CEOs commonly cut corners when they embrace digital transformation. Thus, they waste their efforts and may at the same time seal the future of the company they lead.
Indeed, when they eventually embrace and support digital transformation, they make three critical mistakes.
- Top managers – CEOs -prefer to assume low risks when initiating a digital transformation They tend to implement proven concepts from other geographical areas (typically USA). To implement or develop “bleeding edge” technology or methods is a “no-go”
- Digital transformation is mainly seen as a means to reduce costs, not as a new set of tools to drive new revenues
- The operational IT department – typically the CTO- and the ones in charge of digital transformation on the business side – for example a Chief Digital Officer- are not necessarily coordinated. The responsibility areas may overlap
Although the intentions maybe good, these are, from my point of view, management aberrations.
First of all, applying only proven concepts and tools does nothing to improve the position of your business. All your main competitors are probably doing the same, and probably at the same time. If you are operating in an industry where companies are struggling with low margins, almost no growth, and periodic lay offs, this kind of digitalization is not going to move the needle. You may argue that the alternative had been to shut down the company. Well, if you don’t deliver margins, you don’t grow and in addition you must invest continuously and heavily just to stay afloat, your customers have already told you that they don’t really need you.
Second, focusing on reducing costs only gets you digging even more into the rabbit hole. Innovation will suffer. Differentiation will disappear. You will use lower costs to lower prices to your customers even more. Your customer will own you by the magic of bids, RFP and RFQ.
If you don’t deliver margins, you don’t grow and in addition you must invest continuously and heavily just to stay afloat, your customers have already told you that they don’t really need you.
You will be participating in an endless and painful race to the bottom. Is that what your shareholders and employees want? Worst of all, your customers don’t want that either. They want suppliers that understand their business and contribute with innovative and exciting products and services. I know, because they have told me so.
Finally, when the responsibilities of CTO and CDO aren’t clearly defined, one of them will win and the other one will lose. Typically, the CDO will lose. It may be because the CTO has a clear and easy to communicate roadmap linked to daily operations. It may also be because the CDO needs the CTO in order to deliver on his or her projects. This brings us back to the two previous points.
From my point of view, CEOs have a great responsibility these days.
- They have to balance operations and innovation, They have to funnel enough resources into designing and/ or building their own digital solutions and stay ahead of their competitors.
- In order to do that, CEOs have to decide which few digital focus areas the company should excel on, based on the strategic position the company wants to achieve. A discipline must be implemented of continuously monitoring projects, both operational and business-oriented. Regular project portfolio meetings are an essential part of this.
- The power of CTO/ CIO vs. CDO has to be carefully balanced. Both have to be given incentives based on collaboration and common achievements.
The job of the CEO is not an easy one, and the digital revolution is not making it any easier. The next few years will clearly show which companies believed and used digitalization and which ones got at the end used by it.
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