Name one legacy entity that really has "digital transformed itself." Note that better return on investment; happier customers; happier employees; better productivity or higher market share, often said to be ways to meassure digital transformation success, actually can be used to measure success of all other efforts to make any business run better.
If any firm cites better performance on those and other metrics because it uses "digital" or "information technology," how is that in any way different from past applications of IT to improve performance?
In other words, is anybody really pursuing digital transformation, or simply spending more on information technology than they used to, to do more things "using the internet" or "online" or "faster."
Many note that “Digital transformation” (DX) efforts fail at about 70 percent rates. In truth, failure to achieve the fullest and deepest meaning of digital transformation might be virtually 100 percent.
Many argue that DX is, in principle, different from earlier uses of information technology, which were mostly about efficiency and automation. That might be overstating matters, but failure rates for IT projects are often as high as 70 percent.
Perhaps we should simply admit that change efforts fail most of the time, in any sphere.
Perhaps we also should admit that what people now call “DX” is not what most entities are attempting.
Digital transformation is almost-always said to involve big changes in culture, technology, external and internal processes to achieve a revolution in business models. Indeed, the term “transformation” virtually requires it.
Most often, most entities saying they are engaged in digital transformation actually are doing something else. Which is to say, they are applying IT mostly to improve or modify existing processes, without fundamentally changing their revenue models, customers or value chains.
The point is that, no matter what they say, most entities claiming they are doing “digital transformation” really are not doing so. They are applying digital technology, yes. Trying to improve customer experience; product features; response times and efficiency.
Few really aim to revolutionize their revenue models, change customers, sell products that are not what their legacy entails.
Digital transformation is said to be an effort to change business models, while applied information technology earlier was mostly about efficiency and automation.
That claim, like most generalizations, has to be qualified.
One would be hard pressed to argue that Apple Computer and Microsoft in the early days were engaged in applying technology to improve the efficiency of their businesses. Instead, they were doing transformation: using technology to create new business models and products.
More recently, one can make the same argument about Amazon, eBay, Airbnb, Uber, Meta, Netflix or Alphabet: each is a transformation, not an effort to be more efficient, in a direct sense.
To the extent the definition of DX is true, the former aims to create new and different value; new products and services. In this view, earlier uses of applied information technology mostly aimed to produce lower operating costs.
In a sense, this is the classic distinction between “effectiveness” and “efficiency.” Some might argue that earlier uses of information technology mostly aimed to “do things faster and at less cost.”
In that analogy, digital transformation aims to “do the right things, not existing things faster.”
Still, it is arguably correct to say that most organizations and firms will never move beyond the older “efficiency” focus, because most entities will never really change their business models. They will keep doing what they have been doing, in that regard.
If one believes that the crucial attributes of DX are changed business models, and not “merely” better customer experience, profit margins, product features and attributes, then few firms will ever achieve DX.
So perhaps it is not surprising that 70 percent to 74 percent of DX projects and efforts fail.
Of the $1.3 trillion that was spent on digital transformation--using digital technologies to create new or modify existing business processes--in 2018, it is estimated that $900 billion went to waste, say Ed Lam, Li & Fung CFO, Kirk Girard is former Director of Planning and Development in Santa Clara County and Vernon Irvin Lumen Technologies president of Government, Education, and Mid & Small Business.
That should not come as a surprise, as historically, most big information technology projects fail. BCG research suggests that 70 percent of digital transformations fall short of their objectives.
From 2003 to 2012, only 6.4 percent of federal IT projects with $10 million or more in labor costs were successful, according to a study by Standish, noted by Brookings.
IT project success rates range between 28 percent and 30 percent, Standish also notes. The World Bank has estimated that large-scale information and communication projects (each worth over U.S. $6 million) fail or partially fail at a rate of 71 percent.
McKinsey says that big IT projects also often run over budget. Roughly half of all large IT projects—defined as those with initial price tags exceeding $15 million—run over budget. On average, large IT projects run 45 percent over budget and seven percent over time, while delivering 56 percent less value than predicted, McKinsey says.
Beyond IT, virtually all efforts at organizational change arguably also fail. The rule of thumb is that 70 percent of organizational change programs fail, in part or completely.
The big observation, however, is that digital transformation--in the sense of new business models--will rarely succeed, in the broad sense of creating entirely-new revenue models. A firm that makes its money selling autos and trucks will rarely become something else, no matter how much technology is embedded in the business. Airlines never become something else, no matter how intensive their IT efforts.
Name any legacy firm, in any industry, that has truly “transformed” its business model by becoming something else. Try it. You will find scarcely a handful of firms that could make the claim. Perhaps you cannot name even one firm that has achieved a transformation of business models.
Most firms can only say they are better able to customize or personalize, extend modes of customer interaction or change processes faster. Few, if any, legacy firms can make the claim they now sell to different customers, earn their money in different ways, by selling different types of products.
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