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Why Large Enterprises Struggle with Digital Transformations

3 min read
Jan 29, 2020 1:02:00 PM

We’ve entered and settled into the age of technology, yet large, traditional enterprises are still clinging to the manufacturing age. This is painfully evident in their use of outdated and ineffective methodologies and tools like focusing on projects and not products or spurning the necessity of adopting agile practices in favour of the limited, yet well-known confines of waterfall.

The result, at a time when a digital-first experience is essential, large enterprises often struggle with software development and the delivery process; failed projects, reworks, missed deadlines, cost overruns, and poor market fit for new products is unfortunately the common experience.

The more perilous consequence is that they struggle to keep pace with growing tech companies. The necessary digital transformations they must undertake to serve their market and compete with new players and disruptors is a painful process and sometimes fails altogether.

Before we can uncover the specifics of why they struggle, it’s important to understand why traditional enterprises need digital transformations in the first place.

Disruptors, market demands necessitate digital transformations 

A number of factors have contributed to the urgent need to undergo a digital transformation and evolve from using legacy tools and methodologies. Primarily, it’s a consequence of market demands that expect a digital-first experience and competing against the digital disruptors that are providing them.

We recently wrote about how digital-first services are disrupting and transforming traditional financial organizations with emerging new technologies and competitors in both the FinTech and Digital Banking spaces. 

At first glance, something that complicates digital transformations is doing it at scale, but a closer look reveals that scale isn’t the blocker it appears to be.

Digital transformation and product delivery at scale is challenging, but with the right tools and methodologies, not impossible

Smaller tech companies are quite agile and can be quickly responsive when they need to be. They can deal with multiple competing priorities, adapt a corporate strategy that is constantly evolving, effectively manage a constant stream of feature requests from sales, customer success, and customers.

The conception is that larger enterprises don’t have the luxury of being this nimble and responsive. Yet companies like Google, Facebook, Apple, and Amazon have equally sizeable workforces and consistently deliver new products while responding to evolving market needs and demands.

What allows the likes of Google, Facebook, Apple, and Amazon to effectively deliver products and services is that they’re structured just like small tech companies, but at scale; they focus on products, not projects, and implement agile practices across the breadth of all product teams and the organization—not just development. Thus, while scale definitely introduces complexity and can challenge digital transformations and product delivery, it’s not insurmountable.

Detractors would say that there is something fundamentally different in what works for a tech company than what works in a traditional, large enterprise, but that’s not quite the case either.

The economy is now a digital economy which means all companies must be tech companies

All companies, especially large enterprises, are now tech companies—or at least they’re finding they have to be.

New value is either being created through digital experiences, products, and services, or underpinned by technology.

A modern car bought in the last couple of years is basically a smart phone on wheels loaded with sophisticated apps like a go faster app, a break app, a blind spot app, or a turn my air bag on app.

The products and services offered by a modern bank for example, are largely delivered digitally because that is what the market demands and is needed to stay competitive. At some banks, the number of people involved in the creation of software and systems associated with delivering this service is approaching 50% of the total workforce. In other words, many of the world’s leading enterprises have already become, or are on their way to becoming tech companies.

Yet many large enterprises are far behind in terms of their ability to deliver value to their market. In large part, this is due to their reliance on archaic methodologies and tools like focusing on projects, investing their energy in long-winded and inflexible requirements documents, gathering feedback when it’s too late, etc., causing them to be slower, less innovative, and open to being disrupted.