Long Established Businesses may want to pass up “Digital Transformation”
The concept of “Digital Transformation” is another regrettable example of multi-syllable tech speak: an otherwise opaque label (name) affixed to organization-wide projects where large global businesses try to evolve (or shall we say “devolve”) into versions of Eric Reiss’ “Lean Startup” or something out of a Clayton Christensen case study/success story.
Champions of this effort are also careful to include a very wide range of organizational projects within the digital transformation activity genre. For example, an organization opting to address a chronic malaise of fractured business structure (in other words, an organization plagued with “internal silos”) with computing tools and services is said to have embarked on digital transformation. Likewise, commencing an organization-wide effort to pool historical performance data and, then, to re-analyze it from some external or otherwise supposed new perspective is also considered a good example of digital transformation.
Of course digital transformation is also, broadly speaking, change management, so platform adoption activities where the platform needing better adoption is cloud computing, or internal electronic collaboration, fits the bill and can also be included under the digital transformation concept umbrella.
But whether an organization decides to “go there”, or not, should not be prompted by FOMO. Please don’t drink koolaid on this one.
Instead, a realistic appraisal of your organization’s position within a targeted market, your brand, and recent historical performance as measured against performance targets should be the drivers.
Position within a targeted market
Market leaders should not presume they will be able to successfully transform themselves into disruptors. It may be better to move “up market” than to commit lots of financial resources to a change management project likely to take a long time at high social cost. Speaking of big organizations, one only need look at what Apple has achieved by introducing an iPhone at a price point north of $1,000.00 USDs to see the benefit of moving up market rather than joining the messy fray at the commodity level of the smartphone market.
Brand
If you sell sugary, fizzy soft drinks, can you realistically expect to transform yourself into a healthy consumer beverage company? Further, if a big portion of the consumer market for soft drinks already likes your offer, should you throw it out the window to jump on the healthy drink bandwagon?
If PepsiCo and Coca Cola can serve as a useful example, the answer is clearly “no”. Better to acquire a business already active in the targeted new market, while preserving the unique brand of your new subsidiary, independent of the money-making sugary brand the parent company produces, if your organization plans to succeed. Welcome Dasani Water!
Following the Dasani Water example, traditional print news organizations should, therefore, buy already digital versions of themselves rather than start a journey down a path to transform themselves into an online news organization. Verizon has started down this path, but, unfortunately few print publishers, if any of the big news publishers have chosen this route without an attempt to assimilate the acquired business and brand into the parent. Dow Jones, Conde Nast, even the New York Times are all examples of big organizations catching a cold from attempts to digitally tranform themselves.
Recent Historical Performance
The nice thing about established, larger businesses is they have a lot of history. So understanding why undesirable performance trends have occurred is usually a far easier task than, for example, forecasting revenue performance for a digital startup. No doubt a numbers review may surface a real need for a digital makeover, but larger organizations will do much better if they allocate time and resources for a performance review before they start changing computing systems. If the answer is to move off of an outdated RDBMS, or to move forward on an effort to pull systems for inventory management, sales, and third party suppliers into a truly “modern” ERP than so be it. But be sure to figure it out first.
