And the combo of digital disruption and the 70% failure rate of digital transformation is a lethal mix
The current turbulence in retail, manufacturing, energy, transportation, media, and other industries is a classic trend during an industrial revolution. It has happened in prior industrial revolutions, although the technology drivers of change were different. Companies die during industrial revolutions. Obviously, they don’t die without a fight. Their demise often occurs despite the best efforts of reputable, visionary, and innovative leaders to transform their companies. This has been true of prior industrial revolutions as well. A few are successful but unfortunately, most are not.
Digital Disruption in the Context of Historical Change
We need to recognize that digital disruption is one and the same as the Fourth Industrial Revolution. The terms ‘digital disruption’, ‘digital transformation’ and ‘the fourth industrial revolution’ have been co-opted by product companies with smart marketing people. That strategy is understandable from a seller’s perspective, but in an era of overcrowded communication and misinformation, this confusing terminology is potentially hazardous to customers and users of digital transformation.
There is a risk that they mistake the need for continuous digital improvement with the urgency for transforming entire business models. Clearly framing the need for digital transformation in terms of being the strategy to survive and thrive in an industrial revolution (i.e., the fourth industrial revolution) is important. This is a big change, and we cannot afford missteps in the transformation in the face of it.
70 Percent of All Digital Transformations Fail
Digital Transformation is the modern-day fight to survive the existential threat of digital disruption caused by the Fourth Industrial Revolution. Half the companies on the Fortune 500 list will turn over in the next decade. The disruption is here, it’s massive and it’s urgent. Per Credit Suisse, the average life-span of an S&P 500 company today is 20 years, down from 60 years in the 1950s, and falling fast. Entrepreneurs, boards, executives, and public organizations are actively consumed by this issue. However, the sad truth is that 70% of all digital transformations still fail today. Some have put that number as high as 84%. That’s a shocking number, given the extremely high stakes. We must do better! The combination of an industrial revolution (i.e., Digital Disruption) and a 70% failure rate of a ‘vaccine’ (i.e., Digital Transformation) against it is worrying. The use of a disciplined methodology to improve the failure rate is critical.
What Should You Do?
First, separate the continuous improvement actions from the additional transformational projects which are necessary during disruptive times. No amount of continuous improvement on the old horse carriage would have led you to the internal combustion engine of the automobile, during the second industrial revolution. Learn the differences in methodology, which are needed to be successful in truly transformational projects, as opposed to the traditional continuous improvement projects. And finally, seize the moment! Every change is also an opportunity!
This is an excerpt by Tony Saldanha from his best-selling book, “Why Digital Transformations Fail.”