The Critical Missing Piece from Four Failed Digital Transformations

Nobody would claim that change is easy. In fact, the research indicates just how difficult a large-scale digital transformation can be. Research indicates that 70 percent of change programs fail.

However, many digital transformations begin on the wrong path. Companies decide that they need to embrace digital solutions. In many cases, however, the goal is never more clearly refined than that.

Consultant McKinsey Digital notes that a fuzzy definition of “digital” adds to this problem. Too often companies struggle to connect a digital strategy to business objectives because they lack a single definition of what digital means to the organization.

By not setting clear definitions for a digital transformation, and objectives for how this transformation supports existing business units, companies quickly lose their way. The four examples below reveal just how important a clear starting point can be.

1. General Electric: Internal business unit or external sales platform?

General Electric had a big goal: to become the software platform for the growing industrial internet. Within a year of launching its Predix platform, it was earning more than $1 billion in revenue from Predix and other productivity solutions. In 2015, the company launched its GE Digital business unit and soon had more than 1,500 employees managing the digital scene.

However, it turns out that this rapid growth didn’t have the internal support it needed. While some individuals in the company saw GE Digital as an outward facing brand strategy, it was built to support internal IT development needs. Initially, the GE Digital unit had been given autonomy in order to build out its Predix platform. However, that decision brought with it a need for the business unit to bring in revenue. Suddenly GE Digital had to focus on short-term revenue gains over building up long-term value.

When its goals shifted, GE Digital began to partner with other software companies and sell its consulting services—even without the innovative digital answer it promised. Once the focus moved outward to building revenue, the program began to come apart.

2. Ford Motor Co.: Auto company or mobility service?

In 2016, Ford Motor Co. launched its Ford Smart Mobility LLC subsidiary to quickly enter the growing $5.4 trillion transportation services market. Its goal was to transform Ford into “an auto and a mobility company.” That definition, as noted in the launch announcement, hinted at some of the trouble to come. The company saw the auto and digital businesses as separate. In fact, it was headquartered separate from the rest of the company and had little communication with other business units. In 2017, the segment lost about $300 million, attributable in part to quality issues that come from lack of integration. More recently, Chariot—a $65 million investment into ride-sharing through shuttle buses—closed due to failing ridership.

A digital transformation should change the way a company operates, but it only works if the entire company is prepared to move forward. Through a culture change, companies can create lasting behavior that supports the specific digital change.

3. Procter & Gamble: Digital leader or consumer product leader?

In 2011, Procter & Gamble CEO Robert McDonald set out to create “the most technologically enabled business in the world.” The digital transformation involved the large-scale application of technology and analytics across every aspect of operations. The broadly expressed goal was to improve products and services for consumers. However, at the time the company was already an industry leader.

The company opted to invest in an expensive digital transformation during a time of economic uncertainty. Ultimately, the company saw a small ROI on its expensive company-wide transformation and lost some ground to its competitors.

Today the company is focusing its digital objectives, beginning with establishing higher levels of collaboration between IT and other business units.

4. Nike: Hardware provider or data collector?

In 2012, Nike helped launch the wearable hardware industry with its FuelBand fitness tracker and a new language in tracking metrics. Only two years later, the company had shuttered these efforts. At the time, critics called it a misstep.

Turns out, Nike may have been on to something. With the growth of this market, competition became more fierce. Sensors improved dramatically, speeding past the point which Nike could keep up. Ultimately, the company opted to step back from manufacturing and hardware engineering to focus on athletic software. It was a strategic shift to focus on data, which the company saw could help it in the long-term.

Lessons learned

By setting clear goals for digital transformation, companies can establish necessary metrics to track success and framework to make improvements. These programs also could have benefited by starting small, testing a single strategic objective, and securing the entire leadership team’s support. With a strong framework in place, companies can roll out a digital transformation that can be integrated throughout the corporate culture.