The fourth industrial revolution is an exciting time to be alive and innovative start-ups are proving size doesn't matter when you know how to put new technology to good business use. Meanwhile, some incumbent camps are falling victim to The Great Digital Illusion.
Established firms feel the early discomfort caused by new business models that have begun to deplete their market share and profits, and their attempts to stem the bleed is drip-fed by so-called “digital transformation”. The unfortunate reality for many of these firms is that they are well and truly lost in The Great Digital Illusion.
The Great Digital Illusion is common to many firms that grew up in the pre-digital era and is fuelled by digital initiatives that CEOs are hoping will prevent any further loss of market share and profits. They are the initiatives which workforces are being led to believe are transformational for the company they work for. They provide the oxygen that fuels a corporate feel-good factor, and the carbon monoxide that creates hallucinations of transformation.
Symptoms of The Great Digital Illusion
Common symptoms of The Great Digital Illusion include the emergence of siloed projects that have words such as cloud, mobile or any other digital label associated with them, but when the outcome neither disrupts markets nor protects against disruption.
This is typically accompanied by a placebo effect, which makes people feel good because the firm is “becoming digital”, but aside from this, the real condition of the company fails to improve. Until the next check-up however, when a new annual report and numbers are revealed, everyone feels that the future looks bright because the firm is “becoming digital”.
Many so-called digital transformations are merely digital change projects, with “digital transformation” printed on the tin. They look promising from the outside with their cool transformation label, but inside is nothing that will disrupt markets or defend against disruption. There's nothing transformational in the tin.
While the lofty leadership mission of digital transformation is typically to innovate and disrupt the market or defend against disruption, the strategy sitting under that mission is often only enough to create a better version of the past. It's enough to digitise marketing, to make operations more efficient and effective, to make products and services a little cheaper or faster, or to give the workforce access to new digital tools. Which is all good and positive – but will that truly disrupt the market or defend against disruption?
This is fake digital transformation. Projects that digitise the past, but which fail to transform a business in a way that disrupts markets or defends against disruption.
In an interview for MIT Sloan Management Review Professor Jerry Kane at the Carroll School of Management in Boston College asked;
“Where do you think companies are today in developing their digital strategies?”
Deloitte Center for the Edge co-founder John Hagel III responded with;
“I still think they’re way behind. Generalisations are always risky, but most of the executives I talk to are still very much focused on digital largely as a way to do “more of the same,” just more efficiently, quickly, cost effectively. But I don’t see a lot of evidence of fundamentally stepping back and rethinking, at a basic level, “What business are we really in?”
How Will Digital Disrupt or Protect Against Disruption?
Digital agencies (many previously known as advertising or marketing agencies) have done a tremendous job of selling the digital transformation concept to many thousands of companies that are desperately seeking solutions. And so they should be good at it, because after all, that's their business! But if what you offer customers is no longer attractive, if it's antiquated and obsolete in the face of new offerings, how is your digital marketing project going to disrupt the market or protect against disruption?
Extreme Example: No elaborate digital customer journey is going to persuade the public at large to start buying rolls of Kodak film again. So while marketing is vital, alone it'll be hard pressed to enable you to disrupt the market or protect you against disruption, if your customers have better options elsewhere and your business model is out of whack.
If your operations succeed at getting an improved version of your traditional products and services out to customers a little cheaper and faster, how is that so-called digital transformation going to disrupt the market or protect against disruption? And if your workforce can use their smartphone to book holidays and do other tasks online, will that so-called digital transformation really disrupt the market or protect against disruption?
On the other hand, these initiatives might be individual components in an overarching digital transformation strategy, all of which need to be integrated. But what exactly does that strategy, roadmap and transformation outcome look like for your firm? And who's leading that bigger transformation picture on a day-to-day basis? And how? Let's not lose sight of the fact that many of the reasons why transformations run into trouble have been haunting complex initiatives for decades. It's staggering but true, that teams are still making the same simple mistakes that previous generations made before them.
A Warm and Fuzzy Digital Transformation Feeling
In the grand scheme of things, the digital transformation label is cool, fun and sexy, and you'll be hard-pressed to find anyone's professional profile where the words “digital transformation” haven't crept in. And let's face it, digital transformation is often now an obligatory theme that needs to be communicated throughout many firms these days. If it's not there, people think there's something wrong. The digital transformation theme makes everyone from the CEO to the wider workforce feel good about themselves and what's happening around them. But how is that so-called digital transformation going to disrupt the market or protect against disruption? The reality for many firms is that it won't, because they've fallen victim to The Great Digital Illusion.
While a so-called digital transformation gives people a warm and fuzzy feeling, who has scrutinised and validated it as being a transformation that truly will disrupt the market or protect against disruption? Who in the firm can rise above The Great Digital Illusion cloud to see the light of day, and have the courage to throw a bucket of water over their peers and say; “snap out of this illusion before it's too late!”
Fake Digital Transformation
Core to The Great Digital Illusion are fake digital transformation projects, and the problem for many firms is that they've now invested heavily in pallet loads of these – but it's not just about the money. It's about the hearts and minds of the workforce that have been sold the digital transformation dream. It's about the strategy that the CEO has communicated in his or her annual report and sold to their board of directors and shareholders as being the solution that will turn around last year's disappointing numbers.
Fake digital transformation seduces entire companies into The Great Digital Illusion. For one or two years, executives and shareholders live in hope, while the wider workforce ride an exciting digital transformation wave. But eventually the writing will be on the wall, the reality will come to light, and you know precisely what will hit the fan. Because then it will have become blatantly obvious that the so-called digital transformation has neither disrupted the market nor protected against disruption. Because no new markets have been won, traditional markets have eroded even further, and profits have continued to plummet as early disruptors have gone from strength to strength, and new disruptive players have joined the game.
For many leaders, only then will they realise that their so-called “digital transformations” were merely tins of digital change projects with “transformation” labels on the outside. They'd been eating fake transformation all along and no one noticed or spoke up about it.
Legitimate Transformation
Making digital core to creating a new business model is one form of legitimate digital transformation of the business. Another is the collective portfolio of digital projects, which when integrated in the right way, will disrupt the market or protect against disruption. But the overarching strategy and roadmap should clearly communicate how the digital transformation portfolio will bring about that new future.
Isolated digital projects might only be siloed digital change projects at best, which alone are neither transformational nor capable of disrupting or protecting against disruption. Let's not forget that two years ago, the likes of Gartner and IDC suggested this would happen, and it's all playing out as they predicted.
Now is the time (before it runs out) for leaders to start being honest with themselves and to put their so-called digital transformations to the test.
Questions to Ask:
Start by asking “how is our digital transformation going to disrupt the market or protect against disruption?”
Dig deeper with questions such as;
- Will our digital transformation eliminate our industry’s customer pain-points and complexity?
- Will our digital transformation cut our prices by at least 80% and still enable us to make money?
- Will our digital transformation make our dumb products and services smart?
- Will our digital transformation build a platform where buyers, sellers and innovators (including our competitors) in our industry do business together?
- Will our digital transformation transform our physical products and services into digital offerings?
And for every answer of “yes” you need to ask Why? How? and When?
Invite those responsible for leading the transformation to articulate the overarching strategy, roadmap, its governance and risks. Get to understand how the bigger digital transformation picture is on track to disrupt the market or defend against disruption. Get clear on how innovation has been fully leveraged to underpin the new future that's being created. And what exactly does the innovation process they've been using look like? Because as vital as a HR process is to HR, and a Finance process is to finance, innovation needs process too – as does transformation. So get clear on what innovation and transformation processes your firm is using.
Remember: change fixes the past, while transformation creates a new future.
So you need to be asking “how will our digital transformation create a new future? – and not just a better version of the past” and “how will this disrupt the market or defend us against disruption?”.
Snapping Out of The Great Digital Illusion
Waking up from being under The Great Digital Illusion might be a hard pill to swallow. That said, it's far better to swallow this pill now than continue believing that all your digital projects are in fact digital transformation. While witnesses in court proceedings swear to tell “the truth, the whole truth, and nothing but the truth”, business leaders need to do the same and speak up about fake digital transformation.
When Volkswagen installed sophisticated software known as “defeat devices” in diesel vehicles, they cheated their customers and their people. They didn't tell the truth. The CEO and his team broke trust by not being honest. Now, every leader with a degree of management oversight of a digital transformation, has a moral responsibility to open up their initiatives labelled “digital transformation” and ask; “how is this going to disrupt the market or protect us against disruption?” They have a responsibility to snap their executive colleagues out of The Great Digital Illusion and expose any fake digital transformation.
Leaders don’t always face pleasant choices, and most leaders are quite new to transformation, so when fake transformation is put in front of them, often they don't know the difference between that and the real thing. But if this post has made you sit up and think about what's going on in your company, remember that people respect leaders who admit their mistakes and who set about fixing things. Even if bringing fake digital transformation to the surface makes you unpopular in your firm, and it probably will, you can at least know that you've acted with integrity and honesty, instead of continuing to evangelise what is only fake digital transformation in disguise. Which ultimately won't enable your firm to thrive, let alone survive for very long, in the fourth industrial revolution.
Digital Projects Are Good – But Stay Honest
There's nothing wrong at all with digital change projects, because they bring about much needed small change, which is enabled by technology. They often save some cash and introduce improvements, so companies really need these projects. But don't mislead the workforce and stakeholders into believing that all digital projects represent digital transformation that will disrupt the market or protect against disruption, if in fact they stand little if any chance of doing that. If they're part of an overarching transformation that's fine, but be clear about what that looks like and communicate it well.
Then be honest. Be honest with what you find. Be honest about any fake digital transformation promises that have been made, then set about the real business of legitimate digital transformation that will ensure your company's ability to not only survive, but also to thrive in the decade ahead. And let your traditional competition live under The Great Digital Illusion fuelled by their own tins of fake digital transformation.
Learn to Spot Fake Transformation
The world has been sucked into fake news and now some companies have fallen prey to fake digital transformation and entered The Great Digital Illusion. The question is, who will have the courage to speak up and break the illusion?
You might also like to read Dangers of The Transformation Illusion.