Why Digital Transformations Fail

Why do digital transformation initiatives fail? Discover some of the most common missteps that doom transformations from the start.

Table of Content

    For years, we’ve seen a barrage of grim statistics suggesting that digital transformation fails are an inevitability.

    There’s this classic from McKinsey that dates back to at least 2016: “70% of DX initiatives fail” dates back to at least 2016. And this one from a 2017 Bain survey: just 5% of DX projects met or exceeded expectations, 20% failed, and 75% of orgs settled for dilution of value — minor improvements but nothing transformative.

    In 2020, BCG reported that around 30% of transformations achieve their target objectives. 44% produced limited value (but not sustained/meaningful change) and 26% delivered less than 50% of the target. Which indicates that things are getting a bit better — though the average org still has a long way to go.

    Though, for whatever reason, many of the stats that get thrown around are really old – which seems a bit odd when you consider the rapid pace of change and how it impacts DX projects and priorities.

    Business Leaders Guide to the New Digital AgeBusiness Leaders Guide to the New Digital Age

    While it’s common knowledge that digital transformation is hard to pull off, it’s hard to get a realistic picture of where the numbers stand today.

    But maybe stats aren’t so important. Whatever the fail rate, understanding why digital transformations fail — and what you can do about it is the best way to beat those odds.

    Here, we look at some of the most common missteps that doom transformations from the start.

    Digital Transformation Fails on an Ad-Hoc Basis

    Another reason that digital transformations fail is that businesses approach DX projects on an ad-hoc basis. This issue likely links back to a common piece of advice: that transformation needs to happen incrementally.

    It’s true that digital transformation can’t happen all at once. But you have to think about making incremental improvements on a holistic level. Each solution is part of a broader digital ecosystem – where individual solutions function as one seamless experience.

    As such, every change must contribute to the overall experience, align with customer priorities, and bring you closer to reaching strategic long-term goals.

    Siloed implementations cause all sorts of problems. It slows innovation and creates inconsistent customer experiences.

    Projects might be treated as theoretical experiments, and as a result, no effort is made to improve processes or experiences related to that transformation. Or – orgs end up trying to reproduce successful pilot projects in different business areas, without adapting them to the new use cases.

    Whether you’re trying to improve the end-user experience, streamline processes, or enable more effective collaboration, projects need to deliver some sort of measurable impact that aligns with big-picture goals.

    You’ve Forgotten About the End User

    Orgs often start building solutions without considering what end-users actually want or how to monetize and package new products/services to maximize profits.

    Leading companies dig into the data and immediately focus on solving end-user needs. They don’t waste time building products no one wants, nor do they waste valuable resources on unproven solutions.

    By investing in high-impact areas where there’s a proven need, organizations can be more strategic about IT spending. For example, they can allocate for unexpected disruptions (like a DX emergency fund) and invest in future transformations that build on past improvements.

    Most transformation initiatives have two groups of end-users: employees and customers. Solutions must be driven by data-backed needs/customer feedback and produce a specific outcome for the user.

    As Microsoft’s Digital Transformation Playbook points out, business models have evolved. Rather than prioritizing one-off transactions, the focus is on driving continuous engagement. That shift means companies need to actively engage their customers beyond the traditional sales cycle.

    You might start by trying to answer the following questions:

    • How can you help them get the most value from your products/services?
    • What do employees need to help customers achieve the results they’re looking for?
    • Which processes/business areas have the greatest impact on customer outcomes?

    Then, from there, look at the data to pinpoint priority areas you can use as a jumping off point for collecting feedback from customers and employees. By the way, the playbook includes a simple journey mapping exercise (and worksheet) to help you connect end-user insights to actionable improvements and measurable outcomes.

    Bringing IT, client-facing SMEs, and other internal end-users together early in the game ensures
    that project plans cover everything from timelines and budgets to quality standards, cybersecurity, and tech investments.

    idea table

    Lack of Leadership

    According to a TEKsystems poll, 93% of business leaders believe technology can fundamentally transform their business. Yet close to 40% of participants admitted their current organizational structure can’t support critical transformation projects.

    Jason Hayman, a market research manager weighed in on the findings. He says that while technology is more accessible than ever, narrow mindsets prevent businesses from reaping the full potential of their DX investments.

    The entire organization needs to rally around a common vision and shared goals. And, crucially, they need to understand how transformation projects benefit end users and fit into the context of a broader strategy and digital ecosystem.

    It’s on the C-suite to lead the charge – communicating a clear vision with measurable goals, a compelling reason why this needs to happen, and what stakeholders stand to gain from this effort.

    But — it’s also about enlisting the support of champions across the entire organization. These team leaders and power users are instrumental in securing buy-in — in large part, because they can communicate big-picture DX goals in context with individual roles.

    An unclear vision inevitably means employees are forced to make do with vague requirements/expectations for what the end result should look like, who it’s for, and how it does X or Y.

    Resistance to Change

    Large-scale digital transformations have more to do with people than process changes or technology. People implement systems, design solutions, and solve problems. Technology allows them to achieve those goals — but getting employees to that point is incredibly difficult.

    Resistance from employees uncomfortable with change and all the uncertainty that comes with the territory can easily shut down a DX project before there’s even a definitive plan in place.

    There are two things at play here.

    1. The first is a lack of trust based on past experiences (big changes often mean there’s a mass lay-off just around the corner). You can overcome trust issues by involving employees in the entire process, addressing concerns, and providing resources and support that help them prepare for upcoming transformations and continuously develop new skills.
    2. The second challenge – changing the collective mindset — is much harder to overcome. With leadership, the mindset shift is about envisioning the possibilities that tech can unlock and its impact on customers, employees, and business performance – then it’s about presenting that vision in a way that convinces people to buy in.It’s a bit different with rank-and-file employees or veteran SMEs –particularly in cultures where cross-functional collaboration, problem-solving, and group training opportunities aren’t the norm.

    Firms also need to zoom out and consider how to maximize long-term returns.

    For example, employees often have a hard time letting go of old habits – so DX leaders need to ensure that they provide adequate training and incentives to not only learn the processes and standards but stick with them.

    That means, investing in upskilling, reskilling, and training that reinforces agile-like practices.

    Cybersecurity is an Afterthought

    While digital transformation unlocks all kinds of game-changing possibilities for organizations to optimize, innovate, and crush the competition, it also puts them at risk.

    DX projects generate an explosion of data, dependencies, and connections, all of which provide new opportunities for threat actors to infiltrate your system and steal valuable data, credentials, and IP, deploy malware, or hold digital assets for ransom.

    Organizations simply cannot afford to treat cybersecurity as an afterthought.

    Security must be embedded into every part of the digital transformation process — starting from the very first stages of planning.

    Final Thoughts

    Digital transformations fail because they’re hard work. If you cut corners, you’re doomed. The good news is, failure isn’t inevitable.

    Being aware of common pitfalls is the first step toward avoiding them in the first place and proper planning is crucial when it comes to achieving big-picture goals.

    But – working with the right partner is just as important. The right experts can help you set goals, identify and implement solutions, and maximize the ROI of your DX investments – for the long-haul.

    Velosio’s industry-specific services and solutions set the stage for a smooth (and sustained) DX journey. From cloud migrations and D365 ERP implementations to leveraging the benefits of Azure and the Power Platform, our experts will help you overcome barriers, act on opportunities, and continuously drive game-changing improvements. Contact us today to learn how we make it happen.

    The Right Microsoft Partner Can Drive Business SuccessThe Right Microsoft Partner Can Drive Business Success