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Even though digital transformation has become a buzzword for quite some time, business leaders still struggle to challenge their company's status quo and truly start their transformation journey. Powerful leadership, which is able to stay agile and keep track of an ever-changing environment is essential in digital transformation. Therefore, it is not a coincidence that exactly C-level executives pose as the main obstacle to progress in a company's digital journey (Futurum, 2018). Eventually, companies, which are in digital denial, are not capable of meeting a market's demands and are forced to quit. For example, Blockbuster - a former movie and video game rental giant, which failed to transform into a digital model like Nerflix; or Tower Records, which enjoyed being their customers' primary spot to get desired music CDs, but had to file for bankruptcy as they refused to invest into digital music.
Resistance to change is the main reason why even the biggest companies can fail. Resistance comes from many directions, but mostly it can be recognised in illusions which are used to avoid confrontation with more complex reality. There are common illusions, which can be often stated as a reason why companies reject a digital transformation journey.
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"We are doing fine"
The belief that a business is doing well is a direct sign of an upcoming failure. It is very easy to lose sight of external threats if a business has a stable and comfortable position in the market. Recent market destruction caused by a global pandemic has taught us a valuable lesson: any business has to be ready to change regardless of its strength and superiority. Even though we survived the pandemic crisis, we have to continue to be on the watch for upcoming challenges, because they will never stop. COVID has significantly disrupted our world, reshaping the way consumers behave, businesses operate and employees work. By investing in a future-proof digital infrastructure, a business assures a better visibility over its operations and improves its resilience capabilities. On top of that, digital oriented companies have already reaped the benefits from their tech investment. Their enterprise value is more than two times higher from companies, which are lagging behind in digital transformation (BCG, 2020b). Refusing to believe in the need of digital transformation means turning a blind eye on an ever changing market. Instead of this, business leaders should embrace the truth and start safeguarding their businesses from upcoming challenges. -
"We did enough"
While 80% of companies are set to accelerate their digital transformation, only 30% of digital transformation objectives actually succeed (BCG, 2020a). Most of the failed cases struggle to achieve their goals as they do not recognise the need for greater strategic efforts beyond investments in new technologies (Deloitte, 2021). Even though technologies play a central role in digital transformation, it is not a determining factor. Blind and groundless investment in flashy digital solutions leads to a failure. A company has to undergo a thorough strategy development before investing in required tools. It has to be clear for all the stakeholders which value implemented technology will bring for internal operations and customers (BCG, 2020b). If a business leader struggles to identify how exactly new digital tools improve current affairs of the business, a company's digital transformation journey is far from complete. -
"Too big risks"
It is natural for a human to be afraid of the unknown. It is impossible to have full control over future events or understand what exactly lies ahead. Unfortunately, specifically for a business, avoiding taking necessary risks can lead to making decisions focused solely on short-term survival and turning a blind eye on crucial long-term strategy. This tendency is especially present right now as the global pandemic has disrupted "regular" state of affairs and forced businesses to see future perspectives more negatively and therefore, riskier (HBR, 2022). Sustaining the reputation and financial stability are among main concerns when it comes to taking a leap of faith. However, business leaders should change their perspective towards risk-taking: from a threat to an opportunity. Companies who keep themselves from taking risks slow down internal innovation and progress. Whereas taking risky decisions has the potential to strengthen a company's position. When it comes to investing in digital transformation, a business also invests in better visibility of its operations and in productivity. Proper adoption of digital infrastructure with a well-thought-out strategy enables a company to have access to data-driven insights, which safeguard it from potential challenges (KPMG, 2022). Even though it is impossible to predict the future, statistics still show a light at the end of the tunnel. Companies, which undergo digital transformation, experience nearly two times higher growth in earnings than the ones, which lag behind (BCG, 2020b). -
"It is not relevant for us"
Implying that digital transformation is not relevant for a company, business leaders only prove that they refuse to understand what are its true capabilities. Moreover, it is a common misconception that digital transformation is something that belongs only in the IT and tech sectors. However, companies across all the industries, which embraced digital transformation, report the improvement of operational efficiency, faster time to market and being able to meet changing customer expectations among top positive outcomes (PTC, 2018). Overall, companies experienced an increase in competitive power as a result of digital transformation (Futurum, 2018). On the other hand, while digital leaders enjoy the benefits technology brings to their companies, digital laggards risk losing 46% of their annual revenue if they do not change (Accenture, 2018).
Digital transformation is a complex journey, which aims to reconstruct a company's operations for greater efficiency in the long run. Therefore, its benefits tend to be hard to recognise in the very beginning.
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Reference List
Accenture. (2018). Full value. Full stop. Retrieved from https://www.accenture.com/_acnmedia//Thought-Leadership-Assets/PDF/Accenture-Future-Systems-Report.pdf
BCG. (2020, October 29a). Flipping the Odds of Digital Transformation Success. Retrieved form https://www.bcg.com/publications/2020/increasing-odds-of-success-in-digital-transformation
BCG. (2020, May 8b). Is Your Technology Ready for the New Digital Reality?. Retrieved from https://www.bcg.com/publications/2020/is-technology-ready-new-digital-reality-post-covid19
Deloitte. (2021, December 15). Start your digital transformation with the end in mind. Retrieved from https://www.deloitte.com/global/en/our-thinking/insights/topics/digital-transformation/digital-transformation-evolution.html
Futurum. (2018). 2018 Digital Transformation Index. Retrieved from https://futurumresearch.com/wp-content/uploads/2018/05/Digital-Transformation-Report-Final-052118.pdf
HBR. (2022, January 18). Convincing Your Company Leaders to Invest in New Technology. Retrieved from https://hbr.org/2022/01/convincing-your-company-leaders-to-invest-in-new-technology
KPMG. (2022, February 22). Confident risk management for a complex world. Retrieved from https://home.kpmg/xx/en/blogs/home/posts/2022/02/confident-risk-management-for-a-complex-world.html
PTC. (2018). Digital Transformation Survey. Retrieved from https://www.ptc.com/-/media/Files/PDFs/PLM/Digital_Transformation_Survey_Final_WEB_Single_Amend.pdf