Governance: Key ROI of Digital Transformation

Companies the world over understand they need to integrate digital technology into all aspects of their business and move to platform-based operational and business models – the most efficient way of matching buyers, partners and sellers ever devised. Using these models, customer-centric digital natives have completely altered customers’ expectations about how they interact with companies they buy from. Every sector is being disrupted – from agriculture to virtual events via Zoom.

McKinsey notes that, “Since 2000, over 50% of Fortune 500 companies have been acquired, merged, or declared bankrupt, with no end in sight”. The only way to compete is to adopt these tried and tested practices to become digital too.

The C-suite understands this only too well but is in a tough spot. On one hand, they understand the urgency and importance of digital transformation, which was underlined by the sudden, massive shifts in the way we work, study and socialise due to the pandemic. On the other hand, there are examples of hugely expensive “less than successful!” digital transformations abound. Bain & Company found only 5% of attempted transformations meet or exceed expectations.

There also appears to be a bewildering number of reasons for the failure: lack of top management support; insufficiently clear, consistent and compelling communications; no urgency or deadlines; badly defined goals; resistance from employees; poor coordination across the organisation; and no actionable, verifiable feedback to test and reset the transformation as necessary.

The good news is that on closer inspection, the situation is not as confusing and chaotic as it looks, although it is complex. It turns out that a major common contributor of almost all transformation flops is poor governance. Digital transformation involves every aspect of an organisation and everyone in it. Structured governance is essential to ensure that everyone takes the same approach to common goals, in a coordinated, timely way. It also provides mechanisms to constantly check progress, address problems and adjust goals as necessary because no one operates in a static market.

IDC predicts that in 2023, spending on digital transformation will reach $2.3 trillion globally and account for half of all ICT spending. Traditional companies have been struggling to adopt digital natives’ practices and copy their success for a decade, undergoing digital transformation projects that have mostly failed, at great financial and sometimes reputational cost too.

The most often cited statistic is McKinsey’s 70% failure rate, but Wharton Business Consulting highlights a survey by Couchbase that found 90% of digital transformation projects fell below expectations, or delivered only minor improvements, or failed completely. This was based on responses from 450 CIOs, CTOs and digital leaders at companies with over 1,000 employees in the U.S., U.K., France and Germany.

So digital transformation is essential, but the chances of it succeeding based on evidence to date is extremely low. What’s the answer to what is perhaps the biggest question facing companies the world over? In a word, governance: It might not set the pulse racing, but it should.

API and application integration governance has a wide-ranging and foundational role to play in successful digital transformation. Failure to embed governance when planning digital transformation strategy is likely to damage or destroy return on investment (ROI). Governance needs to be applied to every aspect of an enterprise and all its employees, and not just for the duration of a particular program either: it has profound implications for whatever steps the enterprise wants to take next.

This white paper looks at:

• the drivers of digital transformation
• the fundamental attributes of platform-based business and operational models
• how to leverage good governance, starting with the Bezos Edict regarding a disciplined, consistent approach and application of technology
• ecosystems, and the power of scalability and automated integration
• examples of failed digital transformation efforts – and successes
• recommendation to help you succeed at digital transformation

Digital natives’ platform-based business and operational models are the most efficient way of matching buyers and sellers ever devised, giving rise to some of the world’s most valuable companies in just a few years. Their use of technology is always to improve customers’ experience, and they excel at the first rule of being in business – be easy to do business with!

The two tables below show that in November 2020, seven of the world’s most valuable companies were platform-based, compared with one – mobile operator NTT DoCoMo – in 2020¹ .

*As of November 3, 2020.

Source: https://www.gfmag.com/global-data/economic-data/largest-companies

Source: https://www.youtube.com/watch?v=fobx4wIS6W0

Their platforms – in different variations – support ecosystems of buyers, sellers, users and partners, and have reshaped and raised customers’ expectations about their dealings with all kinds of companies. And the more successful they are, the more participants they attract which drives greater success. This is known as the network effect and the different types of platforms and the many variations of how they are used are explored in this pioneering book, Platform Revolution.

Another great attribute of platform-based models is that they are so flexible, in Amazon’s case enabling an online book seller to become, among other things, one of the biggest public cloud providers in the world through Amazon Web Services.