Getting digital back to basics part 1: a decade of fatigue

As technology experts, we enter 2024 with fatigued optimism. In this first of two articles, we unpack the fatigue brought by the past decade’s anemic return on digital investments and the hype that fueled unreachable successes. In the second article, we make the case for optimism in spite of today’s exhaustion. Find the original post on our blog.

For at least the past decade, non-tech businesses viewed digital as more than a process enabler—digital was a means for normal businesses to transform into high-margin, self-exalting tech companies themselves. Concurrently, venture capitalists and institutional investors believed their smart money would seed a new, winner-take-all digital landrace.

Before the post-pandemic economic reality manifested, everyone’s head was in the clouds. Our collective hallucination has finally cratered, leaving buyers of technology stalled, tired, and disillusioned. How did we get here? To center ourselves, let’s:

1. Acknowledge what we fell for
2. Address counterarguments and assuage doubts
3. Examine modern digital’s monuments of failure

Caught in the prospect and promise of transformation, we drifted away from the basics: digital tools should reduce problems by solving them faster, cheaper, or invalidating them altogether.?

Technology hype you fell for

We all got suckered in, oversubscribing to the technology-driven story of money and progress. To question it was to ostracize yourself. Let’s examine some heinous phenomena that overcomplicated or overinflated digital:

1. The tech press became a future-promising hype machine. Technology publications have an incentive to constantly cover the next big thing. Whether it’s an against-the-odds tale of two guys in a garage minting miracles or paid editorial coverage about a venture capital firm’s newest (and pressured) portfolio company, the hype machine persuades by associating technology with money and success. Corporate-run media outlets and social media accounts only amplify the problem. The hype machine’s goal is to use this power to get you to buy commodity tech at high margins. For the technology-as-fashion or technology-as-sports follower types, such stories make for a nice win-win. If you’re looking for substantive business results, well...?
2. FOMO is the hype machine’s main tool. If you don’t buy into the metaverse, cryptocurrency, AI, or next year’s thing, you’ll be left behind by progress. Your customers want progress, you can’t miss that! The awkward reality is that it takes between 12–18 months for an established company to integrate a new technology. In that time, the hype machine has already moved on. Twice.
3. Digital evangelists made tech startupness a virtue. Your corporation is big and old, therefore it’s slow, teetering on the brink of obsolescence. Won’t be long before your business gets disrupted by those proverbial two-guys-in-a-garage who can move fast and break things. Note that hype media still consider Google and Facebook/Meta as startups—they’re just big startups. These are wrinkled, prescription-taking, middle-aged companies paralyzed by their own opportunity cost, not vigorous youth with new ideas. As you may have noticed, “Founder” has become a popular title on LinkedIn, signaling strong faith despite a trying market.
4. Non-startup people found it difficult to separate viability from hype. “Startup” doesn’t necessarily equal “good”. Corporations made countless attempts to mimic startups and venture capital, investing directly, empowering “intrapreneurs”, and creating centers of excellence to self-disrupt. Trouble is, no established career-corporate executive has the patience for a zero-to-one effort, for as disruptive as these ventures may be one day, they need to be big obvious on the quarterly P&L today. This is why M&A’s a better approach for incumbent companies as well as their targets.

No analysis of digital failure is complete without this backdrop explaining (in part) the motive why behind our current state. The beliefs underwriting these phenomena combined to encourage poor decision-making, rash actions, and an unforgivable amount of burned dollars and irreplaceable hours in the hope of achieving high margins, lower operational costs, and near zero marginal costs. Next, let’s look at what hype built.

Repeat digital product, program, and project failures

We’ve touched on this before, but most organizations are still waiting for the past 20 years of investments in digital to pay off. The entire economy has been waiting since the 1970s. How is that possible when it so directly defies the narrative?

New techs implemented in normal business operations did displace old roles—no one employs throngs of accountants like they used to. New techs did not increase economic productivity because they did not create new margin for their buyers. Any money freed by implemented tech typically goes back into said tech. As the phrase goes, “hardware eventually breaks, software eventually works.”?

Over time the efficiencies and new channels obtained by that technology become table stakes to service your market. When efficiencies do arrive, they frequently drive prices down instead of pushing profits up. This creates the amazing consumer surplus everyone has benefitted from—think streaming entertainment, the everything store, and a portable supercomputer in every middle schooler’s pocket.?

Benefits have not been as clear on the business side. Consequently, most organizations only begrudgingly make necessary digital investments, often building the wrong things or building the right things wrong. Collectively, everyone made bad bets during the exuberance of 2011–2023. Often well-justified bad bets, at that. These were the most common:

1. Non-core creations. Side quests, vanity projects, and theoretical adjacencies led so many businesses astray, we believe these alone drove demand (and salaries) for software engineers to absurd levels. Internally, symptoms include shadow organizations, massive outsourced labor pools, and lots of colleagues who don’t actually understand your customers. Personally-witnessed examples include OEM suppliers building marketing websites for customers, pure professional services companies making connected products, and full app builds to automate events that only ever happened once. In the past 10 years, your average software services vendor probably obtained half their revenue from non-core creations alone. While attempting to establish some new digital toehold, many businesses forgot which side of the Pareto Principle to invest on.
2. Too many sales tools. Businesses usually create custom sales tools under the belief that their sales staff are unable to have a meaningful conversation with their prospects and customers, so it becomes the digital tool’s job to know the product. In the case of analytical sales tools, senior leaders get seduced by the idea that data by itself can persuade, and it’s the salesdrone’s job to wave that data under someone’s nose. It’s ironic that most software developers joined the trade to build video games or empowering, creativity-freeing tools. Instead, a huge percentage of their custom code went into sales aids that couldn’t improve a mediocre product, bolster a flat value proposition, or explain specifications any better than paper.
3. Overbuilds. In our collective exuberance to completely replace non-digital processes with a fully modern, digital process, many build teams attempted to cover 100% of potential usage scenarios before launching their offering into the world. Along the way, everyone forgot why the thing was made, and design, architecture, and prioritization choices come unmoored from the application’s purpose. Worse, few sought to understand the value people actually received from the application. Ultimately, many created Leviathan only to discover people like it for one tiny feature and tolerate the rest. All the while, customers happily continue on using previous tools and processes.
4. Permanent exploratory construction. Never-ending sprints with huge teams burning warehouses of cash together. If your application sits atop a codebase mountain of deprecated features and dead weight code, but your implementers remain focused on new functionality—colloquially “perf farming”—you’re stuck in this trap. It takes steely-eyed discipline to define “done” in digital. It takes tungsten carbide hardness to enforce garbage collection, non-functional optimization, and focus on solving the business problem during development. It takes superheroic courage to say “no” or “let’s prototype it and see how users behave with it” to a feature request from on high. You need all three to stop the sprint.
5. Unending mega-implementations. Still going on that ERP or EHR rollout, are you? It’s not just your organization. Big iron implementations take so long and soak up so much money that the state of the art, and more importantly, the market served by the implementing business itself will change before the tech enters service. If it takes longer to build or implement your digital thing than it takes to build an aircraft carrier, you’ve spent too much time or money and need to refocus. These implementations frequently become jobs programs for throngs of overseas contractors.
6. Over-reliance on commodity services as salvation. What makes your organization so special that people buy from it? It probably isn’t the way you implemented Azure or Salesforce! Your CRM, for example, helps you do business by removing more friction than it adds, but it does not make your business incrementally cheaper to operate or meaningfully more valuable to your customers. The gains might not justify the expense, either. That instinct to reach for efficiency introduces a strategic problem in digital—if you make something efficient before you make it excellent, you’ve optimized something unused or unusable and captured zero efficiency. If your organization regularly switches systems, you might be caught here. It’s unlikely the CRM, ERP, project management software, and team collaboration software operate exactly as your organizational culture does, which means there will be a cultural adjustment to adopting it. That adjustment period isn’t included in the annual fees. If someone else has a thing, it’s not a competitive advantage for you if you buy it, too.

Global industry built an incredible amount of digital, some of it valuable, and as we’ve argued, much of it not. Everything was built for a reason, and it’s worth examining some enduring rationales and counterarguments.

Digital initiative rationales that create failure

Continued coping beliefs and potential counterarguments to digital’s record of hype and failure may include:

1. Sunk costs. The surest way to lose your investment in SAP is to halt the project, right? Halting it might be the only way it ever ends. Let’s say you’ve already invested a ton of blood, sweat, tears, and dollars, and Leviathan works. Then ask “does it work to the tune of what it cost in margin and opportunity?” If so, you have a winner. ?
2. But AI. AI’s gonna take your job, so if you don’t AI your business, someone else will. We do think AI’s worth exploring and even provide experience-based guidelines describing how you can practically add AI to your business processes, but a sizable portion of AI’s hypothetical gains have already been eaten by “lower” forms of software, cheaper labor, and improved business process instrumentation. For decades, AI has been about computer algorithms making recommendations on what happens next. Your authors have designed a handful of prediction algorithms, if only to underline the point that AI needn’t be sophisticated to be useful. This acknowledgement actually makes AI easier to justify, and clarifies potential business uses. If you can demonstrate value above and beyond those elements, AI will at least be worth attempting.
3. Software is eating the world. Eating, or has eaten? This’ll vary based on the sector and task under inquiry, but depending on what’s under the microscope, it’s very possible that applying advanced software will wring significant gain from a given process improvement. Software is a form of automation, so it’s entirely possible a process is too complex to be readily automated (self-driving cars) and won’t provide obvious gains. Plot twist: it’s even more possible that switching from your current solution to a similar equivalent will yield better results despite the internal resistance.
4. Lack of exploration/incuriosity. If you don’t explore with tech, you’ll miss out on adjacent growth, the logic goes. We agree in principle, with one massive caveat: strategy. Intentional, justifiable exploration that’s part of a deliberate and considered strategy will help your business. A good strategy has an opinion about the future, and simplifies decisions through deliberate focusing and ignoring. Doing technology reactively or because someone conflates technology with forward progress will only create more waste.
5. My data! Your data’s been an untapped goldmine for what, a decade now? (Hint: you’re the goldmine.) Success with data is less about Ph.D datagnomes mining magic from data lakes than it is about creating understanding you can use to save or make money. Once again, an argument advancing the need to extract value from your business’s data supports the notion that the fundamentals will trump fancy tools. With data, fundamentals mean instrumenting, exposing, synthesizing, and acting upon the few data that genuinely matter. Hope and data do not mix.

All critique feels pessimistic and negative because it’s uncomfortable. What some call negativity, we call acknowledgement and accountability—the beginnings of moving forward. Following tech unquestioningly has failed most businesses, but adopting a reactionary Luddite mentality won’t keep you or your business competitive.?

There is a kind of leader who can see a decade out, sees demand shifting, and knows that change is necessary. Counterintuitively, this far-sighted leader isn’t a castles-in-the-sky butterfly chaser. They think closer to the core because they understand their business's offering, market, and value well enough to think critically about investment in digital. This is who you must become. Stay tuned to learn how next week.?

through consulting can prepare you and your organization for the new era of efficient digital. When you’re ready to architect, implement, and integrate efficient digital into your business, Next Mile will get you there without waste.