In the class, we discussed the knowing-acting problem. Some companies know if they don’t do the digital transformation, they will be eliminated from the market. However, they didn’t take their actions. It made me think that there are companies:” knowing, acting, but failed.” I wonder why they failed, the keys to digital transformation, and what I can learn from their failures.
When I search digital transformation failure cases, GE comes out most. So let’s start with GE.In 2011, GE labeled itself as a digital industrial company. What is a digital industrial company?
GE’s digital transformation work started in 2013. GE launched an IoT platform, Predix, for the industrial internet, moving them to a data-driven company. They digitized its products and services and transformed the business model of industrial products. GE connected all of its machines, equipment, and processes by combining the informational technology with its traditional operating technologies. They managed the data from it and turn it into insights and then improve their business—the embedded sensors on everything from manufacturing equipment to airplane engines.
In 2015, They created a new business unit called GE Digital with a CEO, Bill Ruh. GE digital is to use the data to make GE a technological powerhouse. Despite investing billions of dollars in GE Digital and its thousands of employees, GE suffered significant losses. GE Digital quickly fell into a platform to report revenue to shareholders. And The CEO was soon forced to resign.
Why did GE’s digital transformation fail?
The size of GE
GE is too big to digest all the transformation at one time. Because of their massive business scale, GE needs to predict process billions and billions of terabytes of data. How to take extensive data and make it actionable data is a big challenge for GE.The company operates through too many segments,It takes time for GE to actually internalize the transformation in the different sectors. Digital transformation planning may need to start small. GE often try to take on the task of changing the entire business at once. Attempting to boil the sea, especially within such a large organization, is the secret of failure.
GE positioned its business as short-term revenue growth rather than long-term strategic goals. The GE was on the exact opposite path of the fast-growing digital transformation program.67% executives believe that the key objectives of digital business strategy in organization is to create better customer experience. From my perspective, focusing only on the new revenue is not sustainable.Customer experience, productivity and efficiency should be the long-term solution.
From what we learn from the class, digital transformation is not all about technology innovation but how to align with the culture, organization, and business model. It is a continuous process of changing the way to do business. The disruptive transformation is so destructive that existing organizations will kill them.Therefore, only applying emerging technology is not enough.After all, not everyone in armor suit is Iron Man.
The keys to digital transformation
According to a study by McKinsey, the main reasons why global organizations avoid stalls are as follows. 24% executives believe that strong alignment and commitment across organization is the reason they can undertake digital transformation continuously. A research in MITSloan called it “Digital congruence”.A conservative hierarchy having energetic entrepreneurs may not be able to use their motivation and energy. Similarly, an organization with a flat and flexible structure can still struggle if its culture is concerned about taking risks. But when culture, people, structure, and tasks are stimulated at the same time, businesses can move forward successfully and confidently.
After reading about the failed transformation of large companies, I wonder if digital transformation is for big companies alone. The profit scale of small enterprises is small, and the digital transformation is a process of continuous input. Considering the input-output ratio, small enterprises will not consider the digital transformation. Digital transformation is accompanied by the adjustment of organizational structure and business model. Are small businesses willing to take risks？Introducing new technology and new talent, and providing training, will greatly increase costs. In the face of small profits, whether the small enterprise can survive until get the return of the original investment of digital transformation. “Companies either transform or die in industrial revolutions,” former P&G executive Tony said. Are small businesses doomed in the digital age？What would you do if you are a CEO of a small or micro company?
I run a small business that provides pet grooming, boarding and retail services for community consumers. After a year in the business, I realized that the community consumers are limited and that I had to make changes to break the revenue ceiling.“There really isn’t a way to digitally groom your pet,” says Mike Goodwin, who has been CIO of PetSmart since 2014. Yes, totally agree. I can’t imagine how automated grooming is like for pet.Like most people, I chose to start e-commerce first. Online retail business allows us to acquire new customers and though marketing activities online we try to give pet parents reasons to come into our brick store. However, e-commerce platform brings the platform maintenance and customer online service problems, which means we need to recruit more people. Obviously our profits and money don’t allow us to do that.At the moment we spend a lot of time training our manager to be responsible for maintaining e-commerce platform. But clearly this is not a long-term solution. Even though e-commerce brings opportunities and profits, we also faces fierce competition. We are now suffering from the price war. Second, I bought a data analysis system.Using this data, we better understand customer’s preference and develop stock-buying, marketing and employee training programs.We change customer service process to get more data through talking and interacting with consumers. We call this process “digital paw formation”. After making these changes, I got stuck. Traditional and small businesses with limited capital, I feel every step is very hot feet.
PetSmart’s digital activities include a mobile-optimized website, two popular pet care apps, and build more mobile. Petco has partnered with DoorDash to bring a number of new digital products available nationwide, redesigned a newly website, an enhanced Petco app experience, new online tools for pet parents, and free same-day delivery. Both giants seem to be going the same digital transformation path. Do you think there are limitations to the data transformation of the pet industry and the traditional industry？
I hope that I could get from class and peers about what to do for the next step.