Every person and every organization wants to do the right thing in the right way. Individuals strive for it in both their personal and professional lives. For organizations, it’s a survival issue and a mandate for remaining relevant and being able to grow.

In the 21st century, this is not easy to do. Ninety percent of Fortune 500 firms have vanished since 1955. In a recent study, researchers from John M. Olin School of Business at Washington University (via CNBC.com) estimated that in 10 years, 40% of today’s Fortune 500 firms on the S&P 500 will become extinct. Why is this happening, and how can we avoid it?

Doing things the right way increases efficiency. But it also means that if an organization has concentrated its efforts on the wrong thing, it is doing the wrong thing more quickly!

On the other hand, if the focus is on defining the right thing (that is, strategy and goals) but no action or the wrong action is taken to execute it, an organization will never achieve its goals. We all have seen people and organizations that are happy just having a strategy in place, but what they do daily is not aligned with that strategy. Therefore, they do not achieve the change they desire.

To remain relevant and in order to grow, firms must do the right thing in the right way. Decide what that is, allocate the resources you need to achieve it and develop an implementation plan tailored to your business.

Digital Transformation: Digital Optimization Versus Business Model Transformation

As described by Peter H. Diamandis in his book Abundance, many industries are moving from a world of scarcity to a world of abundance. This simply means that there is more competition on price margins, which makes digital optimization in almost every industry a priority. The focus of digital optimization is to use digital technologies like cloud, mobile, security and analytics to increase the efficiency in current business operations without significant changes to the way business is conducted. The emphasis is on cost reductions, which are necessary but not sufficient to guarantee long-term competitiveness and survival.

The downfall of Blockbuster and rise of Netflix is a classic example of the importance of having the right business model, plus IT capabilities enabling the business to realize a differentiating business model. Both Blockbuster and Netflix had the same high-level objective of providing movies to their customers, but the ways they did it (that is, their business models and capabilities) were different. Blockbuster’s business model and capabilities worked for the 1990s when it had more than 9,000 stores across the United States. But they were not adequate for today. That is why Blockbuster closed the majority of its stores in 2013 and now only nine of them remain (soon to be eight). Digitizing and optimizing the checkout process, inventory management and CRM, which helped to reduce the operational costs at the time, were not enough to transform the business to compete against the rise of Netflix.