Research shows that 70% of digital transformation initiatives will not achieve their goals. The high failure percentage is caused by not having a well-thought-out, supported, and executed transformation program. In 2018, Forbes estimated that organizations would invest $1.3 trillion “in digital transformation initiatives to apply digital capabilities to improve efficiencies, increase customer value, and create new monetization opportunities.” The 70% shortfall equates to over $900 billion in sunk business costs. The research indicates that the most challenging part of digital transformation is not about what to do but rather how to do it. So, how do you do it?
You Need To Pivot
In our post COVID world, it’s essential to pivot and develop relevant products and services for your customers. If your company is no longer providing products or services your customers want or need, then they will go elsewhere. You must change course, or your company might enter a death spiral and, perhaps, never recover. The COVID pandemic plunged the world economy and the US economy, in particular, into a period of contraction that may not bounce back quickly. Many businesses that closed their doors will never recover.
Similarly, businesses that once thrived have become unhealthy because they lost their relevance in today’s rapidly changing and competitive marketplace. In a post-pandemic world, you must regain and keep your competitive edge.
In the past, your business strategy was the roadmap that defined why your company was in business, its core strengths, its customers (existing and potential), products and services you offered or must begin offering, and the reasons your company moved in these directions. That was the general approach to business strategy during the 1970s, 1980s, and 1990s.
An article in the Spring, 1990 issue of MITSloan Management Review, Managing Technology as a Business Strategy, outlined the old model:
“The goal of strategic technology management is to contribute to the value of the enterprise by helping assure that the cash flow on which this value depends will be sustained and will continue to grow…. Management of technology must, however, be purposeful rather than hopeful or “hands-off’ and must always be connected with the firm’s overall business strategy.”
In the past, management added technology to the company’s business strategy. Technology added value because it contributed, helped, and connected with the enterprise by improving economies of scale and reducing operating costs. But that was then. Today’s imperative has changed.
You Need To Pivot Now
Today’s business strategies are not the same as strategies of the past. Strategy has evolved. Technology is out and digital is in (not really, but it sounded cool). The world around us has undergone and will continue to experience a digital transformation. That changing variable requires us to revamp how we use technology in our business. It is not the same as inserting technology somewhere into the strategy or adding some IT best practices to the latest project. A shift in technology use is not a one-time change order or initiative. It IS, however, about replacing the old business strategy and adopting a transformative digital strategy. The digital strategy is the new norm. But what happens if you don’t change your strategy?
If You Don’t Adopt A Digital Strategy, You Will Fade Away Or Cease To Exist
According to the American Enterprise Institute, only 12% of the companies (61 to be exact) that were on the Fortune 500 in 1955 are still there in 2015 – 60 years later. These include GE, IBM, Coca-Cola Enterprises, CVS, NCR, Proctor and Gamble, and others. The other 88% (439 to be exact) of the companies from 1955 have either gone bankrupt, merged with another firm, got acquired, or they still exist but have fallen off the list. The majority of these companies on the 1955 list are unrecognizable and forgotten. Do you know these forgotten businesses? (e.g. Armstrong Rubber, Cone Mills, Hines Lumber, Pacific Vegetable Oil, and Riegel Textile). Me neither.
In our modern world, what is real is this: Strategies have gone digital. The business strategy has been transformed into a digital strategy because it has undergone a digital transformation. Your business must do the same. Business owners – you and your business must adopt a Digital Strategy – a Digital Transformation Strategy. It has become the new norm in the marketplace. The world is changing, and you must change to keep up.
If You Don’t Adopt A Digital Strategy, You Will Lose
You will lose your competitive advantage. Remember Blockbuster Video? In 2000, Reed Hastings approached the former Blockbuster CEO, John Antico, and asked for $50M to buy his company – Netflix. They entered into negotiations. Netflix would run Blockbuster’s online brand. Netflix had launched in 1997 when Blockbuster was the undisputed leader in the video rental industry. In 1994, Viacom had acquired Blockbuster with more than 2,800 locations around the world for $8.4 billion. When Antico was approached, he thought Netflix was just a small niche business and dropped negotiations. In 2010, Blockbuster had incurred more than $1 billion in losses and filed for bankruptcy. It was valued at $24 million. And Netflix? In 2017, it was valued at $65 billion. You see, the real problem was that Antico was unwilling to change and adapt. The world was going through digital transformation. But Antico could not envision a world where folks did not walk into a brick & mortar place to rent a video.
You will forfeit increased profitability. According to a 2017 report from the SAP Center for Business Insight and Oxford Economics, 80% of companies that implemented and underwent digital transformation efforts reported increased profitability and greater employee engagement than other companies. The responses had come from CEOs committed to digital transformation.
At this point, perhaps you are convinced your company needs to move toward a digital strategy. Maybe a little bit of change would be best rather than sudden upheaval. How much change should your company take on? To what extent should your company pivot? Is that what you are wondering? Here is the roadmap. We can help make this happen for you.
Digital Transformation – What Is It?
Digital transformation integrates technology into all areas of a business or organization. It essentially shifts the methods in how the organization does things to produce value to its customers. It also creates cultural change that challenges the status quo to innovate: experiment and get comfortable with failure. Digital transformation serves as the platform for innovation. Innovation uses the methods and ideas from the transformation to derive greater or different values to satisfy the changing needs and expectations of the customers.
Digital Transformation – How Is It Done?
The roadmap of digital transformation includes eight transformation stages that, if executed effectively, will help you beat the odds of not achieving your goals. Each stage or phase has goals, activities, and tools.
1. Introduction – It helps you get key stakeholders on the same page.
2. Core Team – You build a high-performance leadership team.
3. Discovery – You learn how to gather market insight that gives you an objective view of digital opportunities and threats.
4. Vision – Insight from discovery is translated into vision and strategy during this phase.
5. Identify – The identification phase establishes transformation priorities.
6. Engage – In the engagement phase, employees, customers, and partners participate in refining your strategy and priorities.
7. Develop – The transformation initiatives for products, marketing, and operational systems are launched.
8. Transform – Programs that embed the competencies and leadership throughout your organization are kicked off.
What Are Your Pain Points?
Are you in a crowded market where it’s hard to differentiate or you’re losing your competitive advantage and not sure why? Are competitors innovating with new technologies, products, and services but you’re not sure where to start?
I’ve personally seen companies lose business to inferior producers simply because they weren’t standing out. It’s time to act.
If you’re ready to step up or if you have any questions about how to go about your Digital Transformation, please reach out and we can answer any questions you have.
This Blog Is Part ONE Of A Series!
Set Your Vision For Digital Transformation [Part Three]
Ready, Set, How To Digitally Transform [Part Four]