Why do digital transformation programs fail?

For all the talk of companies accelerating business transformation and moving to the cloud, there are still many firms grappling with how they will achieve operational efficiency and move processes online. After all, it’s complex and expensive to move to the cloud, integrate apps and ensure the supporting culture, structure, security, and governance are in place. 

While it may be true companies are accelerating their plans, it doesn’t necessarily mean they are delivering on them. In fact, Forbes says that 84% of digital transformation initiatives fail because the technology selected isn’t appropriate or easy to integrate.

Experience has shown that any digital transformation program viewed purely as an implementation of technology is doomed to fail. This is because a ‘technology first’ approach neglects to consider and accommodate the importance of strategy, culture, structure and governance to delivering a successful business transformation program. 

Transformation failure points

First, there is no ‘one size fits all’ template for success. Every company is unique in design. A transformation undertaken in a ‘Command & Control’ environment will require a very different approach compared with a holding structure or a loosely federated enterprise. This is largely due to differences in stakeholders’ span of control and decision-making processes within these different organisational structures. Either way, most will have legacy architectures to consider, which brings with it cumbersome data management processes and security models and puts pressure on resources. 

Second, digital transformation should always be considered with a strategic goal in mind. Any attempts to implement technology tactically without a clear vision of why it is needed is unlikely to deliver the intended results. 

For instance, the goal might be to increase online sales by 20%. However, it’s impossible to achieve this objective without considering the stock levels, payment platforms, supply chain integration, and the impact on the workforce that manages the increased customer orders and product fulfilment. 

Third, projects will fail without an executive-level sponsor to sell the value and lead the transformation efforts. From a governance perspective, considerable thought must be given to which processes must be modified so that the smallest of changes to the most radical transformation is smooth and has a positive long-lasting effect. 

Next, culture must be aligned. All efforts must be made to identify and influence stakeholders to champion the digital transformation program. So often initiatives fail because people resisted the change. Painting the picture of a better, brighter future is essential. 

However, leadership teams must be able to not only articulate the vision but also empathise with the reasons why people might resist change. Is there the perception that a machine or system will replace jobs?

Organisations that understand this complexity often recognise it takes time to develop the supporting competence needed to deliver the strategy. It’s why some companies choose to accelerate their efforts by hiring external talent that has the experience needed to manage the digital transformation from both the point of view of systems and people.

Finally, there must be an appreciation for macroeconomics and even the political landscape if the transformation is going to be successful. For instance, if legislation or policy is holding up the implementation of specific technologies then it could decelerate the adoption of transformational technology. The public sector and financial services sectors are examples of those that are beholden to regulated frameworks. They often cite this as an inhibitor to progress, especially when it comes to the adoption of public cloud compared with other, less regulated industries. 

There are also economic factors to consider. If the financial investment isn’t available, nor the grants and tax breaks that encourage innovation, then progress will slow down. During the COVID pandemic, many organisations found it difficult to appropriately fund digital transformation projects despite considerable clarity and consensus that they needed to happen. 

This left many companies stuck between a rock and a hard place. While there were huge swathes of consumers who wanted online options, there were businesses who couldn’t, and indeed still can’t react to the demand. Business resilience was greatly undermined. 

On the flip side, there are also consumers who just aren’t ready for the move to online. Digital banking is an excellent example of where transformation left behind those not used to banking online or who were part of the minority of ‘unbanked’.

The right technology choices

Having a broader view of the considerations related to culture, structure, security, and governance is critical for transformation success and should inform technology choices. Aside from making the right decisions on platforms and applications, companies must be able to deal with the ocean of data that transformation creates. Data can drive decision making and create more agile businesses but only if it can be organised and mined. However, the scale of data involved would completely overwhelm most human beings.

That’s why it’s so important to adopt the right technology for the business setting and vision. Only with the right applications in place can organisations find new data to support their decision-making processes, accelerate the time to make decisions and decrease operational costs. Businesses that get this right will strike gold. 

However, where there is gold there are criminals, so every digital transformation program must include security measures as part of the governance. Without sophisticated cyber defences in place, any organisation is an easy target. Cybercriminals are using advanced tactics and techniques to engage in their nefarious activities so defences must match up. 

This is where some businesses can be tempted to make shortcuts. For example, if a retail team can’t detect bad bots on its eCommerce platforms, then they won’t know criminals are scrapping credit card details, blocking inventory and committing fraud. It’s important to make the links between data laws, operational technology, and strategy, and it must be a top-down mandate to do so. 

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