MIT Sloan: Why so many business digital transformations fail
Digital transformation is probably the most talked about business topic these days but it’s the area where most organisations fail to achieve relevant results. More than 70% of enterprises fail to create any value from their digital transformation efforts and fail to meet their business objectives. So why is that?
It turns out that when it comes to digital transformation, companies focus only on the technology aspect of the journey, the new sophisticated software, machine learning, AI, big data, cloud, but fail to realise that the process of ‘transformation’ requires a much more comprehensive approach.
And it’s an approach I call the three pillars of Digital Transformation:
- Strategic transformation
- Operational transformation
- People and organisational transformation
When I consult companies embarking on a digital journey, I ask them in the first instance to carefully consider a few strategic questions:
- What existing problems will the new technology solve?
- How will our current business model be affected by technology?
- Will our value proposition have to adapt?
- How will our business activities, resources and partners be affected?
- What organisational capabilities are required to address these future challenges?
- How will our organisation engage with our current and future customers and stakeholders?
- How would current standard operating procedures have to change?
- What type of tech investments will we need to make?
- How has technology disrupted our industry and what threats does it pose to our existing systems?
- Are we aware of the complex nature of the journey ahead?
I find, in most cases, their answers are not particularly well articulated and while it is impossible to have crystal clarity on such a complex journey ahead, my advice would be for companies to really pay attention to these questions at this stage and to truly consider the implications of digital transformation on their current business model.
Digital transformation progress is not a straight line, but a journey of fast constant experimentation driven by trial and error, and developed in tight collaboration with the operational and cultural pillars.
The reality of a digital transformation journey is that most focus is given to this pillar: what technology to buy, how to use it, who will use it, for what purpose, etc. But in order to succeed and beat the failure odds, companies have to carefully consider these questions too:
- What existing processes and operations have to be reengineered to support the new technology applications?
- How will the new technology improve quality and efficiency of these functions?
- How will traditional work functions have to be redesigned with digital technologies in mind?
- Have we started to comprehend the implications (benefits, costs, and risks) of digital tools?
- Have we started to formulate and execute policies in response to the risks and opportunities presented by digital tools?
Here, companies must realise that digital technology cannot be just simply applied to existing processes, procedures, SOPs and policies. All of these areas have to be completely reengineered and reconsidered in order to complement the technology support.
My favourite saying is, ‘The job is easy, the people are not’ and I can extend this quote to ‘Digital transformation is easy, people transformation is not’. All the data shows that culture is the number one hurdle to digital transformation because digitalisation will affect the corporate culture, the organisational structure, the internal capabilities needed and the relationships between departments. Digital transformation requires extensive collaboration and in silos organisations, collaboration is not always an easy task.
At its heart, digital transformation is a people transformation and companies therefore must consider the following questions in the process:
- Do we have the right culture to adopt change?
- Do we have senior management and board alignment and support?
- Are we truly ready to embrace risk and tolerate failure? To embrace new ways of doing things? To accept speed over perfection in the setup stage?
- Are we aware and prepared to deal with the natural resistance to change that most people and organisations exhibit?
- Do we know how to encourage, measure and reward effort in this new environment?
- Are we ready we empower and trust our staff to work productively in this new environment?
- Are we aware of the type of capabilities we need to remain relevant and ahead in this digital future?
- Do we know how to build and constantly train internal capabilities to perform these tasks and stay abreast of the coming changes in the digital landscape?
Unfortunately, most leaders underestimate the importance of culture and the need for a change management strategy, and like MIT Sloan Professor Deborah Ancona says: “Overlooking cultural change is the biggest mistake in a digital transformation ... Without addressing culture, transformation will probably fail”.
IMD Professor Michael Wade, once said: “There isn’t a single ‘make or break’ step in a digital transformation! Success can only come through careful orchestration of organisational capabilities in the services of a clear transformation vision.”
Digital transformation at its core is not technology transformation, but rather a careful orchestration and balancing of the strategic, operational and cultural pillars.
But it's also important to note that conceiving, organising and executing a comprehensive digital transformation plan to address these organisational challenges will require significant mind share of the senior leadership team and substantial resources of the entire organisation.
Or in layman terms, digital transformation is not a side dish. Digital transformation is the table where all the dishes are served.
About Prof. Loredana Padurean
Prof. Loredana Padurean is the Associate Dean and Faculty Director for Action Learning, Innovation and Entrepreneurship at Asia School of Business established in collaboration with MIT Sloan in Kuala Lumpur, Malaysia“. Her work focuses on 3 areas: entrepreneurship, innovation and digital transformation and “smart and sharp” skills. Prof. Loredana teaches in the MIT Sloan Executive Education program, she is a public and TEDx speaker, an enthusiastic mediocre gardener, a lover of animals and vegan food.
Rainmaking + ESG Launch Supply Chain Resilience Accelerator
Rainmaking, one of the world’s leading corporate innovation and venture development firms that create, accelerate and scale new business, has partnered with Enterprise Singapore (ESG), a government agency that champions enterprise development, to launch Singapore’s first ‘Supply Chain Resilience Accelerator’.
The new programme will unite startups and enterprises to boost scalable technology solutions that help fuel supply chain resilience by addressing pain points in transport and logistics.
Over the last 13 years, Rainmaking has launched 30 ventures totalling US$2bn, including Startupbootcamp. Having invested in over 900 startups that have raised more than US$1bn, Startupbootcamp is one of the world’s most active global investors and accelerators.
The new programme looks to help build more resilient supply chains for Singapore’s burgeoning network of startups by leveraging its advantageous position as a global trade and connectivity hub. As part of the Supply Chain Resilience Accelerator programme, no less than 20 startups with high-growth potential will have the opportunity to become a part of Singapore’s vibrant ecosystem of startups.
Calling Supply Chain Solution Startups!
The programme will kick off with an open call for startups who specialise in supply chain solutions for end-to-end visibility, analytics, automation and sustainability.
Applicants will then be shortlisted and receive nurturing from Rainmaking, fostering valuable engagements with corporates to drive scalable pilots with the aim to stimulate investment opportunities.
“Covid-19 exposed the fragility of global trade, and the Supply Chain Resilience Accelerator is our opportunity to spot weak links and build back better. Piloting outside tech can be an incredibly efficient way to test viable solutions to big problems, provided you de-risk and design for scale. Our programme does precisely this by helping corporate decision-makers and startups to work on compelling business opportunities, anticipate operational risks, and ultimately co-create solutions fit for wider industry adoption,” said Angela Noronha, Director for Open Innovation at Rainmaking.
Pilots will run from Singapore, with the objective that relevant organisations may adopt successful solutions globally. To that end, Rainmaking is currently engaging with enterprises specialising in varying industry verticals and have expressed interest in partnering.
“Even as we continue to work with startups and corporations all over the globe, we are so pleased to be anchoring this program out of Singapore. With a perfect storm of tech talent, corporate innovators, and robust institutional support, it’s the ideal launchpad for testing new solutions that have the potential to change entire industries. We look forward to driving the transformation with the ecosystem,” added Angela Noronha.
One of the first selected corporate partners is Cargill, a leader in innovating and decarbonising food supply chains.
"Cargill is constantly exploring ways to improve the way we work and service our customers. Sustainability, smart manufacturing and supply chain optimisation are key areas of focus for us; exploring these from Singapore, where so many key players are already innovating, will help us form valuable partnerships from day one. We look forward to joining Rainmaking and ESG on this journey to work with, support, and grow the startup community by keeping them connected to industry needs,” said Dirk Robers, Cargill Digital Labs.
In order to raise awareness on the importance of building resilience and how technology can be leveraged to mitigate risks of disruption, industry outreach efforts will include fireside chats, discussions and demo days.
In July, Rainmaking will host a virtual insight sharing event for innovation partners as well as a ‘Deal Friday’ session that connects businesses, investors, and selected startups with investment and partnership opportunities.
Programme events will also benefit Institutes of Higher Learning by offering exposure to how advanced practitioners leverage new technologies to transform traditional supply chain management and share real-world case studies and lessons learned, better equipping next-gen supply chain leaders.
“As an advocate of market-oriented open innovation, we welcome programmes like the Supply Chain Resilience Accelerator, which aims to help companies resolve operational pain points, strengthen supply chain resilience and spur growth in a post-pandemic world. With a strong track record in driving open innovation initiatives for the transport and supply chain industry, we believe that Rainmaking’s in-depth knowledge of the ecosystem and network of global partners can complement Singapore’s efforts in accelerating our business community’s adoption of tech-enabled tools, to better manage future disruptions and capture opportunities arising from shifts in global supply chains. This will in turn help to strengthen our local ecosystem and Singapore’s status as a global hub for trade and connectivity,” said Law Chung Ming, Executive Director for Transport and Logistics, Enterprise Singapore.