DIGITAL TRANSFORMATION AND THE ILLUSION OF PERFORMANCE, TESTING THE LIMITS OF TECHNOLOGY'S EFFECTIVENESS IN ORGANIZATIONS

Abstract

This study aims to critically examine the relationship between digital transformation and organizational performance by highlighting the potential emergence of the illusion of performance phenomenon. The primary focus of the study is directed at testing the limits of technology's effectiveness in creating substantive, rather than merely representational, value. The approach used is a literature review, systematically examining relevant empirical and conceptual literature, particularly in the context of organizations in developing countries. The analysis is conducted by comparing research findings related to technology adoption, organizational performance, and contextual factors that influence the relationship. The results of the study indicate that digital transformation is not always directly proportional to improved organizational performance. In many cases, technology actually contributes to the formation of the illusion of performance, a condition where performance indicators show improvements without being accompanied by fundamental changes in organizational processes and outcomes. This phenomenon is influenced by various factors, including institutional pressures, managerial cognitive biases, and misalignment between business strategy and technology implementation. Furthermore, the effectiveness of technology is highly dependent on organizational capabilities, the quality of human resources, and the surrounding operational context. The implications of this study emphasize the importance of a more reflective and contextual approach to understanding digital transformation. Organizations need to distinguish between symbolic technology adoption and technology adoption that truly creates value, so that strategic decisions are not driven by perception alone