Why should embracing Digital Transformation terrify large organisations?
There are ever-increasing numbers of blogs extolling the virtues of Digital Transformation with the recurring message that large organisations must embrace Digital Transformation or die. These bloggers are mostly right…however……what they frequently neglect to mention is that, to most large organisations, engaging in Digital Transformation represents at least as large an operational risk as not embracing Digital Transformation.
What is Digital Transformation?
In a world that is increasingly driven by technology, almost every effort to improve an organisation’s performance or its services involves Information Technology. So.. yes… that’s Business Transformation of any form, with the word Digital added at the start, because in a technology obsessed world, Digital is the new boardroom buzzword.
Why must big organisations embrace Digital Transformation? We tend to think of three main reasons:
- Opportunities – the opportunities to increase customer reach, reduce costs and improve service are myriad – if you don’t embrace the opportunity, one of your competitors will.
- “Moats” – organisations can no longer consider their position in the market secure – the old barriers to market entry have been eroded, geography and economies of scale offer little protection to organisations any more and new “disruptive” competitors seem to be springing from every patch of bare soil.
- Expectations – the embracing of opportunity and “disruption” has lead to an increase in the level of what employees, customers and citizens expect from services that is only rivaled by their decrease in attention span. If you cannot provide what they are looking for, when they need it, they have the ability to look elsewhere with ease. This translates across industries as well as organisations – a customers best experience in one industry quickly becomes the benchmark across others.
Many more “reasons to embrace” Digital Transformation exist and are covered thoroughly by others. Some of the following are excellent examples:
What doesn’t get a lot of focus are the timeless classics about the dangers of big Transformation projects.
So why should embracing Digital Transformation terrify large organisations?
Digital Transformation is not a simple journey. The path to success can perhaps be pictured using a Wild West analogy – a wagon trail through a desert littered with bones. The bigger your transformative needs and ambitions, the more likely you are to finish up with your bones littering that trail.
Ultimately, Digital Transformation projects carried out by large organisations are frequently just large scale Information Technology projects. According to studies by McKinnsey & Company and Oxford University, the average big Information Technology project goes 45% over budget, 50% over time and delivers under half of what is promised.
By 2020, according to IDC, 30% of the Forbes 2000 list of largest companies plan to be spending over 10% of their revenue on Digital Transformation. Governments, including the UK and US, already spend similar proportions of tax revenue on Digital Transformation.
The prospect of a 45% overspend on 10% of revenue for under half of the expected returns should be enough to strike fear into any board level executive.
Digital Transformation offers unparalleled opportunities for organisations, and failure to embrace it will likely cause organisations to fail in the mid to long-term.
Undertaking Digital Transformation incorrectly, however, may well cause organisations to fail in the near to mid-term.
This transformation trap is causing many big businesses to rate Digital Transformation as the biggest operational risk there is, according to the Wall Street Journal.
However, for those who can safely navigate this potentially hazardous journey and embrace Digital Transformation, it is likely to become a new “moat” to protect their organisation going forward; they will survive and thrive.
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