The $1 Billion Question That Keeps Executives Awake
Multinational organizations regularly face billion-dollar write-offs from failed digital transformations.
That stark warning came from Rotem Hershko, former Chief Product Officer at Maersk and Director of Product at Amazon Global, during his recent fireside chat at Freightos’ Stable Chaos: A Digital Supply Chain Summit. Now a Freightos Board Member, Hershko has led transformations at two of the world’s most influential logistics organizations. The stakes, he emphasized, couldn’t be higher.
Yet the alternative—standing still while competitors transform—poses an even greater existential threat. Drawing from his frontline experience, Hershko presents a roadmap for success that challenges conventional wisdom about when, how, and why physical industries must embrace digital change.
Why 73% of Logistics Leaders Can’t Ignore Transformation
Freightos’ 2024 report found that 73% of procurement teams remain only somewhat or not digitized, with 75% still relying on spreadsheets for critical operations. This digital gap becomes particularly costly in large organizations, where McKinsey research shows companies with over 50,000 employees are 2.7 times less likely to succeed at digital transformation than smaller organizations.
The logistics industry will invest $2.5 trillion in digital transformation in 2024 alone, with projections reaching $3.9 trillion by 2027. Yet despite these massive investments, the failure rate remains alarmingly high. Understanding why—and how to beat the odds—is what makes Hershko’s insights so valuable.
The Paradox of Physical Industry Transformation
“We’re trying to change the wheels while the car is driving,” Hershko explained, capturing the fundamental challenge facing logistics companies. Unlike pure software businesses that can iterate rapidly with minimal risk, physical industries face unique constraints that make transformation exponentially more complex.
Consider this stark example: repainting a single ocean vessel can cost millions in direct expenses, with opportunity costs from downtime pushing the total into eight figures. This reality illustrates why physical industries approach transformation with such trepidation. Every minute of operational disruption translates to massive financial impact, creating a paralyzing fear of change even when the status quo is clearly unsustainable.
MIT research reveals that 70% of contracted freight lanes fail to materialize, underscoring the significant inefficiencies in current systems. Yet companies continue to rely on these broken processes, fearing the disruption of change more than the cost of inefficiency.
Factor 1: Define Your Optimization Target with Surgical Precision
“Digital transformation can solve everything” is perhaps the most dangerous myth in corporate boardrooms, according to Hershko. Too often, leadership teams embrace transformation as a panacea without clearly defining what they’re trying to optimize.
At Maersk, the transformation wasn’t about technology for technology’s sake—it was about reimagining the end-to-end customer experience in global logistics. This clear focus enabled the company to make tough decisions about which legacy systems to replace, which processes to digitize first, and how to measure success.
Modern digital procurement platforms exemplify this approach by starting with transparent KPIs focused on specific outcomes: revenue enhancement, cost reduction, competitive positioning, customer experience improvement, or operational efficiency.
Factor 2: Customer Obsession Must Be Operational, Not Aspirational
“Customer-centric” has become such a ubiquitous corporate slogan that it’s lost much of its meaning. Hershko challenges organizations to examine whether these are merely boardroom platitudes or genuine operational principles.
During his tenure at Amazon, Hershko witnessed this principle in action as the company launched e-commerce operations in countries where online shopping was virtually unknown. “We were willing to be misunderstood,” he recalled, “but as long as we kept first principles in mind and improved the customer experience, we had the conviction that we’d be successful.”
This operational customer obsession involves making daily decisions that prioritize customer value, adopting a win-win mindset, and sharing efficiency gains with customers.
Factor 3: Transform Data Hoarding into Data-Driven Decision Making
Hershko observed that many companies invest millions in digital transformation primarily to access “better data, more comprehensive data, richer data,” yet fail to fundamentally change how they make decisions.
The logistics industry’s obsession with data collection often misses a crucial point: data without action is merely expensive storage. The shift requires making data-driven decisions the default rather than the exception, sharing relevant data with partners and customers, and creating feedback loops where insights directly influence operations.
Manual data entry and disconnected systems continue to impede collaborative decision-making in most organizations, thereby limiting the ROI on major technology investments. Real-time market data platforms demonstrate how actionable data transforms operations rather than just informing them.
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Factor 4: Recognize That Digital Transformation Is Not a Tech Play
Perhaps Hershko’s most counterintuitive insight is that digital transformation shouldn’t be led by the technology team.
“In many places, digital transformation is being led by the CTO,” Hershko noted. “Because it’s about technology, so why not put it in the tech team? I saw with my own eyes that that’s not the case.”
Successful transformation requires an enterprise-wide initiative encompassing operations teams that understand current processes, customer-facing teams that understand pain points, and leadership teams that can drive cultural change—with technology teams enabling solutions rather than leading strategy.
Modern enterprise logistics platforms exemplify this holistic approach by integrating procurement, operations, and market intelligence into unified systems rather than isolated tech solutions.
Factor 5: Communicate, Communicate, Then Communicate Some More
Transformation cynicism is endemic in most organizations. Research shows that every organization has experienced some form of failed digital transformation, creating deep skepticism that undermines even well-designed initiatives.
The antidote is radical transparency: regular updates on wins, misses, and learnings; transparent reporting of both successes and setbacks; and a clear explanation of benefits for different stakeholders.
“As much as you can communicate, more power for you and better for the success of your mission,” Hershko emphasized. Ongoing communication prevents the skepticism and resistance that kill transformation initiatives before they can deliver results.
Factor 6: Go Deep Before Going Wide
The temptation to transform everything simultaneously is strong, especially when significant resources are committed. Hershko advocates the opposite approach: focus on one domain, perfect it, then expand.
This depth-first strategy serves multiple purposes: it builds credibility through visible quick wins, allows teams to learn and refine approaches, reduces risk by limiting initial scope, creates internal champions who’ve experienced benefits firsthand, and generates concrete examples for securing additional resources.
Automated procurement solutions that focus on specific pain points—like eliminating ghost lanes or streamlining RFQs—exemplify this approach, delivering measurable value before expanding to broader transformation.
Factor 7: Under-Promise and Over-Deliver in a World of Overselling
The pressure to secure transformation budgets creates what Hershko calls a “slippery slope” of overpromising. Leaders often present overly optimistic timelines and ROI projections to gain approval, only to face credibility crises when reality falls short.
Instead, Hershko advocates for radical modesty: “Be much more realistic. Have some quick wins. Show progress, then make bolder statements as you go through the transformation.”
This approach builds trust and momentum. Early skeptics become advocates when initial modest promises are exceeded, creating political capital for more ambitious phases.
The Physical Industry Challenge: Bridging Manual and Digital Realities
Physical industries face a unique challenge that Hershko learned through hard experience: the gap between digital aspirations and operational reality.
“I personally made that mistake before in my career,” he admitted, “as somebody who was always tech-native and thought software was the solution for everything.”
Full automation is not always possible or desirable. Physical industries rely on manual processes for valid reasons: safety regulations requiring human oversight, variable conditions demanding human judgment, legacy infrastructure that can’t be easily replaced, and workforce skills developed around current processes.
Successful transformation requires thoughtful bridging of this gap through involving operational teams from day one, understanding why current processes exist before changing them, providing extensive training and support, accepting that some manual processes must remain, and designing technology that enhances human capabilities rather than replacing them.
The Timing Paradox: Why There’s Never a Perfect Moment
One of the most persistent questions facing logistics leaders is when to invest in transformation. Market volatility, budget constraints, and operational pressures always seem to argue for delay.
Hershko’s response is unequivocal: “There’s never a good timing, there’s never a perfect timing.”
Current market dynamics make this even more critical. With spot and contract rate volatility at historic levels and AI-driven automation accelerating competitive advantages, the cost of delay is rising exponentially.
“If you as a company are not going to invest in technology and transform,” Hershko warned, “you can be sure that your competition is doing that, and somebody can come from the back and disrupt your industry.” This threat has intensified as AI accelerates code development, makes deployment more accessible, and enhances data actionability.
First Principles in Industry Disruption
Beyond transforming individual companies, Hershko’s experience at Amazon and Maersk involved disrupting entire industries. His advice centers on “first principles”—fundamental truths that remain constant regardless of technological change:
- Customers will always want better prices
- Companies will always seek better cost structures
- Faster, more reliable delivery will always have value
- Accurate promises and consistent delivery build trust
- Convenience and simplicity reduce friction
These principles align with Freightos’ mission to digitize global freight, creating transparency and efficiency in an industry historically characterized by opacity and manual processes.
The Messy Reality: Embracing Imperfection
Perhaps Hershko’s most refreshing insight is his honesty about transformation’s inherent messiness.
“If somebody from a very nice consulting firm is showing PowerPoint slides that it’s going to be smooth sailing and awesome, you should raise a flag and be very doubtful.”
Digital transformation is messy by nature. This messiness isn’t failure; it’s an inherent characteristic of meaningful change requiring acceptance that problems will emerge unexpectedly, flexibility to adjust plans based on learning, resilience to persist through setbacks, humility to acknowledge mistakes and pivot, and patience for adoption and refinement.
The Competitive Imperative: Transform or Be Transformed
Hershko’s closing message resonates with current market realities: “It’s not a question of if, it’s a question of when.”
With digital transformation spending reaching $3.9 trillion by 2027 and early adopters already capturing significant advantages, the choice isn’t whether to transform but how quickly and effectively to do so.
The seven critical factors provide a proven framework rooted in real-world experience from two of the world’s most sophisticated logistics organizations:
- Define clear targets.
- Make customer obsession operational.
- Activate your data.
- Treat transformation as enterprise-wide.
- Over-communicate.
- Go deep before wide.
- Under-promise and over-deliver.
Digital transformation in physical industries isn’t a destination but a permanent revolution. As Hershko’s experience demonstrates, success requires more than technology—it demands fundamental reimagination of how organizations operate, compete, and create value.
The logistics industry stands at a critical juncture. Traditional competitive advantages based on physical assets and operational scale are eroding. New advantages based on data, connectivity, and customer experience are emerging. Organizations that successfully navigate this transition won’t just survive—they’ll define the future of global trade.
For those ready to begin or accelerate their transformation journey, the path forward is clear: embrace the messiness, focus on first principles, and remember that in a world of accelerating change, standing still is the riskiest strategy of all.
