Why Digital Transformation Efforts Will Continue to Fail

Earlier this year, Cisco Executive Chairman John Chambers was quoted as saying, “The majority of companies will be digital within five years, yet the majority of their digital efforts will fail.” I found that to be really compelling, especially when you consider that one of the major contributing factors for this failure is that many of the enterprise technologies companies are using were not designed for the reality of business today.

Given the enormous global dynamics I discussed in my first and second blogs on the topic of digital disruption, it’s not surprising that businesses have struggled to keep up. In fact, if your software vendor offers you a ten-year roadmap, then it’s probably using a crystal ball and educated guesswork. No one can predict the future—but, with the right technology you can build for it.

Cloud computing, ever-increasing processing power, falling storage costs, mobile computing, and the consumer internet have been among the catalysts for transformation. The cloud has transformed the notion of adapting to change, putting the responsibility back on technology vendors to create software that can be rapidly updated to stay in tune with evolving business needs.

Contrast these developments with old-world enterprise systems that were not built for change. They were designed as monolithic systems, require extensive customization to meet specific needs, and are painful and expensive to manage and update. In these systems, scaling up as businesses grow is a long and drawn-out process, leaving little room for businesses to think about innovation.

Both finance and business managers  need systems that can quickly and efficiently bring together actionable information around both their workforce and financial operations.

The finance software that comes from this era was designed to do the very specific jobs of automating transactions and accounting. It was created to report a very limited amount of data and for a small set of business stakeholders. For this purpose, and with the technology available at the time, it was very effective.  Yet that kind of approach is completely unsuited for the demands of today’s businesses. Both finance and business managers  need systems that can quickly and efficiently bring together actionable information around both their workforce and financial operations.

Why a Holistic Approach Drives Digital Transformation

Many organizations with significant investments in legacy technologies are understandably wary of a “rip out and replace” approach to ensure they have the systems they need to effectively transform their businesses. Yet those legacy technologies continue to hold them back.

I’ve heard this disconnect summed up perfectly by McKinsey: “More connected consumers, automated processes, and sophisticated analytics place unprecedented demands on IT functions. Many companies are struggling to cope, and they seek to deliver on new demands by adding piecemeal elements to their existing operations.”

Even some of the most established global brands have succeeded when they were willing to challenge their own assumptions and embrace technology transformation and self-disruption.

This “piecemeal elements” approach is championed by legacy vendors that are unable to keep up with changing requirements and have tried to adapt by bolting-on missing capabilities to their current technology stacks. Their finance and HR applications became a hodgepodge of acquisitions, connections, and middleware. While bolt-on applications may address specific functional gaps, they can’t support business transformation, and they make contending with rapid change pretty much impossible. They’re also not designed for how people work given that each bolt-on likely has a different interface and can’t easily share data with other systems (even ones from the same vendor).

Digital transformation is impacting all industries, yet companies can’t keep up if they’re too busy maintaining cobbled-together systems. They need a “start with a clean sheet of paper” mindset requiring coordinated rethinking at all levels of the business. That is understandably a scary concept for organizations with investments in legacy IT infrastructure. Yet in speaking to our customers, I’ve learned that even some of the most established global brands, with their roots in the legacy world, have succeeded when they were willing to challenge their own assumptions and embrace technology transformation and self-disruption.

Businesses looking to disrupt before they are disrupted have embraced cloud computing, understand the importance of real-time access to data, and use agile systems that can support changes to business processes and needs. These businesses are embracing disruption head on and see it as an opportunity, and those that can stay the course will not only survive, they’ll thrive.

Read Leighanne Levensaler’s three-part blog series on digital disruption in its entirety starting here.