Top 9 Reasons for Digital Transformation Failure
What are some of the challenges that you face when you choose Digital Transformation? Find the answers in this list I curated from my experience.
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Once you start on your digital transformation journey, you need to prepare yourself for a few obstacles on the way. What are some of the challenges that you face when you choose Digital Transformation? Which organizational and technical obstacles can affect your project agility? Find the answers in this list I curated from my experience.
Now Is the Time for Digital Transformation!
We are living through the golden age of digitization as we know it. Digital transformation is a norm for enterprises today and many have already begun their digital transformation journey. Most enterprises are met with roadblocks in their pursuit, which often spells for expensive setbacks and almost no return on the investment of their resources.
Recently, an Everest Group research found that 73% of companies failed to see any addition to their business value from their digital transformation efforts. The number of enterprises that saw a positive result is just 22%.
While, another study by KPMG noted that 67% of CEOs agree with the statement that Agility is the new currency of business: “If we’re too slow, we will be bankrupt.” In their research of manufacturers’ adoption of digital technologies, 33% of CEOs were found struggling to keep pace with the need to digitally transform their business to compete with their contemporaries.
Let’s evaluate nine top reasons for "Digital Transformation Failure":
1. Resistance To Change From the Workforce
Shaking up the status quo can be met with a lot of resistance, thanks to homeostasis. Digital transformation can be a disruptive change for your workforce, and it is important to tackle resistance for a smooth transition. One of the critical components of digital transformation is the transformation of people aspects (including mindset, inclusion, skills rotation, and job security) and overall HR practices transformation. This calls for regular conversations with your team to keep them informed about the process. Additionally, you can develop a clear language and common format to discuss strategies to involve them in the transition.
2. Lack of Executive Sponsor
When you have a digitally savvy board backing your efforts, you can increase your revenue growth by more than 35% with a higher ROA and associated higher market cap growth (MIT Sloan). An IDG study showed that 46% of IT directors indicated a lack of executive buy-in to be a leading barrier to transformation.
3. Insufficient Knowledge of Digital Transformation Levers and Benefits at CXO and CXO-1 Level
All the chairs and the lead directors must be digitally savvy. According to MIT CISR, to ensure this, leadership needs to discuss the following questions:
- Are we well-versed with the threats and opportunities that a digital transformation can bring about in our company over the next five to ten years?
- Do our directors possess a working understanding of the digital issues and are at least three directors out of the team digitally savvy?
- Do we have a plan to educate the board and increase the overall digital savviness over the next few years?
- While weighing the risks of a project under consideration versus the risk of not doing something new, are we striking the right balance?
4. Lack of Maturity for Modern Processes
Most organizations have not institutionalized modern processes, such as enterprise agile development, iterative deployment, Everything as Code, and DevOps/DevSecOps. This is the reason why so many organizations are unable to increase the velocity of their digital transformation.
5. Too Many Big Projects
It is important to be ambitious while planning your digital transformation. You mustn’t lose sight of your long-term goals and only focus on the short-term goal. What is more important, however, is to not indulge in a lot of big projects that can be difficult for your workforce to undertake.
Digital transformation is a gradual process marked by constant evolution. A big bang approach to Digital Transformation fails as the ecosystem has too many moving parameters. Consider Digital Transformation as a relay race of 4x100 meters instead of a single spirit of 100 meters. Keep the critical spots that need to be serviced in mind and focus on those.
6. Regulatory Compliances
Enterprises with a global presence can face the compulsion to comply with a bunch of different regulations in different parts of the world. This challenge may seem like a lot of hassle, but it is a very crucial step when it comes to successful digital transformations.
The regulations imposed on disruptive innovations are from a design and an architecture perspective. The evolution of conventional regulations depends on the level of disruption. In terms of design, regulations should focus on answering whether the innovation presents any harm or not, instead of focusing on whether it complies with all the regulations or not. In terms of architecture, regulatory agility is of utmost importance as opposed to a multi-stakeholder jurisdictional approach.
7. Too Many Small Scale POC Without Any Planning for Scale or Business Outcomes
Enterprises should indeed start small. They should look for quick wins that come with manageable projects with proven use cases. With multiple projects running simultaneously, there is a risk of being stuck in prolonged “pilot purgatory”.
But here’s the tricky bit! When you invest in too many small-scale proofs-of-concept (POC) without establishing a proper framework or plan, you run the risk of pilot failures/delays. This can affect the deployment speed of your digital transformation.
8. Lack of Organization Change Management
For an enterprise to be successful with Digital Transformation they need to ensure they address Organization change Management. For example, when it comes to application development, it is important for the application leaders to understand the complexities in the culture and structure of the organization. The cultural and structural compositions of these organizations are the main barriers to digital innovation. These can prove to be a foundation for all your strategies and help application leaders who struggle with how to make changes.
9. Confusion Between Digital Optimization vs Transformation
What is Digital Optimization? To improve existing operations and business models, enterprises adopt digital technology, and this process is called Digital Optimization. In most instances, organizations are confused between Digital Optimization (commonly referred to as Digitization) and Digital Transformation — initiatives that are aligned to the Customer Journey and new business models.
The use of digital technologies, like Artificial Intelligence, Machine Learning, Robotics, Cloud, 3D Printing, Augmented Reality, and Virtual Reality, are quickly becoming the norm in most enterprises. However, if these technologies are used to reduce costs, increase margin, or make the processes agile, the business is not transformed in the true sense. Instead, you just optimized the business. Yes, this adds some value, but, such Digital Optimization does not help the business to jump ahead significantly.
Leaders need to realize that digital transformation isn’t a switch that can be flipped on instantly. It is critical to prepare your team for the impending transitions while making sure that a part of your workforce is digitally savvy and possesses the knowledge necessary to undertake this project. Focus on the bigger picture while paying attention to the smallest of the details for the perfect execution. Delegate the responsibility of the transition by establishing a CDO office. Keep in mind the various hierarchical structures of the organization and delegate roles accordingly.
While the failure of certain pilots in the digital transformation journey doesn’t spell the end of the process, it costs the enterprise a lot more: money, wasted resources, wasted efforts of the workforce, and delay in turnaround time. The remedy here is to closely observe the results that the digital transformation processes yielded and analyze them. While this list explores a handful of scenarios, every transition is unique with its own set of problems. The key to solving those issues lies in the tiny details of the project. Analyze the mistakes while keeping agility in mind: Fail Fast, Learn Fast, Deliver Fast.
This article is part 1 of a 3 part series. In part 2 of the series, I will cover “12 Secrets of Successful Digital Transformation” and in part 3 I will cover “15 Digital Transformation Technology Trends for 2021“.
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Published at DZone with permission of Gaurav Aggarwal. See the original article here.
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