“Digital Transformation” is a Misnomer
Most enterprise leaders know digital transformation is a big deal — after all, aggregately, they’re now investing trillions of dollars¹ per year on transformation endeavors.
But the spending hasn’t always led to the results businesses have been looking for. It certainly hasn’t stopped stock market shock waves from rippling through entire industries when, say, Amazon shows interest in a new area.
Worse, according to research firm IDC, 59 percent of enterprises are in a state of “digital impasse.”² Research firms such as Forrester have attributed³ these sorts of struggles to enterprises’ somewhat scattershot approach, such as transformation efforts initiated among some teams but not others, or transformation efforts focused on upgrading systems but not business models.
Perhaps most troublingly, Forrester has found that 21 percent of enterprise leaders “think their transformation is done and dusted,” as vice president and principal analyst Ted Schadler put it, adding, “Really? Done?”⁴
We on Google’s Apigee team share his skepticism. It’s the sort of survey result that suggests that even though most business leaders know digital transformation is a mandate, a significant number may not know just what digital transformation really is. For starters, digital transformation isn’t something that has an end state — there is no “done.”
This linguistic imprecision around what digital transformation entails has reached dangerous proportions — and arguably cost some businesses millions of dollars. Because almost everyone feels pressure to be digital, “digital transformation” has come to mean a lot of different things — which is to say, it can be thrown around and still mean almost nothing.
One executive might think transformation is mostly about mobile apps. Another may decide it’s about artificial intelligence. Yet another may believe that for his company, transformation is just getting rid of an old, on-prem email server and switching to a managed cloud service. In the most myopic sense, all of them have something right about digital transformation — but in thinking so modestly and finitely, all of them also misunderstand the concept in a fundamental way.
If businesses are going to base business mandates around terms such as “digital transformation,” they should be precise about what those terms mean. Let’s break this down, word by word.
Forget “Digital.” Think “Business.”
“Digital,” though key to what we’re talking about, can be misleading. It may tempt enterprise executives into thinking “transformation” is merely about releasing mobile apps or leveraging the cloud for cheap storage. Those things may be part of the equation — but they are not sufficient by themselves.
Indeed, research firm McKinsey finds⁵ that when companies’ transformation efforts are deployed “aggressively and across multiple dimensions, they improve their performance.” This reflects our experience at Apigee; we’ve found that when businesses invest in transformation across the entire business, rather than just in terms of specific and finite investments, they’re more likely to succeed.
“Digital,” then, is not about a website, a mobile app, cloud services or an API. It’s not even just about technology — it’s about everything that allows technology to make an enterprise competitive: governance, funding, operations, metrics, incentives structures, hiring, etc. The distinction between “digital” and the engines running the business have become meaningless. When thinking about the scope of what they’re approach, an enterprise leader shouldn’t think “digital” at all — it’s just business.
Don’t “Transform.” Evolve.
As mentioned, companies do not arrive at a “digitally transformed” state. The necessity of reinvention never goes away. The troublingly large number of executives who evidently think otherwise are thinking like sprinters when they’re actually competing in the world’s most complex and interminable marathon.
Any executive who thinks a transformation effort can be “done” should remember that technology isn’t just continuing to advance at some predictable, linear pace — the pace is escalating.
Decades used to separate the kinds of transcendent, all-purpose technologies that impacted not only individual industries but the operation of society at large. Think of things like the printing press, the lightbulb, automated assembly or automobiles. Today, advancements of this magnitude are arriving within years or even months, meaning that multiple disruptive forces are overlapping. Ten years ago, most people didn’t have a modern smartphone. Today, the mainstream includes not just mobility but also cloud services, machine learning, 3D printing, augmented reality, screenless interfaces, virtual assistants, autonomous machines, and more. It’s a lot for a business to adapt to, and it won’t get easier.
Because the pace of change is always accelerating, there is no final phase — no end to the digital journey. When people say “transformation,” what they should really be talking about is a perpetual state of readiness for ongoing, accelerating change. It’s not about becoming something; it’s about gaining the agility to evolve as needed while other, less adaptive competitors may move toward extinction.
“Digital Transformation” is Really “Business Evolution”
When executives think about their increasingly urgent digital transformation mandates, they must recognize that their job is neither confined to digital nor based on a true transformation.
To succeed, the effort should impact all parts of the business. Technology isn’t something a business bolts onto its existing model; it’s something the business leverages to unlock new opportunities. When Pitney Bowes* invested in the cloud, for example, it wasn’t just looking for marginal efficiency gains — it was also looking for a delivery model for its proprietary data and technology, delivered to a growing number of developers via APIs.
Equally important, the effort shouldn’t have a start and end date. Modern cloud infrastructure services and API-first application development techniques allow companies to adapt quickly by exploiting granular, modular architectures to keep pace with constant disruption. If supported by the right operational model, these architectures and techniques can enable a company to continue leveraging and expanding its unique strengths while simultaneously evolving how it interacts with partners and customers.
For example, by adopting a platform approach built for continuous innovation rather than start-stop projects, Brazilian retailer Magazine Luiza* has replaced its traditional e-commerce inventory, which supported only 35,000 SKUs, with a global online marketplace encompassing more than 1.5 million. It has also increased its software delivery speed from eight deployments each month to more than 40 per day.
Continuous, company-wide adaptation and reinvention has to be the mindset from the start. The goal isn’t to take an amoeba and release an app about it — it’s to use apps and other technologies to evolve that amoeba into something new and more powerful. In so many ways, “digital transformation” sends all the wrong messages. “Business evolution” is the mindset enterprise leaders should embrace.
1: IDC, “IDC FutureScape: Top 10 Worldwide Digital Transformation (DX) Predictions,” November 2017.
3: Ted Schadler, Forrester Blog, “The Sorry State of Digital Transformation,” April 2018.
5: Jacques Bughin, Laura LaBerge, and Anette Mellbye, McKinsey Quarterly, “The Case For Digital Reinvention,” February 2017.
*Pitney Bowes and Magazine Luiza are customers of Google’s Apigee team.