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The Biggest Mistake Companies Make When They Go Digital

September 25, 2018, 5:26 PM UTC

These days every company is a technology company. Even the stodgiest old-line industrial companies are embracing digital strategies to stay competitive. But that doesn’t mean they’re good at it.

Speaking at Fortune‘s Brainstorm Reinvent conference in Chicago, Aaron Levie, the co-founder, chairman, and CEO of online storage giant Box, explained how many firms misfired when they embraced digital four or five years ago.

“Many companies’ first forays into digitals didn’t work. They acquired companies and started labs or added ping-pong tables in hopes of being like Google,” said Levie, adding they nonetheless missed the point.

Levie’s fellow panelist Melanie Kalmar, who is the corporate vice president, chief information officer, and chief digital officer at 110-year-old Dow Chemical, shares Levie’s view. And both executives cited the same reason for the stumbles.

The crucial mistake, said Kalmar, is treating digital as something to add on to a company’s existing operations.

“A lot of ill-fated strategies occur when they say, ‘We’ll take the existing things we do and apply the Internet to it,'” added Levie.

In doing so, companies fail to harness the main promise of digital technology, which is to be more agile and to get closer to their customers.

The temptation to treat digital as an additional branch of their existing business—rather than as a new type of process—is understandable given the strategies many industrial companies used to become successful in the first place. That strategy involved owning lots of physical property and directing large numbers of employees in a command-and-control environment.

Today’s successful businesses, said Levie, rely on using small teams that interact directly with customers in order to iterate and constantly improve. He added that so much of the complexity in big companies’ operations stems from different silos hoarding information.

This doesn’t mean, of course, that every old guard industrial company is going to fade away. Indeed, Kalmar noted how Dow has reinvented itself multiple times in its history and is currently doing so again. Right now, she says, Dow is learning to be “agile at scale.”

Levie and Kalmar also reflected on the famous “software is eating the world” axiom coined by venture capitalist Marc Andreessen. Both agreed that the observation is prescient but that it has not meant, as some supposed, that the future belonged only to software startups. Instead, the winners are turning out to be the companies—including large incumbents—that deploy digital best.