Despite the rhetoric, executing a digital transformation is not about becoming a tech company. It’s about making technology so ubiquitous that it becomes invisible.
There’s a funny thing about digital transformation: we are simultaneously over-hyping it and understating it. On the one hand, every tech company in the world is talking about it. It doesn’t matter how mundane the technology; every company is somehow relating their products to digital transformation.
On the other, many people are failing to grasp the import and impact of what digital transformation really means. In far too many cases, business and IT leaders are dismissing it as nothing more than a marketing ploy. The unfortunate result is that the over-hypedness of digital transformation is obscuring its real meaning.
This dichotomy is most apparent in what I call the tech company fallacy.
Everywhere I turn, I hear another company executive make a proclamation that they are no longer a retailer, a toy manufacturer or whatever kind of company they are — and then say, “We’re a tech company that happens to <<insert product or service here>>.” Ugh.
On one level, it’s understandable. Transforming an organization — particularly a large enterprise — is tough work. You need to jolt people out of their comfort zone and create enough urgency that they are willing to forgo the security of “the way things have always been done” to embrace the uncertainty of new.
The rallying cry of digital transformation is an easy foil for this purpose. But it’s also a trap.
The Tech Company Trap
I blame Amazon for creating this phenomenon. They launched as an “online bookstore” — and most people took them at face value. As Amazon began expanding into other product lines and their dominance became clear, people realized that they were much more than just an online bookstore or even an online retailer — they were a tech company!
Amazon’s eventual move into cloud computing with the Amazon Web Services (AWS) platform cemented this notion that they were a tech company who happened to sell stuff. The problem is that Amazon has always been a tech company.
Jeff Bezos started Amazon as an internet company in search of something to sell. He settled on books for very pragmatic reasons, but make no mistake — as much as Google or Apple, Amazon has always been a tech company.
This distinction is not insignificant. A tech company is one in which technology is the product they sell. In the case of Amazon, their real product is their cloud computing platform and the e-commerce platform they ‘sell’ to third parties who use it to sell their goods.
Companies like Uber and Airbnb have further muddied the water. Industry pundits love to hold them out as shining examples of the tech company ethos that enterprise organizations must emulate — but should you?
Failing to Find the Real Transformation Story
As Intellyx president Jason Bloomberg discussed in his Forbes article, Top Five Enterprise Digital Mistakes, Uber and Airbnb have become poster children of the digital era mostly because they viscerally represent the threat of disruption to well established industries. “Wake up or you will be Uberized next!” cries the call to action.
Unquestionably, Uber and Airbnb operate like technology companies. They deliver a technology platform that disintermediates industries that were otherwise difficult to coalesce into a single addressable market. They removed inefficiency, provided simplified access to an otherwise dispersed set of assets and thus created a centralized market where one did not exist.
There are certainly other industries where these circumstances exist, but let’s be clear: the whole world will not be Uberized.
As evidence of the new world order, pundits love to point out that Airbnb now has more rooms available than the largest hotel providers — yet they own no property. Recent analysis, however, shows that only approximately 43% of Airbnb listings are actually competitive to hotels. Moreover, Airbnb most likely represents no more than 15% of all rooms available worldwide — and probably much less.
There is already evidence that Airbnb’s growth is cooling. This fact isn’t surprising when you consider that there is a significant difference in the customer experience that Airbnb delivers versus that of a full-service hotel.
Airbnb, Uber and other paragons of the sharing economy are powerful examples that the digital era enables entirely new technology-powered customer experiences — but that is not the real digital transformation story.
The Goal: The Ubiquity & Transparency of Technology
It is easy for the promise of Uber and Airbnb to seduce — and frighten — business executives. It makes sense that they will use the tech company ethos as a rallying cry to inspire a transformational effort.
The problem, however, is that it puts the focus on the wrong thing — the technology — and surrenders their greatest potential competitive advantage: customer intimacy.
Most traditional enterprise organizations have risen to prominence based on their ability to connect with their customer’s needs and desires. They should not suddenly abandon their rich history and recast themselves as tech companies.
In fact, they should do the opposite. Traditional enterprises must embrace their heritage, but see themselves in terms of the value they provide and the relationships they have with their customers — rather than the products they produce or the services they deliver.
The goal is not to become a tech company. The goal must be to embed technology so ubiquitously and so deeply within the culture and operating model of the company that it becomes transparent — allowing you to enhance the customer experience and deepen your relationships.
The challenge is that most traditional organizations have a self-view that is essentially synonymous with the product they sell or the service they provide. The required shift is not to become a tech company, but rather to make the organization synonymous with the value they provide and the relationship they create. The organization can only re-envision its business model from that perspective.
The real goal of digital transformation, therefore, is to leverage technology to reshape and enhance the value you deliver to your customers. Whether it leads to an entirely new business model or simply a better, technology-enhanced version of your existing one is immaterial. The objective is that technology becomes invisible to allow you to focus on how to create greater value for your customers.
Calling yourself a tech company is expedient — but it is also misguided. In the digital era, every company that survives will have technology at the core of its business and operating model.
Business executives must lead the digital transformation of their organizations and be willing to re-envision how they operate on every level in order to remain relevant. But simply calling yourself a tech company will not be enough and is much more likely to demoralize your team rather than motivate them.
You must instead create a vision of something entirely new: a vision of your company that is exciting, modern and that feels at home in the future, but that respects your organization’s storied history and deep customer relationships.
You must culturally and structurally transform your organization to compete in the digital era. You must embed technology and the digital ethos into the very core or your operating model. But you must also never forget that it is your unique ability to serve your customers that has been and will remain the driver of your success.
Founder & Institute Fellow
Charles Araujo is a technology analyst and internationally recognized authority on the Digital Enterprise and Leadership in the Digital Era who advises technology companies and enterprise leaders on how to navigate the transition from the Industrial Age to the Digital Era. Having spent over thirty years in the technology industry, he has been researching Digital Transformation long before it became the uber-buzzword of today, and is now focused on helping Digital Era Leaders prepare themselves and their organizations as the macro trends of the primacy of the customer and the primacy of the algorithm collide, ushering us into what he calls The New Human Age.
Principal Analyst with Intellyx, founder of The Institute for Digital Transformation, author of three books, and most recently the co-founder (with his wife) of The MAPS Institute, he is a sought-after keynote speaker and has been quoted or published in CIO, Time, InformationWeek, CIO Insight, NetworkWorld, Computerworld, USA Today, and Forbes.