![]() ![]() Second, digital is not just a thing that you can you can buy and plug into the organization. Therefore, no managers should view digital - or any other major technological innovation - as their sure salvation. A clear one is that there are many factors, such as the economy or the desirability of your products, that can affect a company’s success as much or more than its digital capabilities. Several key lessons emerge when heavy commitments to digital capability development meet basic financial performance problems. And now it’s happening with digital transformation. It happened with analytics and big data, when companies like Sears and Zynga invested millions in creating analytics units that never paid back their investments. It happened with e-commerce, when companies like Staples and Walmart invested heavily in separate e-commerce units, only to have those units drain the company of resources. This kind of unfortunate decision has happened over and over again, in wave after wave of transformative business technology. We think there’s something more here than executive over-exuberance or slowing markets. ![]() However, while their companies had plenty of resources, the big digital bets did not pay off quickly enough, or richly enough, to counter the drain they represented on the rest of the business. What can we learn from these examples of digital dreams deferred? How did these smart, experienced leaders make decisions that don’t look so smart in hindsight? They made the investments, they got a lot of exciting feedback from their digital leaders and from the press, they increased the investments, and the cycle repeated. ![]() At Lego and Burberry, the CEOs leading the digital charge stepped into lesser roles. At P&G, then-CEO Bob McDonald was asked to leave by his board, as was Ford CEO Mark Fields. These companies spent millions to develop digital products, infrastructures, and brand accompaniments, and got tremendous media and investor attention, only to encounter significant performance challenges, and often shareholder dissent. Ford invested heavily in digital initiatives only to see its stock price lag due to cost and quality issues elsewhere in the company. Burberry set out to be the world’s best digital luxury brand, but performance began to suffer after initially improving. Procter & Gamble wanted to become “the most digital company on the planet” in 2012, but ran into growth challenges in a difficult economy. Nike halved the size of its digital unit in 2014 by discontinuing its Nike+ Fuelband activity tracker and some other investments. Lego recently defunded its Digital Designer virtual building program. GE is hardly the only company to run into performance issues and sooner-than-expected executive departures in the midst of a huge digital transformation effort. The new CEO, John Flannery, is focused primarily on cutting costs. Other senior executives have left as well. The company’s stock price has languished for years, and CEO Jeff Immelt - a powerful advocate of the company’s digital ambitions - recently departed the company under pressure from activist investors. However, investors didn’t seem to acknowledge its transformation. The company received much acclaim for its transformation in the press (including some from us). Some performance indicators, including service margins, began to improve. GE also went to work on transforming internal processes like sales and supplier relationships. The company created impressive digital capabilities, labeling itself a “digital industrial” company, embedding sensors into many products, building a huge new software platform for the Internet of Things, and transforming business models for its industrial offerings. In 2011, GE embarked upon an ambitious attempt to digitally transform its product and service offerings. Perhaps companies would be better served by making smaller, more incremental digital bets that are more certain to pay off - and less likely to fizzle out. Lego, Procter & Gamble, Burberry, and Ford also spent millions to develop digital products, infrastructures, and brand accompaniments, and got tremendous media and investor attention, only to encounter significant performance challenges, and often shareholder dissent. ![]() GE also went to work on transforming internal processes like sales and supplier relationships. However, investors didn’t seem to acknowledge its transformation. ![]()
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