Start with Saving, Not Spending
Contrary to popular advice, legacy businesses should begin their data-driven digital journey by saving money, not spending it. Avoiding wasteful practices can generate the seed capital needed for effective modernization. This strategic restraint prevents being locked into costly missteps disguised as best practices. Many of these popular methods deliver little to no real value.
Failure Is the Norm, Not the Exception
Large-scale tech initiatives often fail at alarming rates. Studies show that only about 12% of conventional transformation initiatives succeed, with digital transformations succeeding just 5% of the time. A meta-study found that failure rates for such initiatives range from 80% to 97%. This means only roughly one in eight efforts is successful, as judged by insiders.
The Myth of “Transformation”
The idea that your industrial-era business can magically become a digital powerhouse is flawed. Legacy businesses are not industrial caterpillars that transform into digital butterflies. You win by compounding data-driven value creation, not chasing transformation myths.
Stop the “Spray and Pray” Approach
Many companies pursue isolated “AI” use cases either by crowdsourcing internally or outsourcing to vendors. This results in fragmented, disconnected initiatives. Such spray & pray efforts seem safe but are actually wasteful and guaranteed to fail. Prioritizing small, risk-averse bets leads to mediocrity and wastage, not high ROI impact.
Why Narrow Use Cases Don’t Work
Selecting supposedly low-risk, narrowly scoped efforts minimizes perceived risk but also minimizes potential reward. These narrow plays are defensive, not offensive—they’re designed to protect turf, not win new ground. Your worst customer experiences often reflect companies clinging to such shallow strategies.
Industrial Thinking Fails in a Data-Driven World
Old-school incrementalism doesn’t work in an unpredictable data-centric environment. Problems evolve with data and can’t be solved step-by-step in isolation. Attempting to innovate while protecting existing operations often leads to politically safe but ineffective choices – what some call choosing “sevens” on a scale of 1 to 10.
The Trap of Consensus
Relying on committee-based consensus to choose tech initiatives sounds democratic, but is structurally flawed. Crowdsourced decision-making only works if each voter makes independent, informed choices. That rarely happens in real businesses. Groupthink and bias dominate, leading to poor decisions.
Committees Don’t Make Bold Moves
Most committees aim for the least controversial path, which disregards high ROI opportunities. Lack of expertise, unequal information, and consensus pressure distort good judgment. Such structures are excellent at avoiding blame, not at creating impact.
Boiling the Ocean Is Not Strategy
Doing large CapEx investments in buying cloud or software products and services by upgrading and migrating systems doesn’t in itself create any value. This spend in simply digitalizing existing legacy processes or slapping on some “AI” solutions as duct tape is meaningless. This Soviet-style multi-year across-the-board digital transformation approach is what I call “boiling the ocean”—grand sounding, spread thin, and ultimately futile.
New Tech Doesn’t Automatically Mean New Value
Just because something is cutting-edge doesn’t mean it’s valuable to your business. AI tools, cloud platforms, and CRM upgrades might solve a problem, but not necessarily the problems your customers face. Buying every new toy turns you into a tech consumer, not a value creator.
Tools Without Strategy Are Worthless
Legacy businesses succeed by solving customer problems, not by collecting “AI” tools. Your customer doesn’t care what trendy vendor solutions you use. They care about the value you deliver. Winning requires being a producer of technology that creates value, not just a consumer of tech vendor solutions.
The Incentive Misalignment
Vendors and consultants are incentivized to push new tech for their own gain. Software vendors pitch minimally intrusive solutions to reduce their integration costs and accountability. Consultants pitch large, multi-year projects for maximum billing. In both cases, the scope is manipulated to limit their accountability and to maximise their profits, not to serve your goals.
The Real Impact of Groupthink
This misalignment leads to dangerous groupthink disguised as best practices. When no one is accountable, expensive failures can continue unchecked. Groupthink thrives when initiatives are large, complex, and shielded by jargon or status.
History Shows the Power of First Principles
Napoleon succeeded because he rejected the assumptions of his adversaries. He used first principles thinking to prepare, gather intelligence, and choose the right battles. His outdated opponents were trapped in traditional thinking. Your business needs that same clarity of first principles thinking around value creation to win today.
Rethink from First Principles
Spray and pray, boiling the ocean, and other legacy common groupthink approaches are failing because they miss the core of data-driven value creation. The industrial paradigm is fundamentally different from the digital paradigm which is different from the data-driven digital paradigm. It’s time to return to first principles: by leveraging your unfair advantage, aligning everyone, simplifying by discarding clutter, optimizing to maximise returns and growing in a world of abundance.
Compound Data-Driven Value
Winning is not about adopting trendy tools. It’s about building flywheels of compounding impact. Leverage your unique unfair advantage. Align everyone and everything to your leveraged opportunities. Simplify by stripping away clutter and keeping the costs of complexity under control. Optimize with an empirically valid model of the world to maximize returns. And grow with an abundance mindset unconstrained by physical resources.
