Boardrooms have discovered a marvellous way to waste money. It’s called digital transformation, and if you’re doing it properly, you can burn through billions whilst congratulating yourself on being visionary.
Organisations worldwide squandered some 2.3 trillion US dollars on transformation projects in 2023. The culprit isn’t insufficient computing power or outdated infrastructure. It’s something far more embarrassing: most executives mistake digitalisation for strategy, rather than using digital tools in service of strategy. They’re buying very expensive hammers and wandering about looking for things to hit.
General Electric poured billions into creating an IoT platform called Predix in 2015, hired thousands of engineers, and declared itself a ‘digital industrial’ company. The problem? GE tried to do everything at once without a coherent vision of what ‘digital industrial’ actually meant for its competitive positioning. As the stock price languished and the CEO departed, all those sensors and software platforms hadn’t answered a basic question: which battles was GE trying to win, and how would technology help win them?
The expensive wrong turn
Ford created an entirely separate digital division in 2014, headquartered far from the rest of the business, complete with its own budget and identity. This organisational apartheid ensured digital innovation remained divorced from the core business of making cars—rather like improving your skiing by hiring a brilliant instructor who skis in another resort and never watches you on the slopes.
Procter & Gamble’s 2012 declaration that it would become ‘the most digital company on the planet’ was perhaps the purest expression of strategic confusion masquerading as ambition. The goal was so vague it spawned countless initiatives without clear purpose. Being ‘the most digital’ is not a strategy; it’s a vanity metric. A firm might as well aspire to be ‘the most electrified’ or ‘the most telephonic’.
The pattern is depressingly simple: companies see technology as an end rather than a means. They confuse operational efficiency with competitive advantage, implementation with vision. Bain & Company found that 88 per cent of business transformations fail to achieve their original ambitions, largely because fewer than five per cent of roles in any organisation actually create 90 per cent of the value—yet companies spread their transformation efforts thinly across everyone.
Accelerating towards the cliff edge
Artificial intelligence is about to accelerate this pattern at warp speed. McKinsey reported that 65 per cent of organisations regularly used generative AI in 2024, up from just 33 per cent a year before. Yet three-quarters of businesses lack an enterprise-wide roadmap for AI adoption, and fewer than two in five say their senior leaders understand how the technology creates value.
The same executives who couldn’t articulate why they needed an IoT platform are now racing to implement large language models without clarity on which strategic questions those models should help answer. Technology amplifies intent. Give a brilliant strategy powerful tools, and you’ll compound your advantages. Give a muddled strategy those same tools, and you’ll execute your confusion at unprecedented scale and speed. Only 16 per cent of transformation efforts that don’t fail outright actually improve performance.
Digital transformation has become a linguistic smokescreen for avoiding difficult strategic questions. We need to digitally transform sounds decisively modern and conveniently avoids specifying into what or for what purpose. It’s strategy theatre—all the appearance of boldness without the substance of actual choice.
The unfashionable basics
The companies getting this right—McKinsey calls them ‘AI high performers’—do something unfashionably basic: they start with specific business problems and work backwards to technology solutions. They ask How will this change the game we’re playing? rather than How can we look innovative?
The question isn’t ‘should we use AI?’ any more than it’s ‘should we use electricity?’ The questions that matter are: Which parts of our value chain are we defending or attacking? What customer behaviours are we changing? What cost structures are we breaking? What capabilities do we need that we currently lack? Only after answering these fundamentals does it make sense to ask which technologies might help.
Volkswagen’s Cariad software unit attempted to create a unified operating system for all twelve group brands simultaneously, complete with autonomous driving capabilities and over-the-air updates. By early 2025, the programme was over two years behind schedule, had spawned 20 million lines of code across overlapping teams, and featured boot times above 15 seconds with 1,500 unresolved critical defects. This wasn’t a technology failure; it was a failure to sequence priorities and define what winning looked like.
Strategy before software
We’re witnessing an entire business generation confusing motion with progress, tools with purpose, implementation with insight. The real transformation that’s needed isn’t digital—it’s conceptual. Until executives articulate their strategic intent before reaching for their digital toolkit, they’ll keep producing elaborate, expensive implementations of unclear thinking.
The accelerating adoption of AI makes this conceptual clarity more urgent, not less. You can digitally transform yourself into oblivion with yesterday’s technology, but at least it takes time. With AI, you can amplify your strategic confusion at the speed of a GPU cluster.
What’s needed isn’t better technology or better technology deployment. It’s better strategic thinking about what problems technology should solve, which battles it helps you win, and which capabilities genuinely provide competitive advantage rather than mere operational parity. Until that happens, digital transformation will remain what it largely is today: a very efficient way to spend a great deal of money learning what you should have known before you started.
Photo: Dreamstime.
