Digital transformation: the biggest misunderstanding of a very familiar buzzword

We have spent years talking about digital transformation as if technology were the protagonist. Perhaps it is time to talk about what actually transforms.

There is something fascinating about the way the business world adopts certain expressions. They start as meaningful concepts, become strategic priorities, appear in every conference agenda and eventually reach a point where everyone seems to have become an expert overnight. Digital transformation is probably one of the best examples. Artificial intelligence is currently enjoying a very similar moment, with everyone discussing its revolutionary potential, often with remarkable confidence about technologies whose underlying complexity most of us have barely begun to understand. Apparently, a few prompts, a couple of conferences and a LinkedIn post are sometimes enough to develop an entire strategic perspective. Meanwhile, the conversation rarely goes much deeper than the tools themselves, leaving the more complicated questions about organizational structures, processes, capabilities and the actual implications of change conveniently in the background. The irony is that the louder we talk about transformation, the easier it becomes to overlook what it actually means.

For years, we have associated digital transformation with major technological disruptions. The internet, smartphones, cloud computing, artificial intelligence and the countless innovations that have changed the way we live and work. And, of course, these technologies have fundamentally reshaped our economies and societies. But somewhere along the way, we began confusing the instruments of transformation with transformation itself.

We started measuring progress by the number of systems implemented, platforms migrated, processes automated and, more recently, AI tools introduced. We created digital transformation departments, appointed Chief Digital Officers and built ambitious roadmaps with equally ambitious budgets. Yet, in many organizations, the fundamental ways of working, deciding, collaborating and creating value remained surprisingly familiar.

This is where I think the conversation deserves a different perspective: Digital transformation is not about becoming more digital. It is about becoming a different organization through the possibilities that digital technologies create.

The technology is the enabler, not the transformation

Think about some of the changes that have genuinely transformed our everyday lives. We no longer need to physically visit a bank for most transactions. We can work with colleagues across continents without sharing an office. Small businesses can access international markets that would have been almost impossible to reach a few decades ago. Entire industries have reorganized their production, distribution and customer relationships around new digital capabilities.

What changed in these examples? Technology, certainly. But also processes, behaviors, expectations, business models, economic relationships and even our understanding of time and distance.

A banking application is technology. The ability to manage money independently, at any hour, with entirely different expectations about service and accessibility is a transformation in the relationship between people and financial institutions. A collaboration platform is technology. The possibility of organizing work around distributed teams, asynchronous decisions and international talent networks is a transformation in how organizations operate. An automated production system is technology. Rethinking how workers interact with machines, how quality is monitored, how decisions are made and how resources are allocated is the transformation.

The distinction matters because it changes where we begin. If we start with the technology, we tend to ask what the tool can do. If we start with the transformation, we ask what needs to change, why it matters and which capabilities could make that change possible.

The OECD has been making a similar argument for years. Its research on digitalization and productivity identifies organizational capabilities, managerial skills, financing and changes in business practices as complementary factors that determine whether technological investments generate meaningful productivity improvements. Technology adoption alone does not guarantee those benefits.

This is particularly interesting because it challenges the narrative that technological progress automatically produces organizational progress. It doesn’t. Technology expands what is possible, but organizations still have to develop the ability to use those possibilities.

The illusion of the perfect roadmap

On paper, digital transformation can look wonderfully straightforward. Identify the problem, define the strategy, choose the technological backbone, select the right vendors, allocate the budget, build the implementation plan, communicate the changes to employees and launch.

There you go. Transformation delivered. Well, not quite.

The problem with this sequence is not that any of these steps are wrong. Most of them are essential. The problem is the assumption that transformation happens naturally once the implementation has been completed.

Organizations are not machines that can simply be reprogrammed. They are living systems of people, habits, responsibilities, incentives, informal relationships, institutional knowledge and sometimes decades of accumulated decisions. A new system enters an environment that already has its own logic, and that logic does not disappear because a project manager announces a go-live date.

A company can implement a sophisticated customer relationship management platform while its commercial teams continue managing their most important relationships through private spreadsheets. It can introduce a centralized data environment while departments continue protecting information as a source of internal influence. It can deploy collaboration tools while managers still evaluate productivity based on how visible employees are throughout the working day.

In each case, the technology may be functioning perfectly. The transformation, however, remains incomplete.

Research from Boston Consulting Group illustrates how difficult this can be. In a 2021 study involving more than 850 companies worldwide, only 35% of companies achieved their digital transformation objectives, compared with 30% in its 2020 study. These are survey-based findings, not a universal failure rate, but they reveal an important gap between ambition and results.

I find this particularly revealing because it suggests that the challenge is not necessarily our capacity to acquire or implement technology. It is our capacity to translate technological possibilities into sustained organizational change. And, unlike a software installation, that process rarely follows a perfectly linear roadmap.

Transformation happens in the ordinary, not only in the extraordinary

We have become so accustomed to celebrating disruption that we sometimes overlook the importance of less spectacular changes.

Digital transformation does not always require reinventing an industry, creating a new business model or introducing a technology nobody has seen before. Sometimes, it means eliminating five unnecessary approvals from a process. Sometimes, it means giving employees access to information that previously depended on three different departments. Sometimes, it means changing the way a manufacturing team anticipates maintenance, or allowing a customer service employee to solve a problem without transferring the customer through an endless organizational hierarchy.

Consider a company that reduces the time required to approve a commercial proposal from ten days to two. The technology might be relatively simple: an integrated workflow, shared information and automated notifications. But the actual transformation requires something else. Someone has to question why so many approvals existed in the first place, decide which responsibilities can be redistributed, establish new rules and convince people that the previous process is no longer necessary.

In other words, the technological component may be the easiest part.

This is also why transformation does not have to be revolutionary to be consequential. Incremental improvements, when connected to a coherent strategic direction, can accumulate into profound organizational change.

The challenge is distinguishing between digitizing an existing inefficiency and genuinely improving the way work is done. Automating a bad process may make it faster, but it does not necessarily make it better. And transferring unnecessary bureaucracy from paper to a digital platform does not make it disappear.

The human side is not a secondary workstream

One of the most persistent mistakes in transformation programs is treating people as the final stage of implementation.

First, the strategy is defined. Then the technology is selected. Then the processes are designed. And somewhere towards the end, usually when the implementation timeline is already under pressure, someone asks the communications or HR team to prepare an internal campaign explaining what is about to change. Employees receive an email, attend a training session, watch a leadership presentation and are expected to embrace the new reality. But communication is not a magic layer that can be applied to an organizational change once all the important decisions have already been made.

People do not simply adopt new ways of working because they understand the technical instructions. They need to understand why the change is happening, what it means for their responsibilities, which problems it is supposed to solve and how their contribution fits into the larger picture. They also need the opportunity to question assumptions, express concerns and influence decisions that affect their daily work.

And sometimes, what is interpreted as resistance to change is actually a perfectly reasonable reaction to a poorly designed transformation. Imagine asking a team to adopt a new system that requires more administrative work, duplicates existing tasks and makes it harder to serve customers. The team may not be resistant to technology. It may simply recognize that the proposed solution has made its work worse.

McKinsey’s 2021 research on organizational transformations, based on 1,034 survey respondents, found that fewer than one-third reported transformations that both improved performance and sustained those improvements. Among transformations that failed to engage either line managers or frontline employees, only 3% of respondents reported success. This is an association from survey research, rather than proof of a single cause, but the implication is difficult to ignore.

People closest to everyday operations often understand the practical limitations of a transformation better than those designing it from a distance. They know which processes are unnecessarily complicated, which informal solutions keep things moving and where the official organizational chart differs from the reality of how work gets done.

Ignoring this knowledge is not only a cultural mistake. It is a strategic one.

Leadership cannot delegate the transformation and expect to remain unchanged

There is another contradiction that appears frequently in organizational transformation: leaders want their teams to change without necessarily changing how they lead.

They ask for more collaboration but continue rewarding individual performance. They invest in data-driven decision-making but still rely exclusively on hierarchy and personal intuition. They introduce agile methodologies while maintaining approval structures that make agility practically impossible.

This creates a peculiar situation in which the organization is encouraged to behave differently, but the systems that determine success continue rewarding the old behavior. Transformation requires consistency between what leadership communicates, what management practices reinforce and what employees experience.

That does not mean leaders must become technology experts. It means they must understand the organizational implications of the decisions they sponsor. They need to be prepared to reconsider responsibilities, redistribute decision-making authority, challenge existing incentives and, occasionally, abandon practices that were successful in a previous context.

The difficulty is that leadership transformation is less visible than technological transformation. It is easier to announce the adoption of a new platform than to explain that the organization will need to rethink how authority, accountability and collaboration work. Yet the second decision may be the one that determines whether the first delivers any lasting value.

Communication is part of the infrastructure of change

I have always found it interesting that organizations invest enormous effort in designing technological architecture while sometimes treating communication as a relatively simple matter of information distribution.

But transformation creates uncertainty, and uncertainty does not disappear because a message has been delivered.

Employees interpret change through their own experiences. A new automation initiative may represent efficiency to the leadership team, but uncertainty about professional relevance to the people performing the affected tasks. A new operating model may look more collaborative in a presentation while raising legitimate questions about responsibilities, decision rights and accountability.

Communication must create the conditions for these perspectives to meet. That requires more than polished announcements. It requires continuity, accessible leadership, feedback mechanisms, clear explanations and the willingness to adapt the transformation when reality challenges the original assumptions.

It also requires different conversations with different audiences. The executive team needs to understand strategic impact and value creation. Middle managers need to understand how to translate the change into priorities and decisions. Operational teams need clarity about what will actually change in their work. Customers and partners may need to understand how new processes affect the relationships they already have with the organization.

These are not separate communication campaigns. They are connected parts of the same transformation. And perhaps most importantly, communication should not only explain what has already been decided. It should also help the organization make better decisions throughout the journey.

When communication is integrated into the transformation process, it becomes a mechanism for listening, learning, aligning and building trust. When it is added at the end, it often becomes an exercise in persuading people to accept decisions they had little opportunity to influence.

The transformation does not end at go-live

There is a particular moment in large technology programs when everything appears to be moving towards a single date. The go-live becomes the central objective, the calendar fills with testing sessions, migration deadlines and final approvals, and the organization concentrates its energy on making sure the system is operational.

This focus is understandable. Technology implementations require discipline, coordination and clear milestones. But the danger is allowing the technical milestone to become the definition of success.

A platform can go live on time and still fail to generate the expected organizational benefits. A process can be successfully migrated while employees continue using parallel solutions. A company can celebrate the completion of its transformation program while the actual transformation has barely begun.

The more meaningful questions often emerge after implementation. Are people using the new capabilities? Have unnecessary activities disappeared? Are decisions being made more effectively? Has the customer experience improved? Has the organization become more adaptable? Are teams spending less time navigating internal complexity and more time creating value?

These outcomes require measurement, but they also require patience.

The OECD has highlighted that productivity gains from digital technologies can take time to materialize because organizations need to adapt business practices, reorganize work and develop complementary skills. These adjustments can also involve temporary costs and disruptions. That means transformation cannot be managed exclusively through implementation metrics. Delivering a project within budget is important, but it is not equivalent to achieving the business outcomes that justified the investment.

We need to distinguish between measuring whether the technology was delivered, whether people adopted it and whether the organization actually improved.

A few dos and don’ts for a real digital transformation journey

There is no universal formula for transformation, and any methodology promising guaranteed success should probably be approached with some skepticism. Organizations differ in their history, culture, industry, maturity and ambitions. Still, there are a few principles I believe deserve a place in almost every transformation discussion.

What to do

• Start with the organizational problem, not the technological solution. Understand what needs to improve, which limitations exist and what value the transformation should create before deciding which tools to introduce.
• Map how work actually happens. Look beyond formal processes and organizational charts. Involve the people who understand the daily operations, including the informal workarounds that rarely appear in official documentation.
• Connect technology, processes and people from the beginning. Treat them as interdependent dimensions of the same transformation rather than separate workstreams that only meet during implementation.
• Give communication a strategic role. Create opportunities for dialogue, participation and feedback throughout the journey, not only during the launch phase.
• Build capabilities, not just technical knowledge. Invest in management practices, collaboration, critical thinking and the organizational skills required to make new ways of working sustainable.
• Define success through outcomes. Measure adoption, efficiency, quality, customer experience and organizational effectiveness alongside technical milestones.
• Allow room for experimentation and adjustment. A roadmap should provide direction without becoming so rigid that the organization cannot respond to what it learns along the way.

What not to do

• Don’t confuse implementation with transformation. A successful deployment is an important milestone, but it does not automatically mean the organization has changed.
• Don’t automate inefficiency. Question existing processes before digitizing them. Otherwise, you risk reproducing the same problems with more sophisticated technology.
• Don’t underestimate middle management. Managers translate strategic ambitions into daily decisions. If they are not prepared, involved and aligned, the transformation can lose momentum precisely where it needs to become operational.
• Don’t assume resistance is always irrational. Listen carefully to concerns. They may reveal problems with the proposed solution, the implementation approach or the organization’s readiness.
• Don’t treat communication as an announcement campaign. Sending information is not the same as creating understanding, participation or commitment.
• Don’t expect every department to transform at the same speed. Different functions have different dependencies, capabilities and operational realities. Forcing uniformity can create unnecessary friction.
• Don’t declare victory too early. The real test comes when the project team leaves, the consultants move on and the organization has to sustain the new ways of working independently.

None of these principles is particularly revolutionary. That may be precisely the point. We have spent so much time searching for revolutionary technologies that we sometimes overlook the organizational fundamentals required to make them useful.

And now, artificial intelligence has entered the conversation

It would be difficult to discuss digital transformation today without acknowledging artificial intelligence. Not because AI changes the fundamental nature of transformation, but because it makes some of its contradictions even more visible.

Organizations are experimenting with generative AI, intelligent automation and increasingly autonomous systems at remarkable speed. The technological possibilities are substantial, and many of them will change how knowledge is produced, decisions are supported and services are delivered.

But introducing AI into an organization also raises familiar questions in a new context. What happens to a process when some of its activities can be automated? Who remains accountable for decisions supported by algorithms? Which capabilities become more valuable? How should teams collaborate when certain tasks no longer require the same human intervention? How do organizations protect trust, quality and judgment while pursuing greater efficiency?

These are organizational questions before they are technological ones. And the temptation to skip them is considerable because the technology is increasingly accessible. It is possible to introduce an AI tool into a team in a matter of days. Redesigning responsibilities, establishing governance, developing new skills and understanding the consequences for customers and employees takes considerably longer.

There is also an important difference between using AI to accelerate existing activities and using it to reconsider how those activities should be organized in the first place. The first may generate immediate efficiency gains. The second requires deeper strategic thinking about what the organization should continue doing, what it should stop doing and where human contribution becomes more valuable.

Not every activity should be automated simply because it can be. Not every technological possibility represents a desirable organizational outcome. As AI becomes more embedded in everyday work, the quality of those decisions will matter enormously.

Perhaps we need to stop calling everything a transformation

There is nothing wrong with technological modernization. Replacing outdated infrastructure, improving cybersecurity, migrating systems or introducing new digital tools can be valuable investments in their own right.

But not every technology project needs to be described as a transformation. Sometimes, an upgrade is an upgrade. Sometimes, an automation initiative is an efficiency project. Sometimes, a new platform is simply a better platform. Calling these initiatives transformations does not make them more strategic. In fact, it may make it harder to distinguish between improving existing operations and fundamentally changing how an organization creates value.

I would argue that we need both. Organizations need continuous modernization to remain operationally effective, and they need the ability to reconsider their operating models when circumstances demand more profound change.

The important thing is understanding which ambition we are pursuing and being honest about what it requires. A transformation should leave something different behind. Not just a new technological environment, but a different way of organizing work, making decisions, serving customers, collaborating or responding to change.

And that difference should be visible in everyday life, not only in a strategic presentation.

The real transformation is what remains

Digital transformation has never been exclusively about digital technology. It is about the choices organizations make when new technological possibilities challenge the assumptions on which their existing ways of working were built.

Those choices are rarely simple. They involve trade-offs, uncomfortable conversations, changing responsibilities and sometimes the recognition that practices that worked well for years are no longer appropriate.

Technology can enable extraordinary progress, but it cannot independently create organizational clarity, leadership commitment, trust or the willingness to change. Those capabilities have to be developed, negotiated and reinforced by people.

Perhaps that is why transformation is so much harder than implementation. Technology can often be purchased, configured and deployed according to a relatively predictable schedule. Organizational change requires something less predictable: people learning to do familiar things differently, and sometimes learning to question why they were doing them that way at all.

And when we look beyond organizations, the same principle applies to society. Digital technologies influence how we access services, participate in economic life, build relationships, acquire knowledge and understand our place in the world. Their impact depends not only on what they make possible, but also on how institutions, businesses and individuals choose to use them.

That is a much broader conversation than selecting the next technological platform. So perhaps the question we should be asking is not how digitally transformed our organizations have become, but what has genuinely changed because of the technologies we introduced.

Because in the end, the most meaningful transformation is not necessarily the one with the most impressive technology. It is the one that changes how things work, long after the implementation project has ended.