Saturday, July 22, 2017

Digital Transformation: Five myths

Stephen J. Andriole is a Professor of Business Technology at Villanova University in Villanova, Pennsylvania. Professor Andriole has addressed five myths about digital transformation that could impact how a business goes about transitioning.

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Andriole participated and oversaw digital transformation both in the public and private sector. He served as the director of the Cybernetics Technology Office of the U.S. Defense Advanced Research Projects Agency (DARPA); and as Chief Technology Officer (CTO) and senior VP of Safeguard Scientifics Inc. He was also CTO and senior vice president for technology strategy at Cigna Corp.
Digital transformation is the transformation of business activities, processes and models by the use of digital technologies. Andriole's writes in a recent article that there are five common myths about digital transformation. He notes that many boards of directors and management teams see digital transformation as a way to efficiency, innovation and competitiveness. Andriole says his own experience shows that the path to transformation is a risky one. In the vast majority of cases he says that organizations made significant errors in trying to implement the transformation. The transformation must not only be well-planned and executed but also enthusiastically adopted by upper management.
Andriole teaches and directs research at Villanova on digital transformation and emerging technologies. He collects data about technology adoption and digital transformation trends in the course of his work, lending a great deal of expertise to his discussion on businesses looking to transition.
Andriole claims:I’m constantly hearing about the “amazing,” “fabulous,” “terrific” and “incredible” projects under way with the potential to “revolutionize” companies and “disrupt” whole industries. But when I probe survey respondents for key details about their initiatives, I often find that there is still confusion about the process. To replace this confusion with some clarity, I have distilled my observations and experiences into five myths about digital transformation — each of which has a corresponding reality. If you understand these myths, you’ll be less likely to fall prey to the hype about digital transformation and be more aware of how arduous the process really is.
The first myth is that every company should digitally transform. Not every company, process or business model requires digital transformation. The digital transformation process goes far beyond a simply software upgrade or improvement of the supply chain. It may be a profound shock to a reasonably functioning system. The business must ask if the business processes can be modeled using tools that enable creative, empirical simulations. The company must ask if it can model its existing processes. Andriole claims many cannot. But if you cannot then it is unlikely that you will be able to easily digitally transform all of the processes.
Even if a company could digitally transform its processes does not mean it should. The company should be able to make a case in terms of profit for adopting the digital transformation. If existing business rules, processes, models and systems are working well it makes no sense for the company to digitally transform them. The transformation may be costly and time consuming. No doubt those whose livelihood depends upon marketing and implementing digital transformation will try to convince companies otherwise.
A second myth is that digital transformation gives greater emphasis upon emerging or disruptive technologies. In reality, Andriole claims often the short-term transformation is through more conventional technology. This is because in many cases the existing practices and models of business are outdated. Andriole uses as an example Uber Technologies and Airbnb which have to a degree supplanted hotels and taxis. While emerging technologies may have helped them it was existing technologies, such as mobile phones, apps, and websites that were optimized for quick transactions and location tracking that allowed them to make significant gains over hotels and taxis. These factors helped them offer comparable services to hotels and taxis at lower costs.
The third myth is that profitable companies are the most likely to launch successful digital transformation policies. Adriole argues this is unlikely to be the case. If the company is doing well with its existing processes it is quite unlikely to try out a costly, risky enterprise, that will drastically change its existing system. If some thing is working well, it might be reasonable to make some minor changes but not any wholesale digital transformation. A more likely candidate is a failing company desperate to try anything to get back on its feet. Proponents for digital transformation in a profitable smooth running company are likely to find themselves the object of a political backlash if they try to promote digital transformation. If change is attempted and mistakes are made the promoters will soon be out of the company. Another good candidate for digital reformation are startups with money to burn and which are willing to take risks. It is the newcomers, not well established companies, that are the most likely to adopt digital transformation.
The fourth myth is that companies need to disrupt their industry before someone else does. Yet leading industries in a given market are unlikely to change their business models drastically. While such leaders may describe themselves as innovators and disruptors they usually are not. I presume they may have been such before they came leaders. One might argue though that unless they do change as the proponents of digital transformation argue, they will not remain as market leaders. Those supporting digital transformation may be right. Andriole only is showing that the market leaders are unlikely to change not that they may not need to in time if they do not want to be overtaken by companies that are more willing to take risks. The fourth myth is not really a myth. The myth is that market leaders will adopt technology to disrupt their industry before someone else does.
The fifth myth is that executives are eager for digital transformation. Andriole claims that the actual number wanting such transformation are relatively small especially in public companies. No doubt champions of digital transformation wish this were not so. Andriole claims that many executives are suspicious of digital transformation and worry that the changes might effect their status within the company. They also worry about the complexity of the process and how long they take to execute. Executive of companies that are doing well may be quite unwilling to radically change what is working out well. Even executives who speak favorably about adopting the process may in practice do little to support attempts to implement it. Those within the company who are comfortable with and advocate the new technology may be seen as threats to the present executives.
The champions of digital transformation may have difficulties marketing their wares to many businesses in the face of some of the issues that Andriole describes.