Top 7 reasons why digital transformation initiatives fail
Here’s a scary statistic: four out of five digital transformation initiatives fail to reach their desired goal. The 80% failure rate amounts to a lot of wasted effort, time, and money for everyone involved.
Why are the failure rates so high? There are two possibilities: it stands to reason that either our goals are unrealistic, or the way we go about achieving them doesn’t make sense.
Prioritizing technology over culture and business goals are the main culprit of such a high failure rate. To ensure that your digital transformation initiatives don’t fail, focus on people and business goals, not just on the technology; instead, choose technology supporting collaboration and your business goals.
Resistance to change, competing priorities, and talent shortages — if you’ve encountered any of these issues, you may want to re-evaluate the way you go about your digital transformation before it’s too late.
The good news is that by adjusting the way we go about digital transformation, we can significantly boost our chances for success.
Main reasons for failure
Identifying the risks and reasons for failure is the first crucial step for success. Multiple research organizations, including McKinsey, Wipro, and others, have identified several common reasons for failure. Let’s have a look at commonly cited reasons for failure.
1. Lack of alignment between stakeholders
“Building a visionary company requires one percent vision and 99 percent alignment.” Jim Collins and Jerry Porra
As with any significant change, digital transformation requires collaboration between multiple stakeholders, teams, and departments. Failure to establish clear goals, roadmap, or explain the strategy to everyone involved often results in failed projects.
2. Lack of management engagement
“Think of digital transformation less as a technology project to be finished than as a state of perpetual agility, always ready to evolve for whatever customers want next, and you’ll be pointed down the right path.” Amit Zavery, VP and Head of Platform, Google Cloud
Successful implementation requires complete buy-in from the top-down, as well as bottom-up. Management should be sold on the project and lead the way on a strategic level.
When top management is concerned that a digital transformation project is a waste of time, the project is deemed to fail.
3. Lack of focus on front-end benefits
“The time has come for a technology that helps financial enterprises and insurance companies create and manage their front-end interactions with customers at market speed and reasonable cost.” Tal Daksal, EasySend
Many digital transformation solutions begin and end with the focus on backend benefits, product development, marketing, and sales being left out in the cold. Since those departments are the organization's revenue drivers, it is impossible to transform at the organizational level without the complete buy-in and support from these departments.
The use of low-code/no-code platforms is one way organizations can democratize digital transformation. By giving business users the ability to solve their challenges without involving the IT departments at every step, digital transformation initiatives can be pushed forward from every corner of the organization.
4. Focusing on technology, not the people
“Businesses often forget about the culture, and ultimately, they suffer for it because you can’t deliver good service from unhappy employees.” Tony Hsieh, CEO of Zappos
With digital transformation projects, it is easy to get carried away with shiny new technologies and forget that the driver of digital transformation is first and foremost - the people.
Understanding how employees and customers are evolving, especially during the COVID-19 pandemic, is a crucial driver of success. Many digital transformation initiatives that focus on technology fail, as they do not consider the needs of real people - both customers and employees. When management is so preoccupied with whether they could, they don’t stop thinking if they should.
5. Neglecting digital culture
“Digital culture requires the entire organization to continuously explore innovative digital tools, environments, and channels to drive the organization forward.” Tal Daksal, EasySend
Change management is dependent on the culture that supports the change. Without this support, any change initiative is bound to fail. Digital culture encompasses the commitment of everyone within the organization to use technology effectively in solving business challenges. To counter the fear of the overall complexity and uncertainty of success, the culture of innovation, trial, and error and customer focus must be nurtured and supported for digital transformation initiatives to succeed.
6. The siloed initiative led by IT
“Don’t be fooled by some of the digital transformation buzz out there; digital transformation is a business discipline or company philosophy, not a project. “ Katherine Kostereva, CEO and managing partner of bpm online.
There is an erred perception that IT departments should lead absolutely everything involving technology. Digital transformation initiatives have higher levels of success when their ultimate beneficiaries lead them. CMOs, CDOs, and heads of business units must spearhead the change in solving their business problems and answering their own needs with technology.
The digital transformation that is centralized has less chance to succeed than grass-root initiatives driven by its ultimate beneficiaries.
7. Unclear goals
“The trouble with not having a goal is that you can spend your life running up and down the field and never score.” Bill Copeland
Vague end-goals are one reason why digital transformation fails. When the goal is not clearly defined and KPIs are not agreed on, it is challenging to build a successful project. Digital transformation leaders must focus on SMART goals: specific, measurable, achievable, relevant, and time-bound.
Instead of “becoming a digital organization,” it is much more effective to focus on specific goals, such as “reducing the use of paper and PDF forms in our claims management department to 0 by the end of 2021.”
How to ensure your digital transformation initiative succeeds
“Every successful organization has to make the transition from a world defined primarily by repetition to one primarily defined by change. This is the biggest transformation in the structure of how humans work together since the Agricultural Revolution.” Bill Drayton, Social entrepreneur
The only constant in the digital world is changing. Change is inevitable, but we can direct the change in the desired direction. Change management requires a culture that supports it and drives the organization a sense of direction and clear goals. Digital transformation is a team sport requiring involvement in both approaches: top-down and bottom-up. Collaboration requires a clear plan and expectation setting, supporting culture, and willingness to fail and adjust the strategy at the drop of a hat.
Technology is playing a supporting role in the digital transformation game- the main heroes are people. And this is a crucial distinction that many organizations miss. Technology needs to be focused on solving real problems for real people, not just chasing the latest buzzword for the sake of prestige.
Human-centered digital transformation solutions, as opposed to technology-centered, have much higher chances of success. Choose technology that supports collaboration and your business goals. One such technology is low-code/no-code platforms that amplify your existing resources by giving the ability for business users to push digital transformation initiatives to solve specific challenges they are facing.
To conclude, digital transformation is anything but easy. But at the same time, the ROI of a successful transformation is astonishing. As you embark on your digital transformation journey, make sure to avoid the pitfalls we discussed in this article.