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How is your company’s transformation going? Thought I’d ask, since it seems just about everyone is transforming their organizations these days — or at least talking about it. In fact, talk (and search) of “digital transformation” has been steadily rising since early 2014, when this phrase started moving up the charts. And like it or not, it’s going to be with us for some time to come; the global digital transformation market is expected to grow at a rate of almost 20% annually through 2021. But even with “transformation” and “disruption” on the tip of so many tongues, recent studies point to a curious fact:
Most executives still aren’t taking the steps required to address the fast-changing demands of today’s fickle customers.
Exhibit A. Last month, the MIT Sloan Management Review reported that 87% of the senior executives it surveyed believe digital technologies will have a disruptive effect on their industries. But just 44% of those same execs said their organizations were adequately preparing for digital disruption. Why aren’t companies acting more boldly when they know they should? The author speculated that leaders might not understand enough about technology to make the required changes. Or that they care more about short-term gains than about long-term viability.
I wonder if another factor may be at work, too. Perhaps amid all the talk of disruption, we have made the revolutionary nature of technology seem altogether too routine and familiar, thus blurring the line between digital acceleration and complete transformation. MIT Sloan’s George Westerman describes the situation like this: “Successful digital transformation is like a caterpillar turning into a butterfly. It’s still the same organism, but it now has superpowers. Unfortunately, when it comes to digital transformation, many senior execs aren’t thinking about butterflies. They’re just thinking about fast caterpillars.” Instead of reserving “digital transformation” for the most profound leadership agendas, it has become commonplace to hear just about any IT initiative described as a true digital innovation, regardless of scale or impact. In doing so, many have talked themselves into believing that a fast caterpillar is all the change that’s needed, even as competitors threaten to take flight and soar far ahead.
Digitization vs. Digital Transformation
Jeanne Ross of MIT’s Center for Information Systems Research believes we need greater clarity in the vernacular of digital. She draws a bright line between “digitization” and “digital.” As Ross explains, “Digitization involves standardizing business processes and is associated with cost-cutting and operational excellence.” Digital, on the other hand, “refers to a host of powerful, accessible, and potentially game-changing technologies like social, mobile, cloud, analytics, internet of things, cognitive computing, and biometrics. It also refers to the transformation that companies must undergo to take advantage of the opportunities these technologies create. A digital transformation involves rethinking the company’s value proposition, not just its operations. A digital company innovates to deliver enhanced products, services, and customer engagement.” In other words, true digital innovation represents a change of kind, versus the change of degree associated with optimization.
How do you know if a butterfly-caliber reinvention is called for, or if speedy caterpillar tweaks will do? The answer lies in clearly understanding the threats — and the opportunities — afforded by change. You may determine that customers’ expectations will soon outstrip your ability to innovate and deliver. Or that technology or other enablers have lowered barriers to entry and exposed your industry to unforeseen rivals. Or that your ability to adapt and change falls short of that of industry peers. Each of these warning signs points toward fundamental reinvention, beginning with deep insight into emerging customer needs. In such cases, optimization is not likely to have a meaningful impact. You need a vision for your future and a holistic plan of action to guide your first steps on the long journey of digital transformation.
To learn more about your ability to meet the transformation imperative, I invite you to take our CXIQ Maturity Assessment, which evaluates customer experience strengths and gaps against seven factors of organizational preparedness and capability.