09 Dec Learning from failed Digital Transformations
Over the last decade a staggering 70% of digital transformations have failed. Although most companies and executives know how crucial it is to evolve with technology and create digital processes and solutions, putting it into action is a different story.
Many companies have dabbled in digital transformation, only to hit barriers. Understanding what went wrong with the following three companies can provide guidelines of things to avoid and point future digital transformations in the right direction.
- Ford started a new digital service that was separate from the rest of the company instead of integrating digital solutions
- Procter & Gamble didn’t consider the competition or impending economic crash
- GE created a new digital business unit but was focused on size instead of quality
These errors can spell doom for digital transformation but all three companies managed to try again with better success. It’s important to note that although these companies failed on their initial digital transformation efforts, they were able to make adjustments to succeed in the future. A failed digital transformation doesn’t spell the ultimate end of a company, but it can be incredibly expensive in lost revenues, resources, time and credibility.
In 2014, original American car company Ford attempted a digital transformation by creating a new segment called Ford Smart Mobility. The goal was to build digitally enabled cars with enhanced mobility. The issues arose when the new segment wasn’t integrated into the rest of Ford. Not only was it headquartered far from the rest of the company, but it was seen as a separate entity with no cohesion to other business units. As Ford dumped huge amounts of money into its new venture, it faced quality concerns in other areas of the company. Ford’s stock price dropped dramatically, and the CEO stepped down a few years later.
Lesson: Integrate digital transformation efforts with the rest of the company. In this case, digital transformation as less of an actual transformation and more of a pivot into a new business area. To be successful, digital transformation needs to be integrated into the company.
Procter & Gamble
In 2012, consumer packaged goods giant Procter & Gamble set out to become “the most digital company on the planet.” The company was already leading the industry when it decided to take things to the next level with a digital transformation. However, its broad goal led to broad initiatives that lacked purpose. Coupled with a slumping economy, P&G faced problems from the start. The CEO was soon asked to resign by the board.
Lesson: Look at the competition. The return on investment for a widespread and expensive digital transformation was small, especially with signs of an economy on the edge. P&G likely could have seen more success if it had focused on smaller digital efforts that were more targeted to its existing products and processes. It failed to look at what was going on in the industry to see it was already ahead of competitors and what was going on with the economy. A digital transformation for transformation sake only won’t be effective. It must consider all outside factors and be tightly tied to strategy.
In 2011, GE started a major effort to assert itself in the digital software space by building a huge IoT platform, adding sensors to products and transforming its business models for industrial products. It took the next step in 2015, when it created a new business unit called GE Digital. The goal was to leverage data to turn GE into a technology powerhouse. Despite pouring billions of dollars into GE Digital and its thousands of employees, the company’s stock price continued to drop and other products suffered. GE Digital quickly became stuck in the pattern of having to report earnings to shareholders and was focussed on only short term outcomes and earnings rather than long-term innovative goals and returns. The CEO was forced out.
Lesson: Focus on quality, not quantity. GE tried to do too much without a real strategic focus in any area. The company was simply too large to transform all at once, especially without a true vision of what it was trying to achieve. Digital transformations are often done best with a handful of passionate people leading the charge instead of thousands of employees.
A digital transformation is a complicated and risky undertaking. When done correctly, it can lead to amazing, future-proof results but when done incorrectly it can be extremely costly and embarrassing for the company. These failed transformations show common errors but the companies behind them prove that failure isn’t the end of the road and that successful digital transformation is possible.