Can You Really Afford Digital Transformation?

If you work for any bigger company chances are you have recently started a transformation project. It is also likely that the idea of transformation is still somewhat fuzzy but it is generally believed that the transformation is about a change that is somehow related to digitalization.

Digital transformation is a great example of a change initiative that is more likely to fail than succeed, even if planned, communicated, and managed very professionally.

The pressure to change is usually created by a completely new kind of competition. Any established business has a digital age competitor. It is probably global. It has a completely different business model. It is rewriting the rules of the game. The new contender appears completely strange to anyone inside the old, established business.

“Any established business has a digital age competitor.”

If you have managed your company professionally your people know by heart your propaganda about the excellence of their employer. Therefore, they will definitely not accept the fact that some strange American startup could make their great employer irrelevant. The threat does not appear real.

Resisting the Change in Business

The more successful your business is, the more likely your transformation is to fail. People explicitly resist change because “change” sounds very much like “job cuts”. People implicitly resist change because it implies change of personal working habits. CEOs tend to believe that people come to the office in order to do business. Managers tend to believe that people come to the office in order to execute processes.

The truth is that most people come to the office in order to do tasks and repeat deep-rooted habits. If “change” happens, our tasks and habits are not going to have a context any more. That sounds dangerous.

The best of the strategic leaders may be capable of seeing the trends, analysing the forecasts, and envisioning the future. For someone working busily on his or her daily tasks, the scope is narrower and the future is shorter. It is not fair to assume he would see and believe the same things the strategic leader is able to see.

Think Nokia for Failed Change Management

Change management professionals say that the only way to ignite a major change is to create a crisis, to make the present state intolerable. But if you are managing a reasonably well performing business it does not actually make any sense.

Stephen Elop tried that in Nokia. His “burning platform” speech was a textbook example of professional change management. But he only managed to further paralyze his people and, as a bonus, announce to the whole world that his products are actually cans of shit. Still, Elop did everything by the book.

“Meanwhile, don’t waste efforts transforming your old business.”

Igniting and sustaining a change consumes a wealth of energy. The change is likely to take too long, happen only partially, and cause substantial damage.

Run your Digital Transformation as a Startup

I think most companies should forget about their transformations. Instead, set up a completely new company. Start it earlier than you would start your transformation. Run it as a startup. Let it write its own rules. Do not allow the old business to constrain it. Let your startup die if it does not perform and set up another one.

Meanwhile, don’t waste efforts transforming your old business. Milk it, optimize it for short-term profit, cut it smaller and smaller so that its cash flow can fund your startup.

Building a business from scratch may sound slow, expensive and risky. It is indeed. However, it is most likely faster, cheaper, and less risky than transforming an incumbent.