Why Your Digital Transformation Project Is Failing — and What You Can Do About It
Digital transformation strategies are failing to yield the expected benefits because companies are setting the bar too low and setting goals that are too narrow in scope, according to a November 2022 BCG report.
Instead of seeking to achieve breakthrough performance, companies are focusing their digital transformation efforts on improving internal processes and operations.
The result is that even though 94% say they want their digital transformation to have substantial impact, most projects have failed to deliver — and 60% of decision-makers now expect to increase their spending on digital transformation in the year ahead to catch up.
The Human Side of Digital Transformation
While digital transformation is deeply anchored in technology, humans remain critical to its success, according to Kevin Shuler, CEO of IT consultancy Quandary Consulting Group, who believes digital transformation strategies often fail because they ignore the human factor.
The needs of the team and customers are critical when designing digital solutions, Shuler said, and without considering those needs, organizations are more likely to create an ineffective application or tool than they would have had they taken these needs into account in the building process.
“It could [end up] being harder to use than their current way of working, or it could fall short of what they really need. Same is true for your customers,” he said. “Rather than rushing to digitize every process from a top-down approach, businesses need to consult with stakeholders directly.”
Low-code platforms and citizen development platforms are a way of enabling this. They empower key players in business processes to share insights and take ownership of digital transformations. They know what they need and what customers crave. In return, Shuler said, change management becomes much easier because the team is directly involved in the process.
“They get excited about new systems,” Shuler said. “This creates a positive feedback loop that inspires more creativity and change. It's a much better approach than having IT build custom systems from scratch and then onboard employees who are (at best) agnostic to the whole experience.”
Related Article: Navigating the 9 States of Mind During Digital Transformation
5 Processes to Give Digital Transformation Sticking Power
Improving processes is an important part of improving performance, but the problem with failed projects is that they focus on individual processes rather than the big picture.
Digital transformation is a process in itself and, as such, depends on other processes to succeed, said Sanjay Srivastava, chief digital strategist at professional services firm Genpact. He lists five such areas — or processes — that organizations need to enable for digital transformation to take hold:
1. Experimentation and Incubation
Proofs of concept and pilots allow teams to reimagine and redesign various aspects of the business and processes. Doing them in an agile fashion helps ensure that new emerging technologies are viable, Srivastava said. They prove that the idea works and provide a sense of what the results might be and what other changes may be required for them to be successful in the final rollout.
2. Scaling to Production
Scaling the pilot into a production environment and running the business on it is an important step of any transformational project, but scaling digital transformation requires a different level of planning and orchestration. To do this, Srivastava says organizations must carefully consider building the right operating model and instrumenting process change upstream and downstream to integrate digital into the rest of the business. On the technology side, this means also ensuring that the infrastructure, security, scalability and reliability are where they need to be.
3. Enhancements and Change Management
Adoption is, of course, vital to the success of a digital transformation project because even the best technologies only drive results when used. In business, tuning is as critical because business rules often change, models evolve, and we learn more about edge cases, which must be quickly incorporated into the design and configurations.
In other words, Srivastava said, change management is critical. "Organizations must carefully think about the new operating models and reskilling required to ensure that the teams are set up for success and can adopt and drive success with the transformation," he said.
4. Organizational Change and Culture
The past few years have shown that organizations need to be agile and adaptable to changing conditions in the external environment. Getting stuck in existing ways of doing things is a sure way to get outpaced by the competition.
Digital transformation is an expensive process, he said, but cannot by itself become a function for life. “The best endpoint for businesses is when they have sufficiently transformed their culture that they no longer need DX,” said Srivastava.
5. Clean and Usable Data
According to Srivastava, there is one other important element to a successful transformation project: building a proper data foundation. While technology is the engine, he said, it is data that fuels it.
“Businesses have lots of data; unfortunately, much is sitting in unusable forms in disconnected and disparate systems. Often, the data is not clean — in the sense that it can’t be easily structured. Cleaning up data, connecting it and harmonizing it is core to getting the right fuel into the engine. Without it, DX projects plateau," he said.
Learning Opportunities
Related Article: Why Digital Transformation Is a Process, Not a Destination
Know Thyself
Digital transformation, for most companies, is a struggle from the start. Jon Knisley, principal at business consultancy Reveal Group, said this is because the biggest obstacle to any complex, large-scale change is the lack of detailed knowledge on current state activities.
Most companies don't fully understand how they operate daily and don’t have the data to draw the necessary insights, Knisley said. “A systematic way of examining all the activities a firm performs and how they interact is necessary for analyzing the source of competitive advantage. But technologically, it's not been possible to do this at scale until recently,” he said.
He argues that ultimately, data-driven organizations win out. Organization leaders know this intuitively, and the facts support it. While most companies will tell you they are drowning in data from CRM, ERP, security and other systems of record, processing data is the last major gap for nearly every company in order to get a full view of their operations and be able to truly execute data-driven strategies, he said.
The problem Knisley has observed is that companies have limited process understanding. "They don't know how their applications and data interact, and they don't really understand what their customers expect," he said. “It's next to impossible to get to that magical future state if you don't know what your current state is .... Not even Google maps can help if your location is turned off. Digital transformation is no different.”
Related Article: Do You Know What Data You Have and Where It’s Hiding?
The Importance of Strategy
As with any project, planning is essential to getting it right the first time. No amount of technology will work without a solid strategic plan in place, said Quantive VP of product evangelism Jenny Herald, and leaders must include all the puzzle pieces in their planning to avoid failure and missed objectives.
“For me, the top factor that leads to failure starts with a lack of vision,” Herald said. “Without a vision, the transformation effort will end up as a list of incompatible projects that takes the organization in the wrong direction." She says this leads to a whole other set of problems, like lacking a powerful guiding coalition and under-communicating the vision and transformation objectives.
For any of this to work, she said, the leadership team must come together with a tech and business lead to develop a shared commitment to improve performance through renewal. Ideally, operations and people leads should be looped in, too.
Brian Solis, global innovation evangelist at Salesforce, said organizations need to decide who owns digital transformation as part of the starting strategy. Digitization requires a purpose, stated outcomes and ROI, and organizations can avoid issues by establishing a point person for their digital transformation, he continued.
Then, communication is essential. All business units should understand what digital transformation entails and what they will get out of it. Solis said having a responsibility matrix for cross-functional movement and ownership can be helpful at this stage.
Salesforce CIO Juan Perez said in the current economic climate, every leader has to be more efficient and productive, and CIOs and IT leaders must identify where technology can drive growth, increase efficiency and create more business value faster. When the stakes are high, CIOs and their teams must help the entire company do more with the tools and resources at their disposal.
“To be successful in this effort, CIOs must embrace what I call ‘business intimacy’, direct alignment with colleagues across every line of business to truly understand their needs,” Perez said.
About the Author
David is a European-based journalist of 35 years who has spent the last 15 following the development of workplace technologies, from the early days of document management, enterprise content management and content services. Now, with the development of new remote and hybrid work models, he covers the evolution of technologies that enable collaboration, communications and work and has recently spent a great deal of time exploring the far reaches of AI, generative AI and General AI.
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