DIGITAL transformation was supposed to revolutionize business, bringing companies into the future with cutting-edge technologies and streamlined processes. Yet, after years of investment and effort, many organizations are still struggling to realize its full potential.

In fact, the Harvard Business Review said that, on the average, 87.5 percent of transformations fail to meet objectives. The problem isn't technology — it's the approach. Companies have been too focused on digitalization, not business transformation. The distinction may seem subtle, but it's the reason why so many digital initiatives fail to deliver meaningful change.

When businesses first embarked on digital transformation, the idea was to integrate digital technologies into all aspects of operations. The goal was efficiency, automation and connectivity. Companies implemented cloud computing, artificial intelligence (AI) and data analytics, believing these tools alone would make them more competitive. What they overlooked was that technology is only as useful as the strategy behind it.

Simply digitizing processes doesn't create a better business model, it just speeds up an outdated one. Consider the companies that have successfully leveraged technology to redefine industries — Amazon, Uber, Netflix and Airbnb. They didn't just implement digital tools; they fundamentally changed how their businesses operated.

Amazon didn't just put bookstores online; it reimagined retail logistics and customer experience. Uber didn't digitize taxi dispatch; it built an entirely new system for urban mobility. These companies didn't just automate — they transformed. Many organizations, however, remain trapped in an outdated mindset. They introduce AI, automation and cloud services without changing the way they think about work. They implement new software, but keep the same rigid hierarchies and workflows.

Digital transformation, in its truest sense, isn't about upgrading systems — it's about rethinking the entire structure of how business is done. The companies that fail at digital transformation are those that treat it as a technology project rather than a fundamental shift in strategy. The real power of digital transformation lies in its ability to change not just how work is done, but what work gets done.

Artificial intelligence is a prime example of this. Many businesses see AI as a way to automate existing tasks, improving efficiency and reducing costs. But AI's real potential lies in augmentation — enhancing human capabilities, enabling new forms of collaboration and unlocking entirely new ways of working. The companies that will succeed in the AI era aren't just those that use AI for automation, but those that allow AI to reshape how they operate at their core.

One of the biggest misconceptions about digital transformation is that it's a one-time initiative. Companies embark on multiyear digital projects, believing that once they've implemented the right tools, the job is done. In reality, transformation is an ongoing process. Technology evolves, customer expectations shift and businesses must continually adapt. Organizations that treat digital transformation as a static goal will always be playing catch-up. True transformation requires a culture of continuous learning, innovation and adaptability.

Another critical mistake companies make is viewing digital transformation as an IT-driven effort rather than a business-driven strategy. When transformation is led solely by the IT department, it often results in technology solutions that don't align with business objectives. The most successful digital transformations happen when leadership teams integrate technology with strategic vision, ensuring that digital investments drive real business outcomes. This is especially crucial in an AI-first world.

As AI becomes more integrated into business operations, the focus must shift from simply implementing AI tools to redesigning business models around them. AI isn't just about automating tasks — it's about creating entirely new ways of operating. The companies that recognize this will be the ones that thrive in the coming decade. We are at a moment where businesses have the opportunity to move beyond digitalization and embrace true transformation.

This means shifting from seeing digital tools as enhancements to existing processes and instead using them to rethink and reinvent. The companies that will lead in the AI era won't be those that simply integrate AI into their current workflows, but those that allow AI to redefine how work is done altogether. To succeed, businesses must adopt a mindset of continuous transformation. They must recognize that technology alone isn't the answer — what matters is how they use it to create value.

Organizations that approach digital transformation as a business transformation — one that integrates technology with strategic innovation — will be the ones that shape the future. Those that focus only on digitalization will find themselves left behind, wondering why their digital transformation failed to deliver the change they were promised.

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The author is the founder and CEO of Hungry Workhorse, a digital, culture and customer experience transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation and teaches strategic management and digital transformation in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com. Source: https://www.manilatimes.net/2025/02/13/business/top-business/digital-transformation-is-broken/2054698