Is Your Digital Transformation Effort Doomed?
June 22, 2021
“Companies either transform or die in industrial revolutions,” writes former P&G executive Tony Saldanha in his recently published book Why Digital Transformations Fail. “Digital transformation is our current generation’s attempt to transform in the face of the Fourth Industrial Revolution. However, the sad truth is that 70 percent of all digital transformations still fail today… a shocking number, given the extremely high stakes,” he adds.
What accounts for such a high failure rate? An inadequate strategy; competitive pressures; technology; talent; culture? While all these factors are important, “The surprising answer to why digital transformations fail is a lack of discipline in defining and executing the right steps for digital transformations to take off and stay ahead,” notes Saldanha, adding that, “It is possible to apply the proven checklist methodology from the airline and medical fields to improve the 70 percent failure rate.”
As someone who spends my days helping companies with their digital transformations, I can tell you there are distinct commonalities among companies that fail to bring about meaningful change from their initiative. While there are multiple reasons that doom a digital transformation, there’s one that will guarantee disappointment: setting one’s sights too low. Proper goal setting is imperative.
The single, most important reason to embark on a digital transformation journey is to leapfrog the competition and dominate a category. Companies that focus on that high-level goal of leading their category earn outsized rewards, in terms of stronger growth, higher revenue margins, and better stock performance.
Don’t Confuse Sector Dominance with Other Goals
Being a category leader means just that: your company redefines the value that customers should expect from the sector and sets a bar by which the entire industry is measured. Amazon has done this with its delivery services and has taught consumers to expect two-day free delivery for all online brands.
All too often we’re called in to help rescue a digital transformation initiative that is suffering from this exact problem. Rather than focus on category leadership, companies accept a proxy for it, such as a strategy that is not bold enough, not differentiated or not defensible. Or they place predominance on meeting budget and timeline constraints over the kinds of activities that lead to dominance: learning, continual improvement, and building a killer product that will change the world.
What does success look like? Domino's Pizza is a prime example of the possible. It’s former CEO, Patrick Doyle, was keen to make Domino’s the largest pizza brand in the country, but in terms of sales and stores opened. That journey hinged on getting two things right: an unparalleled customer experience and exponential growth in digital sales.
To achieve the first goal, Domino’s adopted an “AnyWare” approach to order placing. In addition to the traditional channels such as phone, web and apps, Domino’s lets hungry consumers order from Alexa, Slack, text, Twitter, smart TVs, from a car via Ford Synch, among many other options. On top of channel choice, an “Easy Order” feature remembers the customer’s usual favorites and makes it simple to reorder in a single click.
As Mr. Doyle once famously quipped, Domino’s transformed from “a pizza company that sold online,” to “an e-commerce company that sells pizza.”
But did the company succeed in dominating the pizza sector? The answer is a resounding yes. At the start of 10 years after the brand committed to digital, Domino’s has overtaken larger rival Pizza Hut, becoming the category sales leader across the globe. It’s share price has soared from $12 to over $380, a performance stronger over the same period than Google, Apple, Amazon, and Facebook.
In other words, digital innovation served as a pathway to both incremental and transformative change.
When All Eyes Are on the Same Prize, Priorities Will Align
There are several factors that contribute to a successful digital transformation. Its leaders need to insist on recruiting the best talent, on moving fast, and to expect change and move with agility. They need to develop process excellence and to commit to mastery.
Here’s the interesting thing: All of these things become levers people rally around when they share in the quest to dominate a category. Priorities have a way of aligning. Executives seem to find the talent, resources, time, and budget it takes to obtain and maintain that leadership position.
I don’t mean to oversimplify how to succeed through digital transformation. Success requires skill and resources that exceed what most corporations have within their four walls. But there is one constant: the winners will be those companies with an unwavering focus on becoming category leaders.
Keith Schwartz is CEO of Bounteous.
The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.