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Digital transformation: Keep it real…or face business extinction

The global pandemic triggered a surge in spending on business technology – much of it focused on survival rather than strategy. But companies should not mistake such accelerated digitalisation for the need to transform their business models and operations for a digitally powered future.

The legendary Silicon Valley entrepreneur and tech CEO Tom Siebel is a recent convert to the evolutionary theory of ‘punctuated equilibrium’. While classic Darwinism maintains that a new species emerges over eons by adapting to tiny, incremental changes in its environment, punctuated equilibrium argues that significant evolutionary change and the emergence of new species is actually more commonly the result of periods of momentous and rapid change – dramatic periods (Siebel identifies five big ones in his latest book) when more than three-quarters of existing species are wiped out. Think planet-wide volcanic eruptions, mass glaciation, monster-asteroid impacts, sun-blocking dust clouds and sharply acidic seas.

For Siebel, the parallels with today’s business environment are too good to ignore. “We are in the middle of a mass extinction in the corporate world,” he writes. “Since 2000, 52% of Fortune 500 companies have either been acquired, merged or have declared bankruptcy. [Moreover,] it is estimated that 40% of [the largest] companies in existence today will shutter their operations in the next 10 years.” The causal factor in this mass extinction and the inevitable mass re-speciation of the corporate landscape? Digital transformation.

Aside from the obvious dinosaur-killers such as Airbnb, Alibaba, Uber, Google and Amazon, there are countless other examples of this process in motion: Monzo, Klarna and Starling in finance; Skyscanner and Hotels.com in travel; Bulb and Octopus in energy; SumUp and Square in retail payment.

The existential challenge their digitally powered business models pose has obviously not gone unnoticed by traditional market leaders. Many of these incumbents have long woken up to the threat, and most are frantically trying to forge new digitally enabled business models and/or reinvent how they serve customers in order to transition to a new digital future. At least that’s what they say they’re doing.

But here’s the problem. In many (in fact, most) cases, they are mistaking hefty investment in digital tech – something that has only been accelerated by the pandemic – for the business-altering change that the new digital economy demands.

“If your aim is simply to digitalise rather than transform-with-digital, then you’re ultimately going to go out of business.”

Indeed, in many industries the pandemic actually triggered a dialling down of spending on digital transformation (or DX). According to IT industry watcher IDC, growth in spending on DX technologies and services rose by 10% globally in 2020 (to US$1.3 trillion). But that was a sharp slowdown compared to the 18% uplift in 2019. As IDC’s Shawn Fitzgerald told me for an article recently published in The Times’s Raconteur supplement on Business Transformation: “Despite the many bold statements around the crisis accelerating DX activities, much of what people are actually doing would be better termed digitalisation rather than any broader strategic business initiative that exploits new business models and lays the foundation for the future digital enterprise.”

And this distracted state of DX leadership has given rise to some wry memes across social media:

The point was also well made by business transformation consultant and author Scott Anthony in I–Global Intelligence for Digital Leaders (the web and social platform built by SevenC3 to enhance Fujitsu’s brand and customer engagement): “Transformation is fundamentally changing who you are – the corporate equivalent of the caterpillar becoming the butterfly, not simply doing what you’re currently doing better, faster or cheaper.”

In other words, company-wide digitalisation is certainly necessary, but it is not sufficient for digital transformation. “If your aim is simply to digitalise rather than transform-with-digital, then you’re ultimately going to go out of business,” as DHL Supply Chain digital transformation officer Thierry Driesens put it the Raconteur article.

Luckily, there are a handful of warning signs that suggest your company has lost its way – or even not started – on its transformation journey:

  • The absence of a DX roadmap (only 27% of corporations have one, says IDC).
  • The application of DX in discrete pockets rather than company-wide
  • DX not being led by the C-suite
  • A poor commitment to re-educating staff around digital opportunities and creating a DX culture
  • A failure to make data the fuel on which the company runs.


Not that everyone is complaining when others miss such milestones and see their DX journeys stall, of course. As DHL Supply Chain’s COO and CIO Markus Voss has jibed, “We look at what gives us an unfair competitive advantage and exploit it to its full extent.”

So as the pandemic splurging on tech is replaced by more cool-headed decision making, I think management teams at every company should be taking a hard look at their digital investments over the past 18 months to ensure on-going spend is firmly aligned to a transformational agenda. In doing so, they can reaffirm the distinction between digitalisation and digital transformation – and avoid their company becoming one of the casualties of today’s punctuated equilibrium.

Kenny MacIver is the Business and Tech Editor here at SevenC3. If you'd like to chat about your content needs, please reach out to him on Kenny.maciver@seven.co.uk

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