Why digital transformations fail - the superficial transformation
A lot of traditional companies are undergoing digital transformation at present, and most of them will turn out disappointing results in time. I have lived through a number of these personally, and have also heard or witnessed accounts from colleagues associated with other companies' transformations.
These disappointing results are not just 'failure' in terms of projects that had to be abandoned. Most of these companies do not intend to give up, but they are forced to truncate their original vision, lengthen the transformation timeline, or kill some of the projects as the vision changes. These are bread-and-butter changes, but given the high costs involved in digital transformation and the expectations that have been apportioned, it is a rather traumatic experience from top to bottom.
In summary, many routes to massive failure, but they could be avoided. Let's discuss one such route here.
A traditional company often become anxious about digital transformation when they see some start-up rising through the ranks and becoming praised and sung about in the press and among industry players. They see these websites, apps, nice user design interfaces (UX) and new-generation graphics, and believe that this is the future, and the start-up will be taking all the business soon enough.
The response of the CXOs is to buy that start-up, and failing that, launch a digital transformation - if we can't buy it, we will replicate it. This type of transformation is characterised by having a digital division heavily focused on front-end related resources - UX designers, web and app developers, online & social media marketing agents. If they see a nice website, or a nice app, they will copy it; if they see several nice webs and apps, they will quickly analyse their features, then decide which ones to put on their own, although including them all in is the typical decision.
The kind of transformation is fast and exciting - creating a new web or app is comparatively simple, and in no time there is a digital answer to the start-ups. But the downside is immense - the company does not know what they are doing, nor what should be next. You have an app and you have put up some social media marketing, but are the behind-the-scene operations able to help the app perform? Is the backend digital infrastructure supporting the app for future iterations? Do the CXOs understand what metrics to track and what means success/failure? Does the company understand how much autonomy should be given to the app team to grow it, and how much resources should be devoted to its R&D? These are the new things that MUST come with real digital transformations, and merely having a customer-facing product is not digital transformation, it's digital pretension. The company has an app or web, but it hasn't acquired itself a complete business unit like its other business divisions.
This reminds me of a historical comparison - back in mid 19th century, both China and Japan jumped onto the 'reformation' boat to become competitive on the world stage. Both decided to reform their military from sword-and-arrows to guns-and-cannons. The Chinese delegation went to Europe and spent a lot of money on the latest munitions machinery and designs; the Japanese delegation was much poorer but wiser. They spent a small portion of their thin budget on machinery, but then spent time studying the latest military strategies, fighting personnel resourcing & training methodologies, and the logistics and supply chains to support the weapons & soldiers. Half a century later, the two countries came head-to-head in a naval campaign, and Japan wiped out the Chinese navy.
If a company focuses only on the superficials and what the customers are seeing, instead of looking behind the scene to see all the mechanisms and expertise to make the superficials shine, then it is not too far off being China in the historical metaphor.
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