A successful digital transformation can deliver significant rewards. But these common misconceptions can undermine your company’s ability to achieve desired results.
Digital transformation has the potential to be, well, transformative; when done right, a digital transformation can enable your business to reap significant, and well-documented, benefits. But with many things IT, there comes a tendency to get wrapped up in the hype and not think through the hard truths of execution until the promise doesn’t live up to the expectation.
And of course, the underlying concepts and strategies of digital transformation are not new. The idea of rethinking of how an organization uses technology in pursuit of new revenue streams or new business models has been central to business “since we started to put corporate records and transactions on computers in the 1970s, and it continues to build and accelerate in the transformative age of digital today,’’ notes Michael Kanazawa, Americas advisory leader of innovation at Ernst & Young. For those who have been continuously innovating and leveraging new technologies, there is no hype, he adds.
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“There is a constant push to innovate business as fast as new technologies enable breakthroughs in value and business performance, and that’s a journey,” he says, “not a moment in time to be ‘hyped.’”
Here are seven myths about digital transformation from industry experts and business and IT leaders.
Myth No. 1: Digital transformation is an IT function
With new and emerging digital capabilities affecting all areas of the business, it’s important to remember that the transformation is just as much about leadership as the technology, says Janice Miller, director of leadership programs and product management at Harvard Business Publishing Corporate Learning, a leadership development firm.
“Digital leadership requires an entirely new mindset, one that needs to be carried out to all members of an organization, at every level,’’ she says. To be successful, “companies need to assess how the technology will be used to improve their business model, and drive value and connect with end customers.”
Technology can be a powerful enabler, agrees Aaron Rubinstein, manager of shared services & technology for the global supply chain at Anadarko Petroleum. “But without an organizational structure aligned to support the objectives of the project, a culture that accepts the rationale for change, and intuitive business processes that connect people and systems, a truly transformational outcome is very difficult to achieve,’’ he says.
Thinking about these types of projects narrowly as software implementations often results in a failure to realize the full potential of what was envisioned, Rubinstein says. Not only do you need the right team to lead a transformation effort, he adds, but also a broad, organizational culture that is ready to undertake meaningful change.
Myth No. 2: True transformation is a blue chip’s journey
The reality is real transformation comes from disruptors that do not have large market share, says Stephen Andriole, a professor of business technology at Villanova University’s School of Business.
There is still a lot of ignorance surrounding what digital transformation is, based on Villanova data, he says. Some respondents thought it was the equivalent of installing a new ERP system, he says. Consequently, large corporations think they dominate their industries simply because they have been successful in the past, says Andriole, noting that “Marriott could have done AirBnB. But they didn’t.”
Other startups, like Amazon, Uber and Netflix, among others, have found tremendous success over traditional players in their respective industries, he points out. However, established companies like Starbucks are also staying competitive because they are always looking at their processes and experimenting with their stores, Andriole says.
“They’re very innovative and looking at their processes and making adjustments to improve those processes,’’ he says. “They’re one of the first, I believe, to do cashless transactions because they want them to go faster and sell more stuff. … You think making coffee is simple, but it’s not.”
Most companies do not take the time to figure out their business processes or create active process maps, he says. It’s only when they are losing market share, or an executive becomes worried about receiving a smaller bonus — or fears being fired — that they become willing to try new things.
Over 70 percent of respondents to a 2016 Villanova survey who expressed interest in data transformation said they did not have active process maps, according to Andriole. “People tend to not talk about data transformation and business process management (BPM) in the same breath,’’ he says.
When organizations don’t have a full inventory of their business processes, they are unable to answer questions like how do you cross sell and how do you innovate, Andriole says. A process is broken, he adds, when it is not open and agile.
He cites the time he was interim global CIO at pharmaceutical company Shire from 2010 to 2011, as an example. Andriole began looking at BPM and discovered that many processes, like supply chain planning, were broken.
“But the stock was rising, and not too many managers and executives who owned the broken processes were — understandably — all that interested in shining bright lights on problems in their house,” he notes. “Why call attention to problems when everyone’s making money?”
The stock continued to rise, so the appetite for process transformation remained low, he says. More recently, though, the stock has fallen and the need for digital transformation and other steps, is now obvious, he says.
This is the time when savvy CIOs can resurface as saviors. “When times are tough everyone wants solutions, and no one wants broken processes on their watch," he says. CIOs can increase their influence in organizations that need help by leading major digital transformation efforts. “If they succeed, they can earn a coveted 'seat at the table,' Andriole notes. “Of course, if they fail, they could become a casualty of the very processes they're trying to transform."
Digital transformation works best when times are tough — not when everything's going well, Andriole says. “So in a twisted way, CIOs should be ready to move when stock prices fall."
Myth No. 3: Digital transformation is about reducing the workforce
Digital transformations often make use of emerging AI and machine learning capabilities, leading some to believe that the end game of digital transformation is fewer roles for humans. But, as good as AI and machine learning might get in near future, you still need human beings, says Andy Bennett, senior vice president of IoT EcoStruxure at Schneider Electric, a Paris-based corporation that focuses on energy management and automation in buildings and other structures.
“It’s not a surprise, but I think the No. 1 thing that unsettles or at least contradicts a lot of the hype … basically comes down to humans in a myriad of ways,’’ he says. “Often you hear folks talk about this huge impact that’s going to take place with machine learning and ultimately will decrease workforces and drive efficiencies. That’s absolutely something I’m not seeing today.”
Instead, Bennett is seeing the opposite. The more automation and data analytics that organizations put in place, the more human beings are needed to drive the algorithms and understand what’s happening in complex buildings or manufacturing plants, he maintains.
There are “so many inefficiencies baked in” to connected devices that it is a fallacy to assume data analytics will enable quicker reaction time. “I find we’re almost going in the opposite direction,” he says. IoT helps us get better at finding information, “but you do need a lot of human interaction.”
When Bennett has conversations with CIOs, he says he finds there is an inherent belief that data analytics and AI will result in equipment not breaking or not needing to be serviced, which is not the case. “What we’ll be able to do is be more reactive; maybe get to things before they break, but you still need a person to show up at a plant and do something about it. I have the sense that that gets lost in translation.”
Myth No. 4. Digital transformation is all about the technology
There is a perception that businesses simply need to bring in new tools, models, and skills to compete on a new playing field, says Seth Robinson, senior director of technology analysis at CompTIA, a nonprofit trade association for the technology industry.
Yet, CompTIA research shows that while businesses have an appreciation for strategic IT, they are not necessarily prepared to execute on that vision, he says. Seventy-eight percent of firms surveyed say they are using technology to drive business outcomes, but only 28 percent are extremely confident in their ability to apply technology to business goals, Robinson says.
Companies often clamor for digital transformation because they see business environments and customer demands changing. But recent breakthroughs, in particular around the cloud, have built some expectations that aren’t always valid, Robinson says. Technology alone, he emphasizes, is not the panacea when executives don’t stop to consider the full stack of requirements and skills that are needed.
“As companies seek digital transformation, they will have to invest in building the right culture, and also in the transformation of the IT function, including new skills and partnering opportunities.”
E&Y’s Kanazawa agrees. “The key myth is that digital transformation is just about technology, rather than being about creating amazing new experiences and value for customers, partners and employees.”
Here, Kanazawa says, consumer experiences are driving the need for great digital customer experiences in unlikely markets. “We have had executives in industrial markets like energy services, agriculture and building management … describe frustration that they can’t purchase industrial products and parts with the same ease that they download digital content at home, hire a car service in real-time or have your favorite bottle of wine drop shipped to your house the same day.”
So when it comes to serving those customers, he believes, “you are competing against the best digital experiences that your customer has in their personal life.”
Myth No. 5: Executive buy-in is a sure thing
For any project to be successful, you need buy-in and continuous support from upper management; digital transformations are no different. Yet, senior executives are often reluctant to greenlight these projects because they are often complex and daunting, says Andriole, who is also a business consultant.
He says he’ll be called in to advise a company that thinks it needs to do a digital transformation project and finds, “It’s more about lip service than it is about reality.”
Often, they have the “if it ain’t broke, don’t fix it syndrome,” he says.
In those instances, Andriole’s advice is to “find a big mirror and look into it. What do you really see?” If there is no real reason to deploy a digital initiative or commitment on the part of management, he says, don’t do it.
Myth No. 6: Digital transformation brings IT-business harmony
Successful digital transformations require collaboration between IT and the business, but if you think IT-business harmony is the guaranteed outcome of a digital transformation, you may want to think again, says Schneider Electric’s Bennett. “I think it’s a fallacy. They don’t get along very well. They come from very different starting points.”