Why do some companies survive the digital transition better than others?
It is believed that 50% of the traditional companies on the Fortune 500 have disappeared since 2000 due to digitalization. They failed to remain relevant and competitive in a fast-changing business environment and was easily phased out. This is the brutality of digital transformation. It is a force without pardon or sentimentality. Never before has the rule and pre-requisites of business changed so quickly – and the rate of change is continuing to increase. The question I ask myself is why some companies survive the digital transition better than others and retain their competitiveness in a new business reality? Is it just a matter of luck or is it more to it?
It is possible to conclude that luck is part of the equation. The fact is that all companies are asserted to equal amounts of new (independent and unpredictable) market opportunities and threat that can have both a positive or negative impact on the company performance. But only some companies have the ability to leverage the opportunities to get the full benefit, while others fail to create any benefits at all. Also, only some companies can minimize the consequences of market threats, while other fall into the trap every time. The determining factor is not a game of chance but rather the nature and characteristics of the company governance, leadership and organization. Companies with a responsive governance and mind-set are more likely to be “lucky” than others.
“I do not know anything about luck, apart from that the more I practice, the luckier I get.”
When studying successful companies in the field of digital transformation, we can conclude that they all have an approach and culture that goes beyond technology.
- Common vision and purpose in dedicated leadership team.
- Finding a business model and capability mix that helps the organization to earn money in the digital landscape – value proposition and customer expectations!
- Prepared for the unpredictable - continuous change!
- See IT/digital transformation as a cultural, leadership and governance challenge – beyond technology.
- Focus on people! Able to inspire and motivate employees to feel a passion for IT/digital and the new opportunities/innovation
- Doing their own analysis – trusting own judgement!
- Effective management of information
A few months ago, I visited a company experiencing the perfect storm of digital transformation. Stable and predictable business was a thing of the past. Among the new competitors was Google, Skype and Spotify – unicorns on a quest to disrupt. The question asked was how to run change in a chaotic business environment? Isn’t stability the pre-requisite for change? We agreed that there were no ‘period of stability’, and that they needed to embrace unpredictability and learn to navigate through chaos. A system of continuous change was set-up with a clear digital vision and purpose, and 8-week management sprint approach to harbour the change journey. New requirements, expectations and pre-requisites governed the change journey going forward in manageable parts. Prepare for the unpredictable with continuous change.
Another company I visited in 2017 had just started their digital transformation journey in great style focusing on automation of existing processes. But soon the pre-requisites changed, and the team needed to show new revenue streams to justify their existence. Digitalization should not only improve the past (current processes) but also pave the way for the future (new revenues). The new demand forced them to view themselves in a new light and be innovative. They created a new digital service that revolutionized their current business and started a new stream of revenue.
What we can learn from these two examples is that successful digital transformation is achieved by creating the right circumstances for change. An environment where change, innovation and digital is part of the everyday business and way of working. Unfortunately, many companies have not done their homework of defining what digital transformation means for them. Finding their true purpose and meaning in the digital transformation – going beyond technology.
“Victory awaits him who has everything in order—luck people call it. Defeat is certain for him who has neglected to take the necessary precautions in time; this is called bad luck.”
- Roald Amundsen, The South Pole
There are other excellent examples in the Swedish market where companies have good progress in their digital transformation journey. Companies that dare to challenge traditional, listen to the organization and clean up the waste of traditional way of working. What is common for these companies is the ability to look beyond technology (Internet of Things, Artificial Intelligence and other hot technologies) and actually create the right circumstance for change – by focus on the why and how. No technology in the world will give answers to those questions. The answers are often in ourselves, in our company leadership/culture and in our purpose and meaning of business. These answers are critical in creating commitment, on all levels, for a difficult journey ahead among leadership and employees to drive the digital transformation – the future is bright! The first step is always the most difficult step, but does it really have to be?
- Investigate whether your company is ready for digital transformation. How many of the seven criteria for success do you recognize in your organization?
- Learn from others. How have others address the same challenges that you are facing?
Approximately 50% of all companies on Fortune 500 have disappeared since 2000 due to digitalization. When studying companies who have failed to respond to digitalization, as they did not dare to challenge their current business model, leadership and way of working. They built their future on traditional “old” technology, business models and innovation that did not compete in the new digital era. To survive in the digital era, we must learn from the business failures and dare to take the first steps of digital transformation – going beyond technology. Do you dare to take that step?