how) and what to do. Never do it the other way. It is also important for organizations to scientifically monitor their effects and test their assumptions. With a better digital experience, a cohort of more loyal customers, and more money to spend with us, how do I set the metrics to prove my guess? More importantly, how do I formulate my hypothesis with the least amount of time, money, and resources to scale my work?
Lack of innovation, data, people, and geopolitical representation at the top.
The fifth aspect that is sometimes missing is related to the transparency and alignment mentioned above. Innovation, data, people, and geopolitical risks don’t have to be hidden under IT, human resources (or people and culture), or compliance. Today they are all interconnected and need to work together. As the number of connected devices grows, companies need to evolve, manage cybersecurity risks and train their employees. To ensure the transition of our workforce into the post-pandemic world, we need a more mobile and digital workforce. Companies like EY are moving their 300,000 employees around the world by offering badges, democratizing training and learning, for example by offering a free technology MBA in partnership with e-learning platforms such as Udemy and Hult University.
The average life of the companies listed in the Standard and Poor 500 was 61 years earlier. Today he is about 18 years old. By 2027, 3 out of 4 companies are expected to disappear from the list. I think we should stop seeing digital transformation as a countermeasure to interference and focus on how we can use technology to create digital twins to power our analog business. Digital transformation is not an isolated case. It is not a person’s job.