Why Digital Transformation Fails

Chris Pisapia, Chief Executive Officer

September 1, 2016

So, you want to catapult your brand into the digital landscape. Someone on the executive team (perhaps it was you?) has set a companywide mission to “improve the customer experience” using the latest technologies and people are excited. You've got buy-in from multiple teams who are ready to foster brand engagement across channels and have committed to a really big, really hairy “digital transformation” initiative this year. Welcome to the party! By the end of 2017, the vast majority of the world's largest businesses will put digital transformation at the center of their corporate strategies.1

Maybe you've already purchased the tools necessary for this massive, internal digital makeover. You've got a shiny new piece of technology and an approved PO. But, despite your initial optimism, the effort has become a bit stalled. After making the big decision to make a change, going through that purchase process, and signing the contract, you're, a bit, well, stuck. You've hit a plateau after all that momentum, and business leaders such as yourself are asking, “what happened?” and “what now?”

You're not alone in this feeling. $100 billion is wasted every year on digital and analytic business transformations that do not deliver what they promise.2 What's more, 2/3 of digital transformation projects fail.3 Many digital transformation initiatives fail because companies focus too much attention on the technology itself, and not enough on the people and process required to lift it off the ground.

At Verndale, we work with global, Fortune 500 organizations on digital transformation programs. Many of our clients say that solving the operational challenge of managing the new, post-transformation solution is their toughest battle. From identifying the right roles to hire for or outsource, to building out new operational processes, the complexity of change management places substantial pressure on these business leaders.

Part 1 in our series on digital transformation and the importance of change management. Read The Executive's Guide to Managing Change with Digital Transformation for more.

This stuff is hard! A full 70% of change management programs fail to meet their goals, not due to a lack of resources or budget, but often due to a lack of planning for what happens post-launch. The four most common mistakes made when organizations attempt to transform their digital strategy include:

1. Too little investment up-front

The first reason change management fails is that companies and consultants who deal with digital transformation fail to account for it appropriately in the first place. It is often an afterthought, and at that point, it’s just too late. One of the largest challenges that derails transformation initiatives is misjudging or not anticipating risk factors that may have been identified if more attention was paid up-front to the post-launch strategy.

“Left untended, change management quickly becomes the Achilles’ heel of the digital program.”

2. A lack of vision

Digital transformation does not begin from the bottom-up. Only the executive layer of an organization can define a compelling vision of the future, and communicate it across the organization. What’s needed to guide and start change management initiatives is a clear, transformative vision. This is the best way to drive buy-in across the organization from the top down, from executives to management to each individual contributor.

51% of executives cited support from leadership as the top reason for success of a business transformation initiative.4

3. Inconsistent communication

Having a vision is only half the battle when driving organizational change. A related and common error is inconsistency in relaying that vision through ongoing communication to foster a shared understanding companywide. All too often the detailed activities on the ground don't connect to the big picture, putting organizations at risk of the “100 lost projects” syndrome: many initiatives embarked upon but few completed thanks to a lack of leadership, control and coordination.

4. Leadership skill gaps

Only 27% of companies said that their executives possess the skills necessary for digital transformation.5 In one recent study, change management was found to be one of the top five skill sets lacking from executives.6 One specific mistake leaders make in this initiative is to inadvertently foster institutional bias, by buying conflicting data and highlighting only supporting evidence throughout the change initiative, leading to overconfidence and misleading biases.

These four common mistakes represent the work to be done at many organizations, but they are not indicative of unavoidable failure. Rather, by addressing and preparing for these specific challenges, organizations are in a position to implement digital transformation initiatives successfully to unlock major improvements and boost long-term performance.

For more information on how to overcome these challenges and position yourself for success with a digital transformation initiative, read The Executive's Guide to Managing Change with Digital Transformation. This free guide from the team at Verndale walks through the importance of change management, explores why many digital transformation initiatives fail and offers some practical ways to improve change management after digital initiatives are launched.

1 Digital Transformation Predictions, IDC, 2015
2 Genpact study
3 Genpact study
4 Making the Change, Planning Executing and Measuring Successful Business Transformation, Forbes Insights, 2014
5 Skills for Digital Transformation, SAP, 2015
6 Culture’s role in enabling organizational change, PWC, 2013