According to estimates, this year over $1.2 trillion will be spent by companies worldwide on their digital transformation efforts and yet analysis suggests that only 1% of these efforts will achieve or exceed their expectations.
Last year, the World Economic Forum launched the Digital Enterprise project in collaboration with Bain & Company to help companies understand how they can design and execute successful digital transformation programmes. The project was led by a working group of senior executives from 40 companies, including representatives from Walmart, eBay, JD.com and HPE. The report launched today is a synthesis of their discussions and learning over the course of the year.
"Executives are often so involved in their own industries and the operational details of what they do that they don't realize that the most formidable ideas and challenges to their business model might come from outside their own industry. We help executives take a step back, broaden their peripheral vision and enter into conversations with leaders from other industries about their perspectives and experiences," said Mehran Gul, Project Lead for Digital Enterprise at the World Economic Forum.
The working group found that, while people are all too familiar with once-revered brands that failed to stay ahead of the curve BlackBerry, Kodak, Blockbuster there are also examples of successful reinvention that prove that digital transformation, while hard, is not impossible. Netflix went through successive waves of evolution over two decades, transforming from a traditional DVD-by-mail service into the largest online video-streaming service in the US. The number of Netflix subscribers in the US now surpasses all cable subscribers combined, reaching 73% of all households. Dominos, founded in 1960, started making foundational investments in technology upgrades in 2001 and is now the fifth-largest e-commerce company in the United States. Since 2000, it has been the best performing stock in the S&P 500, outperforming Amazon and Google. Dominos has gone from being a pizza company to being a tech company that happens to make pizza.
"Our understanding of digital transformation and what enables it has evolved on both a personal and a company level through this work. While much of the technology is readily available, the real challenge lies in the ability to change business models and the way we work to take out the potential offered. And that makes digital success dependent on leadership, culture and capabilities," said à…shild Hanne Larsen, Chief Information Officer and Senior Vice-President of Corporate IT at Equinor, Norway, and a member of the project's executive working group.
According to the report, successful transformation programmes suggest that, while there is enormous diversity in individual experiences, some common themes clearly emerge. Successful companies embrace digital strategies that can thrive in uncertainty and succeed through a "test and learn" mindset. Instead of focusing on what they are selling, they focus on the needs of the customer they serve and constantly iterate their product or service to better address that need. They invest in developing systems, technology and talent that can help them achieve their digital objectives. Finally, they focus on implementation to ensure that successful experiments can reach scale.
"Things are changing so fast. It's not just what the technology can do but how people react to the technology. It's not just robots. It's people willing to spend the night on a total stranger's couch. That's what's changed today versus 20 years ago. It's more than just data, technology and computing power. It's the way people are responding to it, changing their behaviour so fast and so radically," said Ouriel Lancry, Partner, Bain & Company.