The “lipstick on a pig” phenomenon: Avoid the Illusion of Digital Transformation

“One worrying trend that we see is what I call the ‘lipstick on a pig’ phenomenon,” says Prof. Peppard, adding “This is where an organization gives the illusion of being digital.”

Joe Peppard is a Professor at ESMT, Germany

Professor Joe Peppard will be the guest speaker at the International PANTHEON Conference 2017 in Grand Hotel Portorož, Slovenia, on November 16. He is Professor at ESMT Berlin, Germany, and Adjunct Professor at the University of South Australia. His most recent book is The Strategic Management of Information Systems: Building a Digital Strategy and is currently writing his next book, Digital Leadership for Boards and C-Suites.

When does an organization give the illusion of being digital?

Over the last few days I have been reviewing some of my data relating to how companies are managing – or not – their so-called digital transformation journeys. I am impressed with the ambition of some companies, what they are doing, and what they have achieved. Others, unfortunately, are either sticking their heads in the ground, muddling along without much direction or giving the illusion of progress. One worrying trend that we see is what I call the “lipstick on a pig” phenomenon. This is where an organization gives the illusion of being digital. To the outside world, there may be some shiny new apps, but inside the company is scampering around in the dark. There may be lots going on under the banner of “our digital initiative,” but in reality there is little cohesion and minimal progress is being made.

According to the Altimeter Group, more than 80% of companies today are going through a digital transformation. Do you think that all of these companies know what being digital really means?

 

I think not. Being digital involves more than deploying digital technologies like social media, mobile, cloud, analytics, internet of things, cognitive computing, artificial intelligence or blockchain.  Digital provides the opportunity for a fundamental re-imagining of a company from its strategy through to its operations. To rethink its business model and value proposition, how it manages risk, how it engages with customers and other ecosystem partners, etc. A digital technology like the blockchain, for example, challenges the essence of what we understanding by organizations today, permitting for the first time the possibility of a distributed autonomous organization structure. It also has implications for corporate strategy; for example, platforms challenge the dominant supply side perspective and highlight the importance of managing network effects. Digital can be exciting, thrilling — but is difficult to achieve.

 

Digital provides the opportunity for a fundamental re-imagining of a company from its strategy through to its operations.

You mentioned that “digital” is hard to achieve. Do you think that one of the hardest challenges for any organization on the path to “digital heaven” is to overcome people’s resistance to change?

 

Da, slažem se. Moje istraživanje otkriva da je najteže postići kulturološke i kolektivne promjene koje su nužne kako bi organizacija postala doista digitalna. Za zaposlenike koji nisu spremni za promjenu, promjene znače neizvjesnost, izazov njihovom identitetu i mogu ih potencijalno koštati posla. “Transformacija” je samo druga riječ za promjenu i znamo da je postizanje promjene, osobito kulturološke promjene, nevjerojatno teško.

 

You have to adapt your new ideas to the vision of how your customer wants to communicate with you and how you’ll allow them to do that. You might think that you have a great business model with a winning value proposition, but the customer is the ultimate arbiter.

 

Digitalna transformacija također znači izgradnja snažne strategije i jasne vizije. Da li je razumijevanje potreba naših kupaca dio te jasne vizije?

 

Yes, I agree. My research reveals that achieving the cultural and hehaviour changes that are necessary for an organization to become truly digital are the most difficult to achieve. For employees and C-suites not partial to change, changes will mean uncertainty, a challenge to their identity, and might potentially cost them their job. `Transformation`is just another word for change and we know that achieving change, particularly cultural change, is incredibly difficult.

For example look at Uber. They created the world’s largest car fare service without purchasing vehicles, while eBay and Alibaba created some of the world’s most extensive retail channels without holding inventory. Both focus exclusively on the customer and “their problem to be solved.”

 

You will be talking more about digital transformation and how to avoid the illusion of digital transformation at the International PANTHEON Conference on 16 November in Grand Hotel Bernardin Portorož, Slovenia. Before we meet in person, can you give us some advice how to survive and prepare for being “Digital”?

 

It’s important to understand that digital transformation is not inevitable; it requires the activity participation of the whole organization. Moreover, digitalization is not a fad, but something that has been occurring for many decades although it has accelerated in recent years driven by mobile, social media, internet of things and analytics. There are different pathway to achieving digital transformation and I will elaborate on these during my presentation. If you approach the digital transformation process with doubt in your mind, it is destined to fail. Understand that digitalization is not merely a tool for improving your business’s results, but an absolute necessity for the survival of your company.

 

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