In 2019, Digital Transformation was named the number one priority for IT initiatives in companies worldwide. By 2023, expenditure on technology and related services that enable DT will be $2.3 trillion.
Brands have already begun to enjoy the benefits of digital transformation (DT or DX). For example, Domino’s Pizza has been able to integrate digital technology into their business and are raking in significant revenues – in 2017, 60% of their orders were through online platforms – an app, Amazon’s Echo, their site and social media platforms.
They were also the first-ever brand to deliver pizza via drone, and are part of a Ford project to test deliveries using autonomous vehicles.
Read more digital transformation success stories here.
Despite the above-mentioned success stories, this McKinsey study reveals that the possibility of not reaching profit targets and expectations after incorporating digital transformation in an organization is at least 50%.
But, where could organizations be going wrong? In this article, we explore the reasons why digital transformation fails.
Digital transformation failures
How comes then that DT initiatives have such a large failure rate, the world over? Let’s explore why digital transformation fails:
Failure #1: Problems around goals
There are many problems that have to do with goals:
- A lack of clearly defined goals.
- Top-level management disagreements on what the organization’s goals should be in terms of DX.
- Where several goals have been defined, it is not clear which ones should be the priority.
- It is not clear how RODI (Return on Digital Investment) should be measured.
- The problem to be solved with DT is not clearly defined and understood by all stakeholders. There is a likelihood of ending up solving the wrong problem.
- The problem DT is supposed to solve cannot possibly be achieved by DT.
As you can see, there can be a conglomerate of problems when it comes to goals, which can be debilitating.
Failure #2: Problems around technical skills and technologies
It goes without saying that you need the right team for your DX project. This involves ensuring that the team has the correct skillset. This is however usually difficult to define at the beginning of a DT initiative or project. The common mistake here is to bring together a DT team (in-house or outsourced) that is highly specialized (for example, you might bring together a data scientist, machine learning expert, and an IoT expert).
The downside to doing this is that since the project is still in its infancy, all these experts interpret the problems and solutions differently, and may not agree on a way forward.
Wrong skills for the job…
In addition to having specialized teams, it is also possible to put together a team with the wrong skills for the job at hand. This would be as a result of having a hiring team that has absolutely no clue about DT. They would not know someone who is qualified enough to accomplish the task at hand.
Failure #3: Problems around scaling
There are companies that take up the DT challenge and begin to work on it with a lot of energy and enthusiasm. They, however, somewhere along the way are unable to proceed to full implementation or if they do implement, never get the intended RODI – Return on Digital Investment.
A waterfall approach…
If a company takes on a large project like DT without breaking it into phases, the team gets drained along the way and loses focus. This is called a waterfall model or approach. More agile approaches are needed.
Technologies that do not go beyond the MVP…
According to HBR, the primary reason why digital transformations fail is unsuccessful efforts to scale beyond the MVP or pilot, where Agile methodologies are implemented. The company may have had the right technologies that helped them to build an MVP, but do not have the right technologies to scale.
Failure #4: Problems around stakeholder synergy
There are a couple of problems that have to do with the stakeholders. We mentioned that the top management may not agree on which goals to prioritize, or even what the DT goals should be.
Other problems may arise if some of the stakeholders have not entirely bought into the idea. For example, if some of your employees feel that DT will render them jobless, they will try their best to sabotage the efforts.
Teams working in a vacuum…
As you can see in the image at the beginning of the stakeholder section, different individuals need to work together for DT to succeed. A common scenario is to have the technology team (the ones responsible for building the technology to help with DT) are not aware of the goals that the business team is aiming for (for example, to increase revenue from digital channels).
It is important that these two teams work together and communicate challenges, and successes in order to achieve the shared goals towards DT.
While it is important to trust your gut, sometimes it might get into the way of making good decisions. If any of the stakeholders want to use data from DX efforts to prove a point, then there is a high likelihood of statistical bias, and invalid conclusions might be drawn from data generated form Machine Learning Models.
We have looked at the main problematic areas that result in digital transformation failure. It is good to evaluate your DT project in each of the discussed areas even if it may look like you are currently on your way to success. It might be the difference between success and failure, ultimately.
Looking to start your digital transformation journey today? Talk to us.