The Elephant in the Room: Startups, Enterprises, and the Current State of Digital Transformation

I spent the early part of last week speaking with enterprise thought leaders and executives from some of the world’s largest organizations at the Enterprise Transformation Exchange Summit in Denver, Colorado. The experience was revealing, and on my Tuesday morning panel discussion moderated by IDC’s Tim Scannell, I discussed some of the themes I’ve noticed recurring across industries. Primarily, that even though the challenges written about so prevalently in the startup world manifest differently in large enterprises — and at a different rate of pain — the same root issues still come to the surface. Over time, it is the inability to gain traction and scale that leads to the failure of the majority of digital transformations.

Yes, the majority. While startups are more likely to fail immediately, current trends suggest most category leading enterprises in existence today will be dethroned and disappear within a matter of years, albeit through a slower, more drawn-out death — outpaced and phased out by competitors with time.

In our “every company is a tech company” era, businesses of all sizes are struggling to gain traction as they transition from one stage of development to the next.

The Science of Company (Re)Building

It’s something Bruce Cleveland, founding partner of Wildcat Ventures, writes about in his recent book, Traversing the Traction Gap: in this era, “mistakes will be more commonly fatal for companies of any size, not just startups.”[i] And it makes sense. Digital transformation in an enterprise company requires reimagining and challenging every notion of the business model and operations, while simultaneously maintaining and growing the existing business.

Performing a digital transformation, in effect, requires building a new company within the framework of an operating business — if the new company collapses, there is potential for it to pull the entire structure down around it, just like scaffolding collapsing around an unstable structure.

It’s why I found myself coming back to the same point in multiple conversations last week: while thought leaders like Tom Mohr are writing heavily about “the science of company building,” it is much rarer that we see anyone talk about “the science of company rebuilding.” And yet, there is one — and the methodologies are often not that different from those we preach to startups.

It is one of the fundamental ideas that I intend to apply in my new role at Accelerate Innovation: large enterprises, like startups, must leverage all the research at their disposal to balance the need for constant learning and adaptation with the need to maintain alignment through key transitions.

Wildcat Venture Partner’s “Traction Gap Framework”– which Bruce Cleveland does a deep dive into in Traversing the Traction Gap — does one of the best jobs I’ve seen of highlighting where these transitions occur.

The Traction Gap framework — relevant for both startups and enterprises alike — identifies three key phases of company building: Go-to-Product, Go-to-Market, and Go-to-Scale. Within each phase exists a series of value inflection points, which serve as markers of progress or traction, like the achievement of Minimum Viable Concept (MVC), Minimum Viable Product (MVP), or Minimum Viable Repeatability (MVR).

Image source: Cleveland, Bruce. Traversing The Traction Gap. Radius Book Group, 2019.

Most companies fail not because of an inability to achieve any one Value Inflection Point (like an MVP), but because of an inability to maintain and generate new traction while bridging the gap between completing one phase of development and the next.

While getting stuck moving between phases of development plays out differently in startups vs. enterprises in terms of the specific type of challenges experienced, the impact they have, and the rate at which that impact manifests into something fatal, on both fronts, the road ahead appears bleak and odds of success slim.