‘Digital Transformation’ Is a Misnomer

It’s not about digital or transformation. It’s about adaptation.

The more I study digital transformation, the more I realize that it’s not mostly about either “digital” or “transformation.”

1) Digital transformation is not about technology. A key misconception about digital transformation is that it is something that companies choose to do with technology or is primarily about their implementation and use of technology.

It isn’t.

Instead, digital transformation is about how technology changes the conditions under which business is done, in ways that change the expectations of customers, partners, and employees.

For example, the rise of new disruptive businesses like Uber Technologies Inc. and Lyft Inc. resulted in large part from changes in the technological infrastructure that were not initiated by the company’s founders. Instead, these startups recognized that the widespread adoption of personal mobile devices equipped with certain features provided new opportunities to bring people together to exchange goods and services. They responded to these opportunities by developing novel services that catered to changing customer (and driver) expectations. The success of these platforms further changed business conditions, creating even more new opportunities. For instance, the New York-based restaurant technology company Mobo Systems Inc., doing business as Olo, is building upon the Uber platform to offer restaurant delivery that relies on Uber drivers as delivery people.

So, while Uber, Lyft, and Olo are certainly technology companies, at least in part, the more significant technological shifts that gave rise to their businesses were those over which they had little influence and took place before the companies were founded. Likewise, many of the most significant technological changes to the competitive environment your company faces lay outside your control, but they are created by a pervasive digital infrastructure that continues to evolve. The key question of digital transformation is whether you are paying close enough attention to these changes to respond to the resulting changes in expectations of customers, partners, and employees for how business is done — or whether a competitor or a startup will respond first?

2) Digital transformation is not about transformation. Looking up a number of definitions for the word “transformation” demonstrates that they exhibit a common characteristic — they all define transformation as a singular process that occurs and is then completed.

Digital transformation, however, does not work that way. It is not a process that will ever be complete, at least not in the near future. Moore’s Law continues to suggest that processing power per dollar doubles every 18 months. Storage capacity and networking speeds increase at an even faster rate (doubling every 12 and nine months, respectively). New classes of technologies — artificial intelligence, blockchain, autonomous vehicles, augmented and virtual reality — will likely become widely adopted over the coming decade or two, fundamentally changing expectations yet again. By the time you adapt to today’s digital environment, that environment will have likely already changed significantly.

Therefore, digital transformation is better thought of as continual adaptation to a constantly changing environment. The need for transformation won’t abate, even if you successfully transform. It involves ongoing scanning of the environment to recognize evolving trends, continual experimentation to determine how to effectively respond to those trends, and then propagating successful experiments across the company.

What is digital transformation about, then? At its most fundamental level, digital transformation is about the ability of organizations, its leaders and employees, to adapt to rapid changes wrought by evolving digital technologies. Thus, understanding digital transformation is both good news and bad news.

It’s good news in the sense that all companies can make the types of changes necessary to become more digitally mature. Digitally mature organizations exhibit certain organizational similarities that have nothing to do with technology. For example, our 2017 report on digital business notes that digitally mature companies tend to be organized into cross-functional teams Last year’s report found that digitally mature companies had a distinct set of cultural characteristics, and throughout our research we have found that employees of all ages want to work for digitally mature companies. All companies can develop these traits.

It’s bad news in the sense that almost all companies find these types of changes to their culture, talent, and structure to be difficult to accomplish. Organizations typically change much more slowly than technology does, and these types of changes will not happen without the intentional effort to make them happen. Furthermore, organizations tend to become more static over time, so the necessary adaptability can be difficult to maintain even if it is established.

What can companies, leaders, and employees do now?

  1. Pay attention. We are nowhere near the end of the disruption that digital technologies will have on business. Companies should periodically review the digital landscape for potential changes that can threaten a business. Leaders and employees should develop a fundamental digital literacy and keep that knowledge up to date. Claiming that “we’re not a digital company” or “I’m just not a digital person” is no longer an option. The rate of change is at the point where failing to pay attention and develop a working knowledge of the present state of digital technologies all but guarantees obsolescence and disruption.
  2. Build adaptable processes. Transforming your company is not enough — begin rebuilding your organization in a way that can adapt to constant change. Adaptable processes involve modular organizational structures that can be readily reconfigured and systematic processes that provide employees opportunities to continue developing and updating their skill sets. They also include strong communication practices such that all members of the organization can know its strategic direction and be informed when changes to this direction occur.
  3. Execute. Companies often talk about being digital or becoming more agile without actually doing much about it. Our 2017 report showed that the companies that were most successful with respect to digital transformation were those that invested more time, energy, and money into making it happen. The challenge is that the gap between what is possible technologically and what companies are actually doing is growing wider. Waiting too long may allow new or established competitors to capitalize on these changes, or result in a gap between where your company is and where it needs to be that becomes too wide to overcome.

6 Comments On: ‘Digital Transformation’ Is a Misnomer

  • Raffaele Marcellino | August 17, 2017

    Thanks for this cogent article. Brings home the strong point that the transformation is not essentially technological rather technology is the enabler. The difference now is the rate and scale of change.

  • Ludo Van den Kerckhove | August 19, 2017

    Thanks, Gerald, for this short and powerful article.
    I agree with the content, although the definition of transformation for me is rather a drastic change than an evolutive adaptation. Nevertheless, you are right that it should be continuous, because our world became VUCA and is evolving continuously and with ever increasing speed.
    Hence my way of formulating would be to use the term bi-modal, it’s the AND-AND approach where your company should be able to continuously adapt/improve AND at the same time be able to disrupt and transform parts drastically.
    Can you agree with this point of view? Or better, can it be proven right or wrong academically?

  • mihaela diginohub.com | August 21, 2017

    A continuous process of reinvention – the digital era’s next frontier is the stock market and how companies are measured, for companies is continuous innovation and reinvention.

  • Gudrun HELD | September 3, 2017

    Thanks for this article sharing your more holistic view on ‘digital transformation’. Unfortunately, many executive decision makers rather invest in technology instead of culture and then they are surprised that the ‘transformation’ is not providing the expected benefit. The ‘digital age’ affects the way we structure / organise our business processes, it impacts business models, the way we run businesses and provide our services. It also impacts many areas of our lives. Therefore it is essential to start adaption processes from Kindergarten and find solutions for the elderly. We can compare it to how life changed after the invention of the light- bulb, the telephone, cars or planes etc. or e.g. the start of the Industrial Age. Technology was an enabler …

  • Siobhan Coughlan | September 4, 2017

    Firstly, if we’re talking about misnomers then its not Digital Transformation but transformation enabled by digital.

    I agree that ‘digital’ is an enabler and not a thing in itself – it provides us with the tools and solutions that allow us provide access in different ways which suits many service users / customers. It also enables us do our jobs in different ways and from different locations which again suits many employers and their employees better.

    I would also suggest that ‘digital transformation’ is more than just the ability to ‘adapt’ – its about being innovative so we better harness the technology tools and solutions we have so we apply them in different situations – for example, using GPS mapping to better plan rubbish collection and street cleaning routes; using IoT to help some citizens with long-term health conditions to continue to live in their own homes, or analysing different datasets to better identify those at risk to enable preventative actions to be taken.

    Its about being opportunistic and open to doing things differently or letting customers, workers and providers have more control.

    The key point is that we need to know our service users – customers/citizens/businesses and the services/information they need from us and then work with them to apply the tools and solutions at our disposal so they get easier access, can self-serve/get assisted help, to carry out their business with us.

    Staff should also be able to use these tools and solutions to carry out their jobs more easily e.g. the social worker visiting their client using a laptop / tablet device to update case notes, then shows their client the updated files and agreed next steps so they know what’s going to happen. Its about updated the information in real-time so the systems and relevant partner organisations are all updated and alerted when they need to be. This way the client gets a better service, the social worker doesn’t have to spend time entering the data later into other systems and all the key partners have an up to date case record.

    None of the tools or solutions here are ‘revolutionary’ or disruptive in the sense that digital is often described. However, they are being used in a way that allows the provider and user to access and update information so they have a shared understanding of the case and can therefore make more informed decisions, ultimately providing a better and more joined up service to their shared client / customer.

  • jose fernandes santiago | September 30, 2017

    Agree that it’s neither digital nor transformation, however it is about a change in the operating model, that needs to have an organisation transformation and digital is the disrupting technology, but it’s the way we will work and have to work that makes it massive and all embracing. yes it’s continuous and discontinuous, because it’s ongoing and transforming itself as it goes. It’s disrupting as a result if the slowness of people’s ability to absorb and adapt and adopt fast enough with the technology and innovation.
    it’s always been so just that with the current pace it’s faster and deeper, it’s a paradigm shift how we live not just work, produce and relate to each other with the environment and technology and reality.

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