There’s a scientific term for when a word or phrase is repeated so many times that our minds become unable to process its meaning: semantic satiation. We’ve gotten to that point with the relentless calls for digital transformation.
I think the reason that digital transformation makes our synapses go numb is not just because it is talked about so much these days, but also because it is so hopelessly vague.
What’s said to be meaningful about the phrase is that it tells us not merely to modify the business with technology but to completely transform it. And it positions digital-native startups like Uber and AirBnB as murderous bogeymen relentlessly pursuing analog businesses down a dark alley to their deaths if they don’t transform right now.
Digital transformation does a disservice because it creates tremendous urgency with little specificity on how to do it or where to start—other than everywhere and right away. That’s a recipe for disaster.
This has become a cyclical danger. Back in the nineties, we had a tidier term for digital transformation: reengineering. It even had its own catchphrase: “Don’t automate, obliterate.” The idea was to redesign your business from scratch using a blank sheet of paper, with technology as the enabler.
The concept caused a great deal of excitement at the time because it encouraged organizations to break down work into discrete sets of tasks called processes (yes, that was a new word then), and take a holistic approach to improving those processes across the entire business, all at once.
Name that Tune
Is this tune beginning to sound familiar?
Organizations went wild with reengineering and created open-ended projects that questioned everything and usually wound up, often years later, resolving little—except whether the consultants who charged by the hour would get that boat they were dreaming of (they did), and whether CIOs would catch all the blame when reengineering failed (they were).
In fact, organizations could not obliterate, they could only automate—which wasn’t necessarily a bad thing, because so many processes were still being performed manually. The reengineering craze settled down into an incremental march of automation. It culminated in the great migration to enterprise resource planning (ERP) systems and client/server computing, in part to deal with the nineties’ business bogeyman—um, bug—Y2K, which threatened doom via a couple of missing digits in organizations’ old mainframe systems.
Looking back, many pundits proclaimed reengineering a failure because it did not create the kind of revolutionary change that its champions had promised.
That’s true, but what gets overlooked is the movement’s sole enduring achievement: It forced business and technology into a permanent embrace. From that point on, businesses could not advance without technology. Meanwhile, no matter how far technology advanced, its adoption depended on organizations’ ability to adapt.
Start Making Sense
Business and technology are still doing an uncomfortable dance today. Except this time, technology has advanced to the point where it finally is possible to obliterate. The Internet has become a ubiquitous platform, with technologies such as cloud, AI, and IoT powerful enough to topple old business models and create new ones. And today, there is powerful external pressure for change from customers armed with nearly five billion smartphones.
There are so many options to consider that organizations are overwhelmed. Nothingburger terms like digital transformation rush in to fill the void, making things seem less complex than they are.
But oversimplification doesn’t help anyone. That’s why the SAP Center for Business Insight developed a study with Oxford Economics—to see if we could put something of nutritional value in the nothingburger.
After surveying 3,100 executives, we were not surprised to find that despite all the hype about digital transformation, very few have actually done it: Slightly more than 100 said that they had completed at least a few transformation projects spanning the entire organization. Thus, like reengineering before it, digital transformation has, for the vast majority of organizations, already settled back into the incremental pace of change we’ve seen for the last 20 years.
Where to Start
So how did the leading 100 companies get ahead of everyone else?
By starting where change was needed the most: 92% said they have mature digital transformation strategies and processes in place to improve the customer experience, compared with just 22% of others.
The investments have already paid off: 70% of leaders have seen significant or transformational value in customer satisfaction and engagement, compared with 22% of others.
But beginning with the customer experience also has another benefit: It provides justification for making changes in other areas of the business that don’t directly face customers, but affect the experience. This turned out to be the key to the leaders being able to complete projects across the organization when others could not. You can’t argue with five billion smartphones.
The Link Between Adaptability and Progress
But technology still can only proceed at the pace that organizations can absorb it. That’s borne out by the 100 leaders telling us that change management was their number-one challenge.
This time, however, leading companies aren’t leaving change to the consultants and blaming the CIO when it doesn’t work out. Instead, they’re acting directly to make their employees’ lives easier and happier. That’s reflected in the fact that 66% of leader companies are focusing on eliminating process roadblocks that interfere with employees’ ability to do their jobs.
These organizations are also trying to reduce fear and uncertainty by investing in employees and the tools they need to do their jobs—48% of the top 100 leaders said that investing in digital skills and technology was most important for driving revenue in the next two years, compared with only 30% of others. The leaders are also five times more likely than other companies to say that digitalization has already changed their talent management, and more than twice as likely as others to say that the changes will continue over the next two years.
In these organizations, people really do come first. And the numbers prove it: 64% of leaders say that their employees are more engaged, compared to 20% for other respondents, with those numbers expected to rise to 90% and 56%, respectively, in two years.
The leading companies have figured out the link between organizational adaptability and technology progress. By improving skills and focusing on talent management, they make their organizations more responsive to change. And since change is now all about technology, they can move faster and farther along the technology curve than their peers: 55% of leaders are already working with advanced technologies like machine learning, compared to just 7% of their peers, for example.
Our study demonstrates that digital transformation will not happen overnight. But at least now we know where to start and how to make it successful. The trick will be to improve the balance between technology progress and organizational adaptability so that we can move beyond incremental, episodic change—and get off this diet of nothingburgers.
For more insight on digital leaders, check out the SAP Center for Business Insight report, conducted in collaboration with Oxford Economics, “SAP Digital Transformation Executive Study: 4 Ways Leaders Set Themselves Apart.”
Christopher Koch is the editorial director of the SAP Center for Business Insight.