There are more ways to fail at digital transformation than there are to succeed, providing an entity is capable of, and has set, actual performance indicators for itself; been successful at training its employees; changing its culture and adapting its business processes to match.
Of course, that is a general rule for business in general. Consider the failure rate of startups. After a decade, more than 80 percent do not exist. After five years, half of small businesses have failed.
For the biggest of firms, leadership or existence also is fleeting. Consider that in the 92 years of the Dow Jones Industrial Average, there have been some 100 firm changes. About 63 percent of Dow changes occurred in the second half of a 92-year sample period.
To be sure, most of the firms removed from the Dow did not go out of business immediately. Many survive, but as less-robust versions of themselves, as their markets have shrunk. The point is that no firm is successful “forever.” Decline is the bookend to birth.
Likewise, the typical firm listed on the Standard and Poors 500 index remains on the list less than 20 years.
All of that is simply to note that transformation in business or life is hard, and prone to fail, just as business success is hard to create and sustain over long periods of time.
As applied to any enterprise or firm, “transformation” would normally be measured quantitatively by revenue indices, though cost, profit margin, customer types, purchase volumes or other similar metrics might also be involved.
In other words, a successful digital transformation should often change the business model.
In the end, successful transformation “should” be measurable in terms of new revenue, new product, new service, new market segments served, new types of customers or new charging models.
Basically, transformation would be measured by percentage of revenue earned outside the legacy core business. That is a tall order.
To be fair, many also would consider a “transformation” successful if it allowed an entity to run its legacy business more profitably, or supported higher growth rates in the core business. The metrics for such a change would be measurable in terms of revenue growth, profitability improvements or related indicators such as stock price appreciation.
Others would measure results by measures of customer experience improvement. Relevant key performance indicators could also focus, as noted above, on operational or financial metrics as well as customer experience improvements.
Some of us would tend to discount “customer experience” metrics in favor of operational or financial metrics, though. CX metrics often are hard to quantify and more subjective than revenue, profit margin, revenue or account growth, churn rates, new account gains, average revenue per account and similar financially or operationally-focused indices.
Perhaps the best example is Netflix. It transitioned from renting tapes to renting DVDs, to delivering online content, to producing content. Amazon transitioned from selling books to becoming an e-commerce platform, and now finds its profitability driven by Amazon Web Services.
Though the logical strategic moves might be movement into related roles in a value chain, some argue that is almost never sufficient to achieve big transformations. Instead, changing a business model often requires a shift of organizational mission.
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