Intolead recently conducted a study on Finnish large companies’ strategy creation process. More about the study, findings and conclusion in the future. For now we will focus one of the key findings of the study, a phenomenon so common today: digital transformation illusion.
What is digital transformation illusion
Many companies say they are transforming their business into digital. In reality many are using digital tools to increase efficiencies, cut costs, and automate existing processes. These changes may be necessary, but they are often also signs of transformation illusion. Transformation illusion occurs when making small changes is believed to be undergoing transformation.
Digital illusion is common to many companies that grew up in the pre-digital era. It is often fuelled by digital initiatives aiming at preventing any further loss of market share and profits. These initiatives provide the oxygen that fuels a feel-good factor, and the carbon monoxide that creates hallucinations of transformation.
Dangers of digital transformation illusion
Here are three dangerous downsides of transformation illusion:
- Companies become so busy and preoccupied with creating change, that they stand still in the transformation stakes and become vulnerable to the disruption that they can’t see coming.
- Companies devote their limited time, effort and resources to creating change.
- Companies are lulled into a false sense of security. They might be doing well creating change with digital solutions, but there’s no vision of transformation in sight.
Common symptom of digital illusion is emergence of siloed projects that have words such as cloud, mobile or digital associated with them. Often the investments have been big, in terms of money but also in terms of hearts and minds. This easily creates a culture of one unquestionable (false) truth.
Change fixes the past, transformation creates a new future
Waking up from being under digital illusion might be a hard pill to swallow. That said, in many cases it’s far better to swallow this pill now than continue believing that digital projects are digital transformation.
There’s nothing wrong at all with digital change projects, because they bring about much needed small change, which is enabled by technology. They often save some cash and introduce improvements, so companies really need these projects.
What is wrong is misleading the employees and stakeholders into believing that all digital projects represent digital transformation, that will disrupt the market or protect against disruption, if in fact they stand little if any chance of doing that. If they’re part of a bigger transformation that’s fine, but be clear about what that looks like and communicate it well.
From change to transformation
Making digital core to creating a new business model is one form of legitimate digital transformation of the business. Another is the collective portfolio of digital projects, which when integrated in the right way, will disrupt the market or protect against disruption. But the overarching strategy and roadmap should clearly communicate how the digital transformation portfolio will bring about that new future.
Now is the time (before it runs out) for leaders to start being honest with themselves and to put their so-called digital transformations to the test. Questions to ask are:
- How is our digital transformation going to disrupt the market or protect against disruption?
- Will our digital transformation eliminate customer pain-points and complexity?
- Will our digital transformation cut our prices by at least 50% and still enable us to make money?
- Will our digital transformation make our dumb products and services smart?
- Will our digital transformation build a platform where buyers, sellers, competitors and innovators do business together?
- Will our digital transformation transform our physical products and services into digital offerings?
And for every answer of “yes” you need to ask: Why? How? and When?