Digital “Transformation” Needs to Have a Fast, Painful Death
While the term means well, it’s causing more harm than good… for everyone.
I get it.
“Digital Transformation” is catchy. It means well.
It’s an easy-to-use term like “The great resignation.” It’s something all of us can understand at a quick glance.
I mean, who wouldn’t agree with: “Your company needs to use technology more to increase the impact on your business and customers.”
Here’s a quick question for you:
Who does Digital Transformation NOT apply to? Is there any organization, entity, or individual that would benefit from staying AWAY from digital technologies? Is there any business case for not digitally transforming?
The term “Digital Transformation” is more of a catch-all as it is catchy. And that’s the issue: It doesn’t mean anything because it applies to everyone.
Remember GE’s famous “DIGITAL TRANSFORMATION” campaign:
As recently as 2017, General Electric (GE) had been touted as an example of how established companies could preemptively transform their businesses digitally, without waiting to be forced to do so by their competition.
But in 2018, the wheels appeared to fall off GE's transformation, amid a crisis that included leadership changes, dividend cuts, credit downgrades, and a stock price crash. The company announced that it would sell GE Digital, the newly built-up organization at the heart of its celebrated transformation.
The failure was so epic, it became a case study used by universities around the world. And their peers followed suit.
GE, Ford and other major players poured $1.3 trillion into transformation initiatives, 70% of which — or $900 billion — was wasted on failed programs. The biggest reason: failure to effectively communicate their goals, strategy, purpose and outlook with their employees.
Ah, now we’re getting somewhere.
Is Digital Transformation a Real Thing, or Is it Just Another Catchy Industry Term?
I remember having a conversation one day with a colleague [and friend] who asked, “What is Digital Transformation, really?"
My response was, “There are many views and thoughts around it, but I think it’s a combination of changing the way an organization (the leaders and employees) thinks about enabling its business via digital technologies and how they use those technologies to improve the business processes, business value (like driving revenue), and delight (or wow) their consumers.” (I will be talking about this a bit more in a book I am currently working on.)
I argue that the concept of Digital Transformation has been used as a catchy industry term to get organizations bought into changing how they work within a digital world (kind of as a magic bullet to get an organization where it needs to be). However, I feel it’s a false statement, and many organizations are not transforming.
At this point, every time I hear “Digital Transformation,” it causes the same response as someone scratching a chalkboard!
Digital and Transformation are too big for each other
Have you ever really thought about the two words that comprise “Digital Transformation”?
Digital used to refer to the actual technology and how we use it. It’s fairly straightforward. But, Digital means something bigger. It means technology + customer experience + marketing + business models, etc.etc.. I can go and on.
So right off the bat, “Digital” is a catch-all term.
Then we get to the term transformation. Transformation essentially means that the entire company is changing how they operate from the ground up. They are transforming from one thing to another, just like in our favorite Transformer movies.
It’s no wonder we question the term often. What does it actually mean?
Is Digital Transformation a new thing or just a new term?
The truth is, we’ve been “digitally transforming” for decades.
Most organizations are already digital (in one way or another) and not going through a real digital transformation themselves, but actually evolving instead.
Organizations have been delivering digital capabilities for decades, but in the past several years, they have started calling it Digital Transformation (i.e., web pages, back-office tech, cloud solutions, MarTech capabilities, and so on).
With that said, now that we interact more with smartphones, IoT, web pages, mobile apps, and the instant gratification consumers want via various digital capabilities, the industry is saying we need to transform our digital prowess.
In most organizations, technology has been either driving or empowering the ability to do the job, deliver customer needs, and/or be more efficient, where our technologies and capabilities are evolving almost on a daily basis, and we have to evolve with them.
It’s all about the business, not the technology
It doesn’t matter if we are looking at a CPG organization (‘How are we engaging our consumers to drive better awareness and sales?’), a QSR organization (‘How are we putting solutions in place that let the restaurant operate faster?’), a Restaurant (‘How are we enabling our staff to serve more efficiently and operate more efficiently?’), Health Providers (‘How are we better leveraging technology to improve our patients’ medical outcomes?’), Health Insurance (‘How are we leveraging technologies to better engage our members so we can help then navigate their health outcomes better with the coverage they have?’), Auto Insurance (‘How are we leveraging technologies to improve and expedite the claims process?’), Automotive (‘How are we making the purchasing process smoother, faster, and painless?’), Entertainment (‘How can we leverage technology to create more exciting movies or rides?’), Airlines (‘How are we providing a more streamlined experience to keep our customers with us?’), Pharmaceutical (‘How are we providing a better delivery process?’) or Government (‘How are we able to make our employees more efficient to reduce costs and improve throughput?’). All these industries have the same desire—leverage technology to better engage and delight their consumers, all while reducing their operating costs and increasing sales.
The concept of Digital Transformation is focused not on ‘How do we deliver better digital capabilities or solutions?’ but more around how to get an organization to look at ‘How can we better leverage digital solutions (or technologies) to improve [or empower] the business to increase PNL, improve operating efficiencies (reduce their operating costs), improve customer experience, and/or improve the employee experience?’ as they evolve what they have today to do better tomorrow.
If an organization wants to go from a non-digital business to a digital business, that may be closer to an actual digital transformation! For example, if a traditional company focuses on print and then shifts to digital, that could be a transformation. However, if a company is going from an on-premise solution to a cloud solution, I’ve heard many call that a transformation, but is it really?
I know I’m going to get some pushback for saying this, but I don’t think that is a transformation and is more an evolution of the technical solution onto a new platform (sometimes even tech debt). Maybe it’s transforming the technology or the agility of the technology, but to me, that’s just an improvement/enhancement of the old (an evolution).
Transformation or evolution? Most likely, the latter
From what I’ve experienced in the many digital engagements I’ve been a part of, what most call Digital Transformation is false! Some say an organization might have the intent to actually transform digitally, but they end up failing because of the scale or lack of organizational support.
The intent of a company’s digital transformation often does not match the desired outcome.
I argue that, in today's world, almost every organization is leveraging digital technology in one way or another to run business processes, engage customers, manage customers, or sell to their consumers—so saying you are transforming that organization is not really a true statement. Instead, you are improving [or evolving] technologies, enhancing experiences, innovating new solutions, or improving business processes.
As an organization looks to modernize and become more future-proof, it needs to really evolve its organizational mindset, its processes, and/or its products to a new level of offerings, capabilities, and/or engagements (more on this in my next article “The Evolution of Digital Business”).
To say an organization needs to transform almost implies that the organization is not leveraging its technological capabilities (or solutions) appropriately, and it needs to be scrapped and rebuilt. If that were truly the case, the organization would probably already be out of business or is on the verge of going out of business.
Again, organizations are really not transforming their digital capabilities but evolving them to a higher level of engagement with a more Human-Centered approach, improving back-office capabilities, enhancing operational needs, and expanding on them to scale and perform better.
Transformation is a mindset, not a tactic.
Some organizations may scrap a capability/solution to put in a net new capability; however, I would argue that those are usually just improvements of the old or innovating on what wasn’t successful.
Let’s use my favorite example of The Home Depot—this is one of my favorite stores (I sometimes think my wife hates when I go there because I always come home with some new toys or a new house project).
The Home Depot has put together one of the most seamless and streamlined experiences of their digital engagement with their customers. It doesn’t matter if you engage with them via the web, mobile app, with a person in the store, or even on the phone—you are able to get an exact location of an item in the store and know if it’s in stock (and if it’s not, you can find out what other stores have it and where it’s located in those stores).
You are able to order online and pick up your item within hours at the store. You are able to return an item without your receipt because it's stored digitally and easily returnable (by you or an employee at the store). And many other customer-focused capabilities to make it easier to shop with them, which significantly drives customer retention.
At the same time, their systems are connected to allow employees to do their jobs better in the aisle (to find products), at the call center (empowering them to make decisions and support customers), in the back office (to manage/order inventory and across their partner/external integration efforts, supplier integration, or service provider offerings).
The main point is that all of these great experiences The Home Depot delivers were not due to a Digital Transformation—it was really more an evolution of their back-end technologies to better interconnect their corporate office with their store, enhancements to their information management system to expand and improve their ability to find the information they need, expanding on their CRM to integrate a MarTech stack to allow personalization and engage their customers, and iterating through new capabilities that were (and still are being) created or expanded on.
None of the things The Home Depot delivered happened overnight, and they really didn’t transform anything. They took the technologies they had available, modernized them to be more agile (or adaptable), expanded on them, and created some new capabilities based on consumer demand (which was also a continuous evolution of failures until they were successful).
With that said, they had to transform the organizational mindset to think more digitally around their capabilities, which may have been the only real transformative effort they put forth.
Having technology doesn’t mean you are digital
Organizations really need to get away from thinking that having some technology makes them digital, and they need to focus on empowering the business with digital technologies to provide the right experiences for their customers and their employees, regardless of channel (either in a digital channel or a physical channel).
You need to look closely at your business value, leverage research to understand the demand/need (within your business, your direct competitors, and indirect competitors), and evolve experiences (and technologies) that deliver on their jobs with ease (maybe even “wow” the consumer or employees). If that is appropriately executed, then operating cost reduction and sales revenue should go up (as long as the consumer demand is there for the business or products).
The only problem I’ve seen that can cause this to fail are organizations not knowing how to get out of their own way (which I talk about more in my future book “Being Digital Not Doing Digital”).
With that in mind, I have five key takeaways I think should be considered:
Not everyone can digitally transform. You may need to evolve instead. For example, newspaper companies transforming their company to an all-digital solution is transformation. On the other hand, McDonald’s building a mobile app and a digital drive-through to provide a better way to engage customers is clearly not a digital transformation.
Make sure to align the right executive vision and support to help drive the digital vision forward. A digital strategy that is defined from the middle of the organization with little (or no) support (or buy-in) from all of the leaders above will ultimately fail or get into what I call a digital tailspin. To do this appropriately, all leaders need to understand what their organizational vision is, what parts of the business vision need to be digital, re-evaluate/understand what all of the digital business needs are (not just a few parts), and then define the strategy from there. (I will be talking more about this in my future book, “Being Digital Not Doing Digital.”) However, I suggest bringing in someone who knows how to enlighten C-level executives to understand the need for digital within the organization—such as Salim Ismail, who created the Exponential Organization concept and helps leaders understand digital/tech disruption strategies.
Understand your customer needs, but at the same time, try and understand their unspoken needs (what they don’t think they need yet). A good example of this would be Steve Jobs' efforts with Apple and Elon Musk's efforts with Tesla.
Understand your business needs, what the gaps are, what pains your employees have, and how you can improve/fix them (to fill the gaps).
Understand your current capabilities and their limitations and gaps, and then figure out how you can better the experiences.
Don’t just understand your current capabilities. If you really want to drive forward, you need to innovate around those capabilities—as Salim Ismail stated in his Ted Talk and book—understand what opportunities you can create from existing capabilities and identify needs that can really differentiate. For example, if Yellow Cab had originally thought of a way to take their current cab booking solution and digitize it so consumers could hail/schedule a cab in advance, Uber may have never become so successful (or even come to fruition).
I know this post was lengthy and maybe controversial to some; However, the reality is, digital transformation is an evolution and not an all-at-once type of effort. It’s a mindset, not a tactic! And most importantly, everyone from the janitor to the CEO needs to be all-in.