Why Digital Transformations Fail

Some companies understand just how serious the threat of digital disruption is and some struggle to take it seriously. Thomas Siebel – the founder of Siebel Systems – has written, “When I see CEOs who may be experimenting here and there with AI or the cloud, I tell them that’s not enough. It’s not about shiny objects. Tinkering is insufficient”.

My advice is that they should be talking about this all the time, with their boards, in the C-suite – and mobilising the entire company. The threat is existential. For boards, if this isn’t on your agenda, then you’ve got the wrong agenda.

If your CEO isn’t talking about how to ensure the survival of the enterprise amid digital disruption, well, maybe you’ve got the wrong person in the job. This may sound extreme, but it’s not.”

More darkly, John Chambers, of Cisco Systems, predicts that 40 percent of today’s businesses will fail in the next ten years; 70 percent will attempt to transform themselves digitally, but only 30 percent will succeed. “If I am not making you sweat,” he told an executive audience, “I should be”. (Julie Bort, “Retiring Cisco CEO delivers dire prediction: 40 percent of companies will be dead in 10 years,” Business Insider, June 2015, businessinsider.com. )

It’s increasingly clear that we’re in the middle of a highly disruptive “extinction” event. Many enterprises that fail to transform themselves will disappear.

These, predictions are a couple of years old now, and yet, in the face of such a powerful existential threat, it’s becoming clear that many, if not most, digital transformations either fail to deliver on their targets – or they fail altogether.

Why ?

Well, I suppose the easiest answer is that most of them are done badly. But even those done well have varying degrees of success.

But why should that be so ? Nascent markets certainly concentrate rogue practitioners but I think the reason is a bit more complex than that.

Digital transformation is about sweeping change. It changes everything about how products are designed, manufactured, sold, delivered, and serviced – and it forces CEOs to rethink how companies execute, with new business processes, management practices, and information systems, as well as everything about the nature of customer relationships.

Digital disruption reaches down into the very heart of a organisation. Right down to individual muscles and sinews. And adapting to it in order to survive is just not as simple as changing your software or hiring a social media team.

Real digital transformation is about breaking down barriers, removing the constraints imposed by outdated logic, and leveraging technology to create new revenue streams, drive down costs, and enhance the user experience.

Like an athlete going through rigorous training, successful digital transformation begins with a series of small changes that accumulate until the organisation can cope with bigger demands. When training – or transformation – is finished, neither the athlete nor the company will behave, look, or move the way it did at the start.

Digital transformations are about responding constructively to the effects of digital technologies (and a “digital” way of thinking). They are not about buying shiny new things or elegant new software or putting everything in the “cloud”.

Digital transformations fail because they usually don’t go far enough or deep enough – and because the extent of the threat is not taken seriously. And they often fail because – more often than not – the wrong person is in charge.

The leadership of a digital transformation belongs with the CEO but, because the transformation touches everything, from culture to technology to supply chains to business models and forward strategy, its management belongs it what is probably a new role. You might call this person your Chief Digital Officer – it may not matter – but legacy roles probably won’t do.

What matters most is that you don’t under-estimate the threat being posed nor the scope of the necessary response.

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