In worst-case scenarios, spectacular digitalization failures nearly drove large corporations to ruin! Find out how to avert problems and tap DX successfully…
Back in 2018, US$1.3tn was already being spent on digital transformation (DX), but with an estimated US$900bn of investment deemed to have been unfruitful. This was because 70% of businesses in those days had failed to meet their transformation objectives.
During the past three years, the rush to digitalize had skyrocketed globally. Although the circumstances for accelerating or adopting DX were different this time, one would reasonably wonder how many percent of businesses did not survive, or did not realize as much from the digitalization as hoped?
To get a gauge of this trend and find answers to increase DX success, DigiconAsia.net had to opportunity to consult Dr Dennis Khoo, a DX expert with 32 years of deep industry experience in IT and financial services and digital leadership roles such as the OUB TMRW Digital Bank; and Choi Jung Kui, Programme Director of the Digital Transformation Leaders Programme in the National University of Singapore and co-author (together with Dr Khoo) of a program called “The allDigitalFuture Playbook”(taP), that guides leaders to adopt a holistic approach around people and processes in DX.
DigiconAsia: Why does DX fail to meet corporate objectives in some organizations?
Dr Dennis Khoo (DK): DX in many companies can be extremely complex. Five key reasons for high DX failure rates amid this complexity are: putting the solution before the problem; inability to manage the complexity; treating it as mostly a tech issue; not meeting all three criteria of innovation (desirability, viability and feasibility); and lastly, lacking the talent to execute DX well.
DX is really about holistic business transformation rather than just about digital transformation: it involves leveraging people, process, technologies and more. Many incumbent companies benchmark their transformation against start-ups. While they can certainly learn new ways of working from start-ups, each multinational corporation’s business-culture legacies and complexities requires a different approach.
DigiconAsia: Can you cite some cases of such failures in international firms, and their root causes?
Choi Jung Kiu (CJK): Let us look at a publicly known failure case such as Revlon, Inc., an American multi-national firm focused on cosmetics, skin care, fragrance, and personal care.
After the firm’s Enterprise Resource Planning (ERP) went ‘live’ in 2018, it malfunctioned, resulting in issues with manufacturing and the inability to fulfil orders placed by major clients. Within 24 hours, Revlon’s stock price fell 6.9% after the ERP failure was made public. At the same time, in 2018 Revlon was experiencing operational and financial issues linked to its 2016 acquisition of a competitor, Elizabeth Arden.
One of the reasons cited for Revlon’s ERP failure was a lack of design strategy. As a result, the implementation led to material weaknesses in its internal controls. Revlon later stated that the ROI of its SAP ERP project was negative. This could have been due to attempting too big a change and also over-customizing the ERP solution.
Complex digital transformations such as a change in ERP solution require systematic planning and excellence in process management. Over-customization of the system increases unnecessary complexity and makes DX upgrading difficult. Other powerful case studies can be found here.
DigiconAsia: Please tell our readers more about your approach to avoiding such pitfalls, and what inspired the genesis of the allDigitalFuture Playbook.
CJK: Knowing that even business transformations that leverage the combined power of people, process and technology can fail because an integrated C-suite approach is missing, we formulated a playback to address costly failures revolving around providing a holistic approach to transformation.
In our allDigitalFuture Playbook, we identify four dimensions and 19 elements that business leaders need to manage and monitor in order to get their DX to pay off (see image below).
Each transformation or innovation involves four ‘dimensions’: Customers, Business, Capabilities, People and Leadership. The elements within each dimension interact in ways that the taP demonstrates and explains to help leaders grasp the complexities involved. This complexity is a major factor in the high failure rates of major transformations. Once leaders use taP to review complexities and identify possible weaknesses, they will be able to avert common transformations pitfalls.
The taP methodology is aligned to the three integral characteristics of a successful innovation:
- Desirability (a proposition customers will pay for) maps to the Customer dimension
- Viability (a proposition that contributes to a sustainable and profitable venture) to the Business dimension
- Feasibility (a proposition that has a very high chance for successful execution) maps to thes capabilities, people and leadership dimensions
Uniquely, taP incorporates people and leadership as a dimension, which is more critical than ever today as DX touches the fabric and culture of organization itself. Compared to many ‘solutions-first’ paradigms for managing DX, taP fills a void in the business transformation industry by providing a holistic approach.
We feel that Asian leadership must transform from a hierarchal, paternalistic, and passive-aggressive way of working—to one where a servant-leadership style is dominant, to provide great challenge and great support, to motivate and inspire, and to guide transformation with a higher probability of success for an all-digital future.
DigiconAsia: How can the playbook be tested and improved against future DX applications to ensure its relevance?
CJK/DK: As more companies adopt taP, and as the DX landscape evolves, there will be more opportunities to refine taP to meet future needs, naturally making it more even pervasive and relevant.
This new approach involves a tightly-intertwined matrix of people, process and technology. If the taP approach can raise the probability of success of companies globally, the impact would be huge.
DK: We are also bringing the taP methodology to life, making it the basis of the National University of Singapore’s Digital Transformation Leaders Programme (NUS DTLP) starting in February 2023. C-suite participants will have the opportunity to adopt the taP approach to dissect their organization’s transformation challenges, and also to use it when researching and analyzing customers, competitive forces, and future trends of their industry.
DigiconAsia thanks the two academics / co-authors for sharing their insights into achieving DX