The Case of GE Digital Transformation – Discussing Its Success And Failure
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Contrary to popular belief, digital transformation does not completely uproot existing business strategies and frameworks. Rather, the process is supposed to complement what is already there. A Bain & Co. research found that only 8% of global companies have achieved their targeted outcomes from their investments in digital technology. The statistics related to digital transformation are disappointing. In a McKinsey survey, the success rate for digital transformation was found to be less than 30%.
Most companies adopt a digital transformation strategy for digitalizing their existing business ecosystem to compete in the increasingly innovative and disruptive world. However, the significant gap between the failure and success ratios reflects a lack of common understanding of digital transformation. The lack of clarity in the definition leads to ambiguous strategic decisions, which may lead an organization on a downward spiral.
GE’s ambitious digital transformation initiative ultimately met significant challenges and setbacks, resulting in what can be labeled a GE Digital Transformation Failure.
The Failed Strategy of GE Digital
General Electric fancied to own the industrial internet. The American conglomerate spread its resources too thin in this endeavor, resulting in a failed digital transformation initiative. Formed in 2015 as a separate unit, GE Digital aimed to centralize all the IT operations of the company. With the vision to become one of the top ten software companies by 2020, GE spent billions of dollars on its digital initiatives.
Instead of individual units taking care of their respective digital needs, a separate entity in the form of GE Digital was formed to centralize the company’s digital initiatives. Although GE Digital was supposed to enhance the company’s data analytics capabilities and position General Electric as a more technologically focused enterprise. The unit’s objectives were strikingly different than the company’s expertise. The hurried transition from huge machinery to cloud-based software solutions backfired on the company, leaving GE in a dark economic pothole. The quarterly P&L requirements prevented GE Digital from investing in long-term strategies, limiting themselves to short-term goals that did not add significant value to the overall business.
Against the expectations of opening new revenue streams, GE Digital led to plummeted stock prices, a bad reputation, and economic losses. The new CEO, John Flannery, is now driving a more focused strategy for GE Digital, a 25% budget cut, and a sharp pivot in the digital strategy.
What went wrong:
- The intent of GE was right, but it got lost in the process of doing everything at once. Without a clear vision, driving the digital transformation at the scale of a GE-level enterprise is a suicide mission.
- Despite the heavy investments and best-in-class talent, the digital initiatives did not succeed due to the lack of balance between the business needs and capabilities.
The biggest pitfalls causing the digital strategies to fail are:
- Not having a clarity on what digital transformation means
- Not having the buy-in from the management
- Doing everything at once
- Absence of quantifiable metrics to measure the digital progress
- Lack of a change management plan
The digital transformation failure case study highlighted the critical importance of proper planning, stakeholder alignment, and change management in successfully transitioning to modernized business processes and technologies.
The Digital Triumph of Target
Target remodeled hundreds of its stores to deliver convenient and inspiring shopping experiences to customers. The retailer is focusing on deepening its customer personalization capabilities with the help of a holistic digital strategy. Target is providing its customers with the benefits of e-commerce and physical stores so consumers can leverage the retailer’s in-store and digital advantages.
Instead of replacing its existing physical stores with digital platforms, Target used offline locations to scale up its digital operations. With digital fulfillment becoming a key priority for the company, the retailer’s physical outlets are handling about 80% of their digital volume.
After implementing cutting-edge technologies and fostering a culture of innovation, the company achieved unprecedented digital transformation success, revolutionizing its operations and elevating its competitive edge in the market.
What they did right:
- Instead of succumbing to the sheep effect, Target took an approach different from its competitors. Instead of closing down the physical outlets, Target upgraded them to handle digital traffic.
- Target’s same-day delivery option was a hit among the consumers. By partnering with Shipt, Target increased its digital fulfillment capabilities.
The keys to a successful digital transformation:
- Having the right leaders driving the digital wagon
- Upskilling the workforce for the digital tomorrow
- Establishing a seamless communication channel
- Upgrading the existing procedures with digital technologies
- Managing the change proactively
There is no silver bullet that can ensure the success of digital transformation. If resources were sufficient to guarantee success, there would not be many failure stories of the big-shot organizations’ digital transformation efforts.
Enterprise digital transformation requires deep strategizing and meticulous implementation. By achieving an ideal balance between digital innovation and organizational objectives, digital transformation implementation can be successful.
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