Managing Partner and Founder of Fort Ross Ventures, a venture capital firm aiming to bring more U.S. startups to Eastern Europe.

It’s no secret that to be able to drive disruption and compete effectively in the third decade of the 21st century, older, well-established companies need to be open to the concept of digital transformation. There’s simply no way to fend off digital natives, from giants like Amazon to the constant tide of emerging startups, by doing things the way they’ve always been done.

However, acknowledging the need for change and understanding the scope of it are two different things, and legacy businesses often have trouble right from the start. For example, a common misconception about digital transformation is that all it requires is an infusion of technology at every level of a company. This simply isn’t the case. Technology is an enabler of new ways to conduct business, but digital transformation involves rethinking all facets of a company’s operations.

The constantly evolving nature of technology makes this realization even more critical. Everyone is familiar with the adage that “software is eating the world,” but digital native companies have moved beyond software to something I like to call “liquidware”: highly sophisticated tools that can be used by people without special knowledge of coding and draw on the power of always-learning artificial intelligence algorithms.

Developments like liquidware are the kind that only companies that have truly embraced everything required for digital transformation can employ, yet a handful of common attitudes can keep them from taking the necessary steps. Let’s examine some that I’ve seen most often and the solutions needed to make sure those attitudes don’t take root.

Not Aiming High Enough

It’s common for legacy companies to be satisfied with incremental improvements on products or services that are already popular. The thinking is that by adding new features on top of what has already been shown to work, customers will be loyal and continue to buy.

While even some digital titans like Apple can get away with this for a time because of their great success — I believe the iPhone, for example, has been making slow, steady enhancements with each model instead of revolutionary leaps — it’s a dangerous assumption overall. If a small improvement can only add a proportional amount of value and it fails, the company has wasted time and resources with no real upside.

High-risk, high-reward gambits are a key component of digital transformation. The only way to truly innovate is to take moonshots that have a small chance of success but will pay off big when they do. Even if your success rate is only one in 100, the idea is that the value generated by that one is more than enough to make up for 99 failures.

Celebrating Successes Over Failures And Overvaluing Legacy

This builds on our first point but speaks more to the company culture necessary for digital transformation to take hold. Everyone enjoys success, and it’s natural for people at all levels of a business to want to bask in the glory of a job well done.

At the same time, it can be tempting for companies to rest a little too much on their laurels, touting the importance of being an industry leader in a certain segment for years or even decades. Businesses in these positions can be overly focused on protecting their market share, unaware that the entire market can change in an instant while simultaneously missing out on opportunities to pursue entirely new markets.

Avoiding this pitfall means celebrating the people in a company who take the risks and pursue lofty targets even when they fall short, particularly when they have nothing to do with the company’s legacy. As noted, I’ve found those are the employees most likely to bring about the type of breakthrough needed to take the business to the next level, and their efforts to do so are vitally important. To properly recognize these people, however, also necessitates the right style of leadership.

Promoting The Wrong People

It’s no simple task to make the organization-wide changes that come with a commitment to digitize. Employees at all levels of seniority and across all job functions will have doubts about the new direction, which is why it’s of utmost importance to have leaders who can communicate what the company is doing — and why.

The question is whether those decision-makers exist and can be identified within the current ranks of the company. The answer to the former is often “yes,” but the trouble is that the answer to the latter is usually “no.” That’s because, in my experience, promotions in legacy companies are often given to people who say “no” to anything new. And to tie it back into our discussion about risk-taking, it’s because those people seem right more often, as projects with the best chances of becoming truly disruptive are also the kind that will fail more than they succeed.

To fully enable the top-to-bottom buy-in needed, I believe executives must cultivate a culture where nobody wants to say “no.” Sometimes this could mean seeking out new leaders from outside the organization, as they aren’t beholden to the same worries about legacy or “we’ve been successful doing things this way” concerns. Ideally, though, it can be accomplished simply by empowering employees to take bold leaps and never consider anything too far outside the box. Only that kind of thinking can help complete a true digital transformation and have a company ready to compete in any industry in the decade ahead.


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