Digital transformation isn’t a choice today: any business that wants to survive and prevail during the Fourth Industrial Revolution is going to have to accomplish it. But there’s a huge difference between a small, traditional company and the digitally native powerhouses we consider models of this digital age. The key is looking at your own business — and finding the business model that fits — to chart the best course.
There are plenty of examples of companies that are doing it right as well as wrong. But given that only 30 percent of companies are succeeding at digitally transforming themselves, there’s a lot to learn.
In the new book, “Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead“, expert consultant and digital transformation veteran Tony Saldanha provides all the steps and examples you need to embark on a successful digital transformation. Saldanha has been involved in the process for decades, helping to usher Procter and Gamble into its next generation. He’s been involved in operations, digital transformation and IT, and is a trusted advisor and go-to speaker.
Saldanha recently sat down with Young Upstarts to share his insights about digital transformation — and how to get it right.
Here is some of our conversation:
1. How did your own experience influence your understanding of digital transformation?
Over the past three decades I’ve been fortunate to have had a ringside seat to the evolution of the IT and Shared Services industry, which is at the heart of digital transformation. When I left Procter & Gamble as VP in Global Business Services and IT after a career of 27 years, I’d been associated with setting up the first shared services operation in the Philippines in 1993 — program managing an $8 billion dollar outsourcing deal. I’d led the systems integration as CIO of the Gillette company into P&G in 2005, and run multi-billion dollar IT and Shared Services operations in every region of the world.
In terms of technology and culture these transformations were only a prelude to the digital transformation involved in creating the next generation of internal business operations for the entire industry — working with the top 5-10 IT services companies and hundreds of startups from the biggest venture capitalists. My experience of working with cutting-edge technology including AI and the latest thinking on organizational change really shaped the book. My goal was to present a practitioner’s view of digital transformation, presenting first-of-its-kind thinking on a complex topic, and simplifying it into steps and checklists.
2. Talk about the Fourth Industrial Revolution: What does it mean, and what are the implications for businesses now?
That’s a great question. We’re in the midst of the Fourth Industrial Revolution as defined by the World Economic Forum. When I first heard about it a few years ago, I had to look up the prior three revolutions — caused by the growth of steam engines, then electricity, and then the internet. The fourth is caused by the melding of digital technologies with the physical, biological and social worlds. Just as electricity transformed every industry from factories to communications, digital technology is now disrupting all industries as well.
The implications of this are huge: about 40 percent of the Fortune 500 will not exist in 10 years. In the next 15 years about 45 percent of all jobs, especially in the manufacturing and services sectors, will no longer exist in their current form. That’s disruptive enough, but the knock-on effect on societies and communities may be even bigger. Industrial revolutions produce big winners and unfortunately big losers too, and we can expect this again. Undergoing successful transformations can enable organizations and individuals to be among the disproportionate winners in the Fourth Industrial Revolution.
3. Can you explain what you mean in terms of taking a disciplined approach to digital transformation?
Unlike processes in aviation like airplane takeoffs or medical procedures like blood testing, digital transformation is still as much an art form as it is structured science. And the success metrics show that. While 99.999999 percent of all takeoffs are successful, an estimated 70 percent of digital transformations fail. To be very clear, we don’t need the same reliability as the aviation industry here, but given the criticality of digital transformation in the Fourth Industrial Revolution, a mere 30 percent success rate is terrible. But we can learn from the methods that made aviation and medicine more reliable.
The book applies this kind of thinking, identifying ten specific disciplines that can dramatically make digital transformations more successful. They range from clarity of goal setting to disruption empowerment, to the iterative execution of projects, to culture change. I also include several questions in each discipline that can enable success in a given situation.
4. Can you talk about some iconic companies that have done digital transformation right? What can we learn from them?
Before I do that I’d like to draw a distinction between learning from the usual suspects — like Amazon, Netflix, Adobe, Amazon and Google, who are digitally astute companies already known as models organizations — and from newer success models, like Domino’s Pizza. Companies like Amazon were built on a platform of digital systems (e.g. ordering or logistics systems). But most traditional companies weren’t built as digitally native. They need to reinvent themselves as digital organizations. The book includes dozens of examples of successes and failures from all types of companies, but Domino’s is notable.
For decades, Domino’s played second fiddle to market leader Pizza Hut. And then in the middle 2000’s Domino’s began a sharp decline. Its product quality, sales and share price tanked — the share price in 2008 hit $3, as compared to $250 today. The company embarked on a massive digital transformation program, starting with eCommerce and digital marketing. While its digital transformation journey is still in progress, there’s a ton of lessons we can pick up, including the importance of top-down alignment to digital plans, clarity and measurement of results, and customer-centric strategies.
5. What would you say to leaders who are reluctant to commit to digital transformation — for instance, that are trying to differentiate themselves from Amazon and other digital giants and maintain their own brand?
We need to separate the question of whether digital transformation is essential from the question of which business model to adopt (e.g. should all retail companies become like Amazon).
Hopefully, the first question on the criticality of digital transformation isn’t still in debate in the context of the Fourth Industrial Revolution. That would be like debating whether to stay with horsepower or shift to an internal combustion engines during the Second Industrial Revolution.
But debating the second question — about your business model — is absolutely valid. Most successful businesses should distinguish themselves, but they can and should use digital technologies to do so. Home Depot is a good example. It’s done a great job of continuing to distinguish itself in its local expertise of home improvement, while using digital technology for improving operations as well as in omni-channel sales.
My advice would be for leaders to rethink their business models using what I call “digital leverage points” in the book. These are strategic areas where digital technology can provide massive benefit to their specific organization. So, for example, if personal customer advice was Home Depot’s strong point previously and it used 3D visualization technology to help potential customers see what their home might look like after a DIY project, that could be a distinctive digital leverage point.
The key message here is that digital technology opens up unlimited creative possibilities. By following a disciplined approach to select the right digital transformation goals (as in the example above), and pursuing a rigorous execution, most organizations can turn a disruptive threat into an exponential opportunity. My hope is that the latest approaches laid out in the book will enable just that.