I have a high bar for what digital transformation is, but a dim view of how businesses are benefiting from AI today.

I wrote my first article defining digital transformation in 2015 and updated it to a 2.0 version in 2022. Here’s what I wrote in Digital Trailblazer:

Digital Transformation is about looking at the business strategy through the lens of technical capabilities and determining how technology can improve the way companies operate and generate revenue.

While AI is changing how many businesses operate, few are using it in their customer experiences (CX), and even fewer are generating revenue from AI capabilities. That is, if we leave out technology companies that are clearly generating revenue from AI, and recognize that AI’s big win in CX centers on customer support functions, where many companies have benefited.

For this reason, I believe AI is only reshaping businesses and not driving digital transformation. Yet.

How AI is reshaping business

I have two articles published on AI in digital transformation. One is about AI Agents,  where most CIOs focus on optimizing today’s business operations and driving intelligent efficiencies. Examples: Agents develop code, marketers personalize campaigns, finance closes the books faster, HR streamlines recruiting, and customer support AI agents can intelligently respond to a wider set of customer issues.  

My second article focuses on the chaotic array of AI experiments some organizations are running and why only a small percentage of them make it into production.

Reshaping business operations is AI’s low-hanging fruit. ROI is largely around cost savings – a productivity trap I warned CIOs about that can all too often lead to headcount reductions. Achieving this return assumes that CIOs execute a successful change management program at a time when many employees are fearful that AI spells the end of their jobs.

Unfortunately, we’ve seen this rodeo before. Examples include lift-and-shift cloud migrations, robotic process automations (RPA) to plug workflow integration gaps, and mobile applications that replicate web experiences. Companies pursue these easier “reshaping” objectives rather than targeting digital transformation opportunities.

Why AI is driving a slower digital transformation

Fourteen months ago, experts shared their recommendations with me on how ambitious CIOs can drive digital transformation with genAI. Since then, many CIOs have started to “Redesign workflow experiences with agentic AI” (#5). But few have tried to “Drive a growth mindset to transform customer experiences” (#7).

I’ve asked CIOs about this gap and why we haven’t seen more examples of AI used in product development, customer experiences, and other growth opportunities. Common answers include:

• A lack of consensus in the C-suite on where, when, and how to develop AI-enabled products and customer experiences.
• Challenges in quantifying risk and developing mitigation plans, given that genAI produces undeterministic outputs, and the fear that customer-facing experiments will lead to negative headlines or worse.
• A growing gap between the drive for short-term ROI and the longer, more challenging path of developing the skill sets and competencies required to build, deploy, drive adoption, and evolve customer-facing AI innovations.

AI will have its Uber/Airbnb moment in 2026, a prediction I shared about what will drive a significant track change in many AI strategies.

An AI action plan for CIOs

AI is the catalyst to drive digital transformation, much as cloud and mobile computing were in the past. But new technology capabilities, by themselves, don’t drive transformation. Cloud required DevOps automations, and we adopted design thinking principles to gain a competitive advantage in mobile.

It’s not the technology that drives transformation – it’s the competencies CIOs develop with their leaders and teams, along with evolutions in their collaboration practices that “improve the way companies operate and generate revenue.”

I shared this already, in the preface of Digital Trailblazer:

“The pace of technology change is increasing, and you must reevaluate your digital strategy and priorities. Frequently. You will always be transforming, and your organization must establish transformational practices as essential core competencies.”

What are these practices and competencies for the AI era? I’ve been sharing them in my writing and during the Coffee With Digital Trailblazers. Review my recommendations on product management, agile, and DevOps in the AI era, listen to our discussion on restating QA’s mission, and watch what three data, DevOps, and UX practices enable successful AI agent development. I also have a LinkedIn Learning course, Digital Transformation for Leaders in the AI Era, that’s nearing 10,000 learners.

If you want an accelerant, I’m here to help with two new workshops.

StarCIO’s AI Strategy and Governance Workshop aligns business, technology, data, and risk leaders on a pragmatic AI vision, clear guardrails, and a responsible path to business value. Our second workshop on World-Class IT in the AI Era is a booster to accelerate tech, digital, and data organizations in updating their digital operating models.

Why accelerate the evolution of your digital operating model? Because reshaping doesn’t lead to transformation.