In the early 2010s, ‘Digital Transformation’ was often used as a fashion statement. Not anymore. Today, it has become a survival strategy for every organization. Despite the momentum, most organizations are grappling with their digital transformation strategies even as they entered a new decade.
Last year alone, a whopping 73% of enterprises failed to provide any business value whatsoever from their digital transformation efforts, according to an Everest Group study. Furthermore, 78% failed to meet their business objectives – which is a matter of concern and brings us to the question: Why does digital transformation fail?
While there are many causes of failure or under-delivering expected value in digital transformation, we attempt to highlight only some of the key issues derailing digital transformation in 2020, so that companies can avoid these pitfalls.
CEOs Aren’t In-Charge
Until recently companies often relied on their Chief Information Officer (CIO) and the IT team to drive any technology-led initiative including digital transformation efforts. They, however, failed to understand that the latter is not just a technology effort – but needs a greater level of leadership involvement. Experts believe, it is the CEO, who can steer the entire C-suite and bring sufficient budgets to the table – thereby has the biggest role to play in the success or failure of digital transformation.
When BBC launched its Digital Media Initiative (DMI) in 2008, an ambitious project that was set to fundamentally change how it provides content to audiences, it miserably failed due to sheer lack of executive management support. The problem started after the Siemens contract was terminated, as the corporation didn’t have the required technical capability to deliver the already challenging program.
In 2013, BBC director general Lord Tony Hall announced that DMI was to be shut down followed by some of its senior management losing their job. An article on Raconteur.com quoted consultancy firm PwC in this matter that reported a lack of oversight in the project, due to no executive steering board keeping DMI on track, alongside an inability of the overall governance structure to manage the project’s complexity effectively.
According to the latest data from the MIT Sloan Management Review, digitally mature organizations now have the CEO leading it, with digital transformation now being one of the top priorities of the business as a whole.
It’s a Project, Honey!
A common mistake made about digital transformation is thinking about it as a project. Projects typically have a team assigned to them. They have a budget. They start and then they finish. Treating digitization as a one-off project will derail your digital strategy before you’ve even begun.
Digital transformation in fact is a deep, pervasive and long-lived change. As Daisy Chittilapilly, Managing Director at Digital Transformation Office (DTO) for Cisco India and SAARC, says, “Digital transformation requires a shift in mindset, not just technology. It involves transforming of business models, processes and strategies, and the only way to sustain the level of change and the cultural shift you need to make is to adapt a mindset that continually seeks transformational opportunities.”
Aligning Tech with Business Goals, People
A major stumbling block for transformations involves the failure for businesses to understand the technology they need to operate it and vice versa. In contrast, when IT and the business are on the same page, digital transformation happens more easily. In 2014, classic American car company Ford attempted a digital transformation by creating a new segment called Ford Smart Mobility.
The goal was to build digitally enabled cars with enhanced mobility. The issues arose when the new segment wasn’t integrated into the rest of Ford. Not only was it headquartered far from the rest of the company, but it was seen as a separate entity with no cohesion to other business units. Despite Ford shelling out huge amounts of money into its new venture, it faced quality concerns and revenue loss.
A report, sponsored by BMC and conducted by The Economist Intelligence Unit (EIU), revealed that 31% of non-IT survey respondents view IT decision-making as misaligned with their company’s digital transformation goals, indicating a greater level of collaboration among teams is needed to get a handle knowledge gaps. To be successful, digital transformation needs to be integrated into the company. So, how to achieve alignment of IT and business strategy?
While there is no one answer to this question, experts believe, by strong collaboration and communication among teams, by adopting agile practices and values and bringing, companies can taste digital transformation success.
Where’s the Digital Culture?
Experts believe, digital transformation efforts of the 2020s will require a new level of collaboration between business leaders, employees, and IT department. The need of the hour they observe – is a ‘cultural shift’ that ensures successful adoption of digital solutions, help enterprises in achieving desired outcomes and also align all employees to the established digital transformation imperatives.
This means bringing about a sweeping change within the organization. This in itself is challenging as corporate leaders have enjoyed a certain degree of comfort, will resist change, for the fear of unknown and uncertainty. Indeed, 43% of 4,500 CIOs surveyed for the 2017 Harvey Nash/KPMG CIO survey cited resistance to change as the top impediment to a successful digital strategy.
But culture is the glue that binds strategy, technology, processes, and organization. It’s difficult to identify and alter, but it’s foundational, believes Alyson Clarke, Principal Analyst at Forrester. She mentions in her latest blog that culture change is an incremental process requiring patience and persistence, so it doesn’t happen overnight.
Ignoring Competition, Markets
In 2012, consumer packaged goods giant Procter & Gamble decided to become a complete digital company and hence take things to the next level with a digital transformation. However, its broader goal lacked purpose, as it focused extensive and costly digital transformation with the expectation of an ambitious return on investment. Sadly, it failed to watch out its competition that already focused on focused on targeted and smaller digital efforts that were more targeted to its existing products and processes. This was followed by a slumping economy, making things worse for the FMCG giant. As a new Verizon research shows, “True transformation must include building capabilities to stay ahead of your competition long term.”
The list can go on as to why digital transformation fails because it is a complex and risky endeavor. When done right, it can lead to amazing results, but when done incorrectly it can be extremely costly and embarrassing for the company.
As McKinsey’s senior partners, Jürgen Meffert and Anand Swaminathan rightly mention in their book Digital@Scale,“To make it work at scale, companies need discipline, planning, and committed top-down leadership.” The authors believe, companies must be open to radical reinvention to find new, significant, and sustainable sources of revenue in order to succeed in their digital transformation efforts, especially in the complex and volatile business landscape of 2020s.