3 eras of digital transformation: Are we facing fatigue?

by Trenton Moss on 31 October 2018

Mention the 'D' and the 'T' words together and more and more people will roll their eyes at you. We've been talking about digital transformation for years, yet no traditional business seems to have fully 'transformed' yet. Why is it so many people seem bored of talking about digital transformation?

So what exactly do we mean by digital transformation?

Before I go on, let me explain what I believe digital transformation actually is:

Taking on the culture, processes and ways of working of the companies born in the digital age.

The reason the likes of Amazon and Google (i.e. companies born in the digital age) are hugely successful is because, unencumbered by legacy operating models, they've been able to develop and invent their own ways of working.

CEOs and senior leaders of companies born in the digital era don't tend to take on a command-and-control top-down style; instead they enable their staff to think for themselves. Leaders don't necessarily make the decisions, they provide guidance and outcomes of what they want and decision-making is delegated and decentralised. This means people are able to get things done very quickly, working at pace. 'Survival of the quickest' is not just another digital buzzphrase!

Digital transformation means no longer working on large-scale projects, but rather continuous product development, iterating and evolving on an ongoing basis.

By 2013 consumers were benefiting from being able to self-serve and were demanding that businesses stopped forcing them to call or visit a store.

Phase 1: Digital transformation momentum (2010-2013)

Around 2010, with the initial shock of the recession starting to subside, businesses began to once more look outward with many deciding it was time to drive forward improvement.

There were a number of external factors which made senior execs sit up and realise that digital was going mainstream and was starting to affect their business in a major way:

  • Smartphones, apps & self-service went mainstream
    Mobile proliferation had jumped to 92% of households by 2013, half of them smartphones. More and more consumers were benefiting from being able to self-serve and were demanding that businesses stopped forcing them to call or visit a store to complete simple tasks.
  • Rise of social media
    Facebook went from 145m users in 2008 to 1.2bn in 2013 and Twitter from 6m to 240m users in this period – customers had a voice and were using it to publicly share good and bad product experiences. Companies could no longer advertise their way out of having an average or poor product.
  • Numerous bankruptcies
    Kodak, Blockbuster and numerous other household-name brands were brought to their knees by digital disruption, with other companies such as Nokia and Blackberry barely surviving. The question of which industries and businesses were next was regularly being asked.

Internally, tech-savvy staff were also starting to question old-fashioned ways of working - "Why are things so easy in my consumer life but so complex at work?" - further adding to the pressure on execs and the C-suite. They were now paying attention and digital transformation was gathering momentum.

Phase 2: Digital transformation endeavours (2014-2016)

CEOs and boards started to take action and we saw 2 things happen:

  1. Chief Digital Officers (CDOs) started to be appointed en masse
  2. The large consultancies came along with their programmes of digital transformation

As is so often the case when faced with large problems, execs can sometimes expect a silver bullet to solve their challenges. Unfortunately, neither their CDOs nor consultancies were able to provide this.

CDOs and the consultancies made it clear to CEOs and boards that massive change was needed with typical recommendations including:

  • Move to a product-focus with cross-functional teams working autonomously and continuously on product development, with a relentless focus on customer needs
  • Replace intertwined legacy systems with flexible smaller systems linked together with APIs
  • Lose hierarchical decision-making and allow people lower down in the business to be making decisions (they're way better placed to do this as they're on-the-ground and are far more in-the-know than senior managers)

Suddenly, the C-suite started to understand the enormity of the change required. Their businesses weren't magically transformed as they perhaps had hoped, but had a massive amount of work to do and they needed to decide if they were up for the challenge.

Almost every business not born in the digital age needs to digitally transform.

Phase 3: Digital transformation fatigue (2017-now)

The prospect of sorting out legacy systems, outmoded hierarchies and dated ways of working combined to scare a lot of senior leaders away from digital transformation – they'd learnt just how long it would take to do (think 10+ years) and how much it would cost (think sustained reduced quarterly profits).

They'd hired their highly-paid CDOs and paid a lot of money for their consultancies... and they weren't transformed. Boards started to wonder what their CDOs and consultancies were actually doing as significant change wasn't really happening... so they grew tired – fatigued even – and their interest waned.

Almost every traditional business (i.e. those not born in the digital age) needs to digitally transform... but hardly any are talking about digital transformation anymore. And hardly any are pushing through digital transformation programs from the top-down.

Instead, more-and-more digital leaders have started focusing on problem statements, ideating around how to improve operational efficiency and/or revenue and then rapidly launching PoCs (proof-of-concepts) and then MVPs (minimum viable products).

This bottom-up approach will, over time, allow businesses to digitally transform... but without anyone mentioning the words 'digital' or 'transformation'.

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