Digital Transformation Hub

Aug 4 6 mins

Busting the Myths of Digital Transformation

Busting the Myths of Digital Transformation
Photo by Scott Graham on Unsplash

Digital Transformation is getting the worldwide attention it deserves.  Executives in every industry and country are seeing opportunities to improve their businesses and sensing threats if they don’t.  Although this attention is spurring action, it also comes with plenty of bad information and questionable advice.  Many leaders, guided by pre-digital assumptions or listening to slick, but less-than-thoughtful, “experts,” are buying into dangerous myths.  These myths can blur executives’ strategic vision and promote implementation approaches that don’t work.

What are these myths?  We have been studying digital transformation for ten years – long before digital transformation became a “thing.”  We have researched hundreds of companies and published a book that helped shape the last five years of conversation on the topic.  We’ve seen these myths and the harm they can do.  The seemingly simple solutions they offer can lead to dangerous consequences.  Here are seven of the most common myths we’ve heard.

Myth 1: Digital transformation is a technical challenge.  

This is dangerous because it feels so true.  Our findings are very different. Many companies are adopting many new technologies, but few are doing it well.  Digital Masters, the best companies we identified at digital transformation, excel at two broad classes of capability: digital capabilities and leadership capabilities. They build digital capabilities by embedding the right technologies into the right parts of their customer engagements, operations and business models. They also build strong leadership capabilities to drive the transformational change that leads to business results.

While both are important, we’ve learned that leadership capability is paramount.  It turns technology into transformation.  Technology does not create value on its own.  It only enables value when you use it to improve the way you do business. Leadership capabilities — vision, employee engagement, governance across silos, IT/business collaboration and raising digital competencies – are essential to driving value-creating transformation.

Myth 2: Digital transformation is primarily about customer experience

Customer experience gets a lot of attention, for good reason.  If you can make your customer experiences intuitive, more business will come your way.   There are many powerful and media-friendly stories of B2C companies changing the way they engage with customers.  But they often miss the point of what makes the transformation possible.

An essential source of advantage in digital transformation is largely hidden from view.  It comes from transforming operations.  If your company can streamline the way it works, clean up its product and customer data, or make operations more agile, this will create myriad innovation opportunities.  Digitally transforming operations not only creates efficiency, but also enables new innovations in customer experiences and business models.

Myth 3: Digital transformation is about bottom-up innovation.

We’ve all heard stories about edge innovation or relying on worker experiments to transform how a firm operates. But, our research found no cases of true bottom-up transformation. All Digital Masters had strong top-down leadership. This is a prerequisite for the transformative vision or cross-silo governance that drives true change. The “let a thousand flowers bloom” strategy leads to just that. A thousand unconnected, and often dying, flowers. Bottom-up engagement is still important, and it happens productively when employees buy into the vision and suggest innovations. But, with few exceptions, digital transformation must be driven from the top.

Innovation - Digital Transformation Myths
Image by Michal Jarmoluk from Pixabay

Myth 4:  Hiring a chief digital officer is a “fire and forget” way of hitting the target.

Digital transformation, like every transformation, needs a leader.  A senior person who can drive real organizational change, not just technical innovation.  Many companies yielded to the temptation of hiring visionary and fast-talking technical gurus.  These gurus often have a short shelf life. They set vision and launch initiatives but do not have the power, resources or cultural context to drive effective transformation. Other companies tasked their CIO to drive digital.  This works in companies where the CIO has the vision and capability to drive business change, but often fails. Others asked a business leader to drive change. This works if the leader can envision and drive new ways of doing business, but often leads to missed opportunities and a biased transformation focus. Whoever it is, the digital leader needs top-level support to mobilize resources and overcome organizational hurdles.

Myth 5: Digital transformation is too fast for our IT organization

Digital is fast, but our IT unit is slow.  We still hear this from companies around the world.  Many leaders still try to manage digital activity without involving the IT department.  The truth is that we’ve seen very few digital transformation successes that do not include the IT organization. You may be able to design apps or implement a clever cloud-based front-end system.  But, for sustainable transformation — for systems to connect with legacy data, for processes to flow efficiently and securely, and for scaling the digital initiatives that drive business returns —  you will need close cooperation between IT and the business.

That means changing the way IT works, and how it works with business leaders.   IT must become more agile, and leaders more business-focused, while business leaders become more technology savvy and willing to engage more strategically with IT leaders.

Myth 6: Digital transformation is about radical business model innovation

With many stories of industries being disrupted, it can be tempting to assume that only radical business model transformations are worthwhile.  But these are the hardest and most risky ones to achieve.  It is essential to understand the likely extent and timeframe of disruption in your industry. Industry disruptions are typically long cycles, especially for industries working in physical products. We’ve seen a learning curve with Digital Masters where companies first get good at digitally improving their existing businesses before they leap into radical business model innovation. One common myth is that if you’re not driving a strategic platform in your industry you will be left behind. In reality, not every company is in a position to become a platform leader.  For those that are, the process is complex and uncertain, requires heavy investment, many experiments and course corrections, long-term commitment, and a solid dose of luck. Can your company deliver that ?

Whether or not you consider radical business model change, there are many smaller opportunities in digitally-modifying or digitally-enhancing your business model. These innovations are lower risk and lower cost but can yield tremendous value and learnings in aggregate.  For example, can you provide subscription services instead of waiting for orders?  Can you use data to understand a customer’s risk profile or potential buying patterns, so you can price your offerings better or personalize the sales process? Can you add a per-usage model to your core offering?

Business model innovation can be a great source of value creation, but first understand the timeframe of disruption and be realistic about your organizational ability to respond without damaging the existing business.

Myth 7: Digital will be slow to change my industry. I can afford to wait

Being complacent about the stability of an industry is equally dangerous. We’ve identified Digital Masters in even the most traditional and stable industries such as mining or agriculture. Why? Because digital transformation success is more about leadership drive than it is about industry structure. Many CEOs fear current competitors mastering digital transformation more than they fear clever start-ups. Others think it is better to wait and be a fast follower. Truth is, you need to be hyperaware not just of digital plays from your industry but also players and innovations outside your industry altogether. The best approach is to create strong strategic awareness and vision, and then start taking action to improve your digital and leadership capabilities.  With digital masters in every industry, non-master companies must rush to catch up even as their best competitors accelerate ahead.

Breaking the myths of digital transformation

Myths about digital transformation abound and there is no shortage of media attention amplification. The main lesson is: don’t buy the hype! Make sure your team challenges the myths, traditional industry assumptions or silver bullet solutions.

Our research with hundreds of companies shows that digital transformation is more of a leadership challenge than a technical one.  The right way to manage transformation is to understand what is happening, set a clear vision, engage everyone in that vision, and then continually invest, steer, and readjust to make that vision a reality.  This works in every industry.  Use the myths positively to drive conversations and challenge common thinking, but don’t believe them as truths. Buying into the myths is like following an old map in a fast-changing city.  It’ll get you somewhere, but not where you want to be.

This article first appeared at linkedin.com/pulse

About the Authors

Didier BonnetDidier Bonnet is an Affiliate Professor of Strategy and Digital Transformation at IMD School in Switzerland and Executive VP & Global Practice Leader at Capgemini Invent. He is widely published in academic and professional journals and he co-authored the best selling book “Leading Digital: Turning Technology Into Business Transformation”, published by Harvard Business Review Press.

 

George Westerman MIT's Sloan School of Management

George Westerman is a Principal Research Scientist and a Senior Lecturer with the MIT Sloan Initiative. As a pioneering researcher on digital transformation, George has published papers in Harvard Business Review, Sloan Management Review, Organization Science, and other top journals. He has written three award-winning books, including “Leading Digital: Turning Technology Into Business Transformation”.

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