In our discussions with business executives across industries, one theme often comes to the forefront: They are flustered by the imperative to drive digital transformation.

Everywhere executives turn, they are being warned that their organizations must become digital now or risk survival. In turn, boards are asking questions and expecting to see a well-conceived digital strategy. The problem is, few executives are confident that they know what digital transformation means — let alone how to implement it.

Our usual advice? Relax. Having worked in consulting for a few decades, we have been through similar waves of change involving nebulous technology-based concepts — ERP, e-commerce, CRM, cloud and big data to name a few. Each arrived with a sense of urgency but also a level of complexity and unfamiliarity that spawned trepidation and even fear. This time around is no different.

An Important Lesson From The Past

With so much hype and grandiose language, this era of digital transformation feels a lot like the early years of the mid-90s with the dot-com boom and the “new economy.”

There are some similarities. At the time, business media warned that dot-coms would push “traditional” companies out of business, so companies rushed to take their businesses online. They had little perspective to understand how the internet could transform their businesses, so they did what they knew at the time: They built websites using existing brochure content and product catalogs. New skills required to establish an internet presence were scarce, so they scrambled to find available resources at any cost.

There are also some key differences. Most organizations approached the internet as a new front-end channel that extended their operations, but they didn’t fundamentally change what already existed. The digital economy, on the other hand, is not just about adding new channels to an existing business — it’s about wholesale changes to the way an organization operates from front to back, driven by new data-driven capabilities such as machine learning, big data, agile methodologies and blockchain technologies.

A good illustration is mobile banking. While offering a mobile presence is critical, it is the underlying digital capabilities — such as analytics-driven chat functionality that provides targeted guidance to customers — that will ultimately distinguish a bank in that channel. This requires transforming more than the front end — it requires new technology platforms, new skills and new capabilities for capturing and using data. It also requires a shift in culture.