Digitalization

The 10 Biggest Mistakes in Digital Transformation

1. Not understanding that digital technology needs to move to the core of the company.
2. Lacking understanding of how tech platforms operate.
3. Believing that agile development is enough to create the best digital product.
4. Applying traditional leadership principles and management culture to the technology area.
5. Treating digital technology products the same as traditional IT.
6. Business or sales driving the tech sector.
7. Merely spending more on technology and software or adding more software developers, hoping that this will accelerate progress and improve the digital product.
8. Hiring a CDO who has never seen a line of code, let alone successfully built a complex software product.
9. Hoping that accelerators, incubators, and labs, which operate isolated and far away from the business core, will advance digital transformation.
10. A misguided transformation approach (dual transformation vs. other models) that is much harder to implement.

Digitalize If You Want to Survive

It’s been almost 10 years since Marc Andreesen published his article Software is eating the world. Essentially, this was a warning to all entrepreneurs around the world that computer technology and software would fundamentally disrupt every industry in the future.

And I have this nagging feeling that too many managers of European companies haven’t taken this warning seriously enough. Even engineering-driven conglomerates, like the German automotive companies or machinery manufacturers, struggle with digitalization.

Many companies are now spending more money on software technology than ever before. Many have also introduced modern methods of agile software development like Scrum in their software departments. But that’s not enough to become a digital company.

Digital — Essentially, digital represents 1 and 0, the foundation of all computer software, and therefore embodies everything that can be executed as software on a computer processor. The computing power of these computers has increased exponentially over the past decades (see Moore’s Law), and especially during the COVID-19 era, we realize what this means.

Tesla’s example clearly showcases the disruptive factor of native digital companies. While Tesla still manufactures cars, previously significant components, like the engine, have been overshadowed or commoditized by the use of electric motors with modern battery technology. In essence, Tesla builds a mobile supercomputer. This native digital platform developed by Tesla enables entirely new iterative product innovations based solely on software.

It’s no coincidence that the world’s most valuable companies are tech giants like Apple, Google, Alibaba, Tencent, Amazon, etc., representing various generations of the so-called platform economy.

While many traditional companies are still figuring out what this means for them, an even bigger wave of digital innovation is already approaching. Through self-learning algorithms, also known as Machine Learning or broadly Artificial Intelligence, the world’s existing computing power can finally be used meaningfully.

3 Success Factors for Digital Transformation

From over 20 years of leadership roles in startups, scaled internet platforms, tech giants, and traditional companies, I’ve learned what sets digital companies apart:

1. Understanding the role of digital technology and properly anchoring it in the company.
2. A digital leadership and management culture characterized by empowerment, autonomous teams, and OKRs.
3. The ability to build digital software products.

The most important first step is for a company’s leadership to recognize that digital technology is not just a cost factor, and merely spending more on technology won’t help. Instead, the essential role of technology must be understood, placed at the core of the company, and actively managed with an adapted leadership culture and new competencies.

But then, every company can be successfully digitalized.