Digital transformation a $1.7 trillion industry but 70% attempts fail

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New Delhi– Digital transformation – an essential element of the Fourth Industrial Revolution – is a $1.7 trillion industry but 70 per cent of all such attempts fail due to “lack of discipline” in setting the right goals, says a veteran with three decades of experience in the field who has suggested a five-stage process to get it right.

It’s due to “a lack of discipline in setting the goal correctly for sustained digital transformation and insufficient rigour in executing the change across the enterprise,” Goa-born Tony Saldanha, who led major digital changes at P&G, told IANS in an email interview.

“Part of the issue is terminology. These days the term ‘digital transformation’ is used as a buzzword to describe most things IT. Worse, since the end state of digital transformation is poorly defined, the process to execute it becomes highly subjective, leading to the 70 per cent failure rate,” added Saldanha, author of the just released book “Why Digital Transformations Fail” (Berrett-Koehler Publishers/pp 218/$26.06 on Amazon).

The first issue of confusing terminology around ‘digital’ is easy to understand, he said.

“We have had watches, the Internet, the Cloud, as well as IT automation projects being called digital. If anything related to IT is called digital, then business leaders confuse digital strategy with automation. Therefore, moving your data to the cloud, using software robots or upgrading your email system can be called digital.

“True digital transformation is defined as requiring people, processes and systems in order to win in the next Industrial Revolution. Therefore confusing digital goals with automation is the first reason why digital transformations fail,” Saldanha, who hails from Saligao, a village in North Goa, said.

Thus, if leaders don’t set a clear goal of digital transformation as rewriting entire work systems, then the effort to reinvent the entire company is compromised.

The second issue is in the programme/project management methodologies in digital transformations.

“Those tend to be regular IT project management processes. The best thinking on digital transformation combines traditional IT project management with venture capitalist-inspired risk and portfolio management processes, along with creative design thinking and ecosystem approaches.

“However, most companies don’t have these right tools. As a result, business leaders don’t set the right goals to reinvent themselves and their execution doesn’t use the right processes in execution. Both items drive the failure rate,” Saldanha elaborated.

Using dozens of case studies and his own considerable experience, Saldanha in his book, subtitled “The Surprising Disciplines Of How To Take Time Off And Stay Ahead”, lays down how digital transformation can be made routinely successful. Instead of representing an existential threat, it will become the opportunity of a lifetime. The key to success being that a person must disrupt before they are disrupted.

What then are the five stages of digital transformation?

* Stage 1 is titled Foundation: The automation (or digitisation) of process. It delivers enterprise value by using technology to do work more efficiently and builds the foundation for further transformation.

What are the causes of failure at this stage?

Teams lose sight of the intended business value being targeted or they execute poorly.

What are the disciplines required to address risks?

Committed ownership of the strategy at the highest levels and interactive execution to avoid major implementation failures.

* Stage 2 is titled Siloed; it’s the organic development of major digitally-based processes and products, but only in parts of the organisation. Individual leaders have recognised the threat of digital disruption and started creating new digital business models. Siloed transformations are a microcosm of what will hopefully become higher stages of digital transformation.

What are the causes of failure at this stage?

Common mistakes include under-powering change leaders and making incorrect choices in what to transform.

What are the disciplines required to address risks?

Digital transformation is a hard change. Underinvesting in empowering the transformation leaders is a mistake that often derails progress.

Then, there is the need for digital leverage points. These are essentially your strategic strengths and opportunities that best leverage digital. You identify these using a deep understanding of your organisation’s business opportunities and strategies.

* Stage 3 is titled Partially Synchronised: The partial completion of an enterprise-wise strategy for digital transformation. The term ‘partially’ is reflective of part business-outcome delivery, not part synchronisation of efforts.

What are the causes of failure at this stage?

An ineffective change management strategy or insufficient amount of transformation projects to adequately transform the core organisation.

What are the disciplines required to address risks?

Change management model for effectively transforming the core organisation coupled with strategy sufficiency in terms of the portfolio of initiatives needed to drive a complete transformation.

* Stage 4 is titled Fully Synchronised: the point where an enterprise-wide digital platform or new business model has fully taken root. However, this is a one-time transformation. It is still just one technology (or business model) change away from being disrupted.

What are the causes of failure at this stage?

Inability to complete the one-time digital transformation due to either organisation structure issues or digital literary issues.

What are the disciplines required to address risks?

Digital reorganisation to reboot technical capabilities both in the IT functions and the rest of the enterprise, besides staying current on the rapidly evolving technology landscape, both for completion of the one-time transformation and its successful ongoing operation.

* Stage 5 is titled Living DNA: the stage of perpetual transformation. Constant reinvention and a highly agile culture become second nature to the organisation. The enterprise becomes a disciplined market leader.

What are the causes of failure at this stage?

A loss of the edge that previously delivered a Stage 4 transformation, either due to an insufficiently agile culture or a lack of discipline to constantly sense and respond to new business disruption risks.

What are the disciplines required to address risks?

Agile culture to support constant evolution of the business and organisation, coupled with routinely sensing risk to the enterprise and reacting in a disciplined manner.

At the bottom line, says Saldanah, are the ‘Exponential Five’ technologies that leaders cannot afford to lose track of: AI, smart process automation, Blockchain, robotics and drones and special function technologies (virtual reality, 3D printing, Internet of Things, nanotech, energy storage, biotechnology and advanced materials et al).

“The rest is up to you”, Saldanah concludes.


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