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Insights / Blog / Business

Digital destruction instead of digital transformation!

April 12, 2016
Alain VeuveAlain VeuveManaging Director, AOE Switzerland

Companies are finding it exceedingly difficult to meet the challenges of digital transformation. I can’t begin to tell you how much I’ve struggled in the past few years to convince decision-makers to invest in digital initiatives, travel down new paths, develop new business models, to try to do things better. The balance sheet is sobering. So why even bother?

Uneasy compromises

I think most larger companies completely drop the ball when it comes to digital transformation. Though many digital things are carried out, projects that largely benefit those of us who work in the digital industry, most of these projects are, to speak candidly, simply lukewarm coffee.

Though many top execs never tire of traveling to Silicon Valley and, once there, say something about Uber, Airbnb, Apple and all the other examples of the high-flyers as soon as they are able – if these managers are asked to try out fresh alternatives themselves, you would be hard-pressed to find anyone who actually does so.

Unconventional business models + technology + risk + risk + risk = disruption

And so these managers talk about disruptions and their visions and who knows what else. Strive to make threadbare comparisons that, for example, Airbnb is the largest provider of hotels – even though it doesn’t own a single hotel room.

What this mainly shows is this: These people usually haven’t got a clue as to what they are talking about. They simply mingle everything together: new technology, the entire Silicon Valley hype and their meager digital business.

But, when it comes to creating the necessary preconditions for equipping their own businesses for the future, then most of the time what results are “me-too” projects. We simply have to have an app now, or an online shop. Our revenues are already 15 percent online. compared to the competition, our digital maturity is at 80 percent. Yay.

This is already a whole lot better than doing nothing at all, that much is clear. But one must understand, that the truly successful business models such as e.g. Airbnb, Uber, etc. initially have very little to do with technology.

Rather, it’s the case that everything begins with a concept that can provide a service in a far better way than heretofore possible. And along these savings for all, the company can skim off a margin.

It’s obvious that such ideas can only be carried out in reality when the appropriate digital technology is available and accepted. However, the technology isn’t at the core of these business models.

The third component is risk. To make business models truly fly always requires a high degree of risk. The situation here is that is much more difficult for existing players to take significant risks. The fear of loss is too high. So high, in fact, that one is dead in the water in the mid-term if one doesn’t continuously reinvent oneself.

What’s all the fuss about?

In this environment I’m not really that motivated to help people to take baby steps just because they are afraid to try something new. And it’s not that I’m someone who takes risks recklessly. On the contrary. Thus, it can’t be said that I don’t have a small amount of understanding for this attitude.

During my coaching sessions I repeatedly meet decision-makers who are quite open for more radical options. Together, we weigh the pros and cons and outline truly potent models. Usually, though, these models are consciously shelved anyway – simply because the company is not yet ready for such a large step. I think this is legitimate.

But, these people don’t drone on about how “we’re going to be the next Amazon in the area XYZ”, or bore us with the next “Airbnb phrases” at one event or another. For that, they are all too aware that their company is still standing in its own way. And they are working to improve.

Nothing has to, everything can

If I take a broader view of all of his, then I can conclude that not every company even has to go digital. Companies are only a means to an end. And only those that can adapt to change will actually survive.

Of course it’s not really terrific for businesspeople when their companies fail. But in most cases, they only have themselves to blame. And now you will say that the employees are the ones who suffer. This might be true.

I take I more differentiated view, however. For, by preserving old structures and companies – and exactly those that do not adapt – we increase the social drop height of people considerably. In this context there is nothing worse than subsidizing existing structures. Sooner or later all of them will fail.

And with them many people who have grown accustomed to the subsidized economic reality. But it is precisely this approach that produces the high social collateral damage in the first place.

Fail Fast FTW!

I’m much more of the opinion that companies that don’t progress, should fail as quickly as possible. This lowers the total cost for upheavals and people are liberated from “misleading” structures.

These people, once they have picked themselves up and dusted themselves off, are the breeding ground for new, pioneering companies. Not all, of course – and certainly not all with enthusiasm.

But, most of them will incorporated into new companies. Companies with a future. And make no mistake about it; it’s like everything else in life: When we experience something for the first time, it’s severe. When we go through something for the fourth time, however, we are much more relaxed about it. This applies to changing jobs, too. Not pretty, but doable.

And, this fosters the process all the way to a new, more flexible workaday world. A world where there isn’t just ONE education and ONE career in ONE company. But different ones.

From this perspective, I’m not so sure anymore, whether all companies must “master” this digital transformation. Maybe it’s better if a significant portion sinks. And something new arises from the ashes.