12 reasons why digital transformations fail
- 18 January, 2018 22:00
Digital transformations are fashionable these days. You won't find an enterprise that isn't leveraging some combination of cloud, analytics, artificial intelligence and machine learning to better serve customers or streamline operations.
But here's a hard truth about digital transformations: Many are failing outright or are in danger of failing. Half of 400 U.S.-based senior executives polled by Wipro Digital in 2017 believe their company isn’t successfully executing 50 percent of their strategies. One in 5 say their company’s digital transformation is a waste of time.
Experts surveyed by CIO.com say there are specific impediments to driving the requisite change that transforms an enterprise. Following are 12 issues derailing digital transformations today.
1. Lack of consensus on what digital transformation means
Lack of a clear transformation strategy was cited by 35 percent of executives as a key barrier to achieving its full digital potential, according to Wipro Digital.
The CIO may view digital as a way to drive operational efficiency, while the CMO may see digital as the answer to boosting customer engagement. A true digital transformation requires both.
"You need to relentlessly communicate the vision, stick with it and get people to buy into it," says Janice Miller, who advises enterprise leaders about their transformation plans and is director of leadership programs at Harvard Business Publishing.
2. Lack of CEO sponsorship
Leadership of digital transformations is in crisis, with CEOs failing to shepherd or back a coherent strategy, says Rajan Kohli, senior vice president and global head of Wipro Digital.
Excessive caution and fear of the unknown haunts some CEOs, according to research Digital McKinsey released in 2017. "In today’s environment, making incremental changes is like rearranging the deck chairs on the Titanic," according to McKinsey.
The key to a successful digital transformation lies in creating a new, unique customer experience. Doing so is an enterprise-wide endeavor, and it's incumbent on the CEO to take the reins and drive focus that unites IT and the business.
3. Lack of focus
Without a CEO to shepherd the efforts, a digital transformation lacks focus, imperiling the effort. McKinsey notes that while many enterprises rush to adopt the "let 100 flowers bloom" philosophy for experimentation, focusing on too many things "dissipates management focus and starves promising ideas of the resources they need for a successful scale-up."
4. Resistance to change
Change can be challenging in enterprises where corporate leaders have enjoyed a certain degree of comfort. "People built their careers and power on what they know and it's hard for them to let go," Kohli says.
Indeed, 43 percent of 4,500 CIOs surveyed for the 2017 Harvey Nash/KPMG CIO survey cited resistance to change as the top impediment to a successful digital strategy. Resistance to change can grind transformations to a halt. It's up to the CEO to rally the troops, aligning everyone around the strategy, narrative and vision, Kohli says.
5. Trouble with ‘what and how’
From lackluster fiscal results to pressure from the board and rising rivals, most enterprises know why they need to change. But most struggle to figure out what they need to change and how to go about it, says Kohli. This indecision can create inertia or, worse, wrong decisions.
One of the chief challenges enterprises face is reconciling their digital change strategy with short and long-term financial goals, particularly for publicly-traded companies beholden to shareholders and Wall Street. "Sometimes decisions made for the short term are not the best for the long term," Kohli says.
6. Lack of pace
The snail's pace of change isn't helping. Only 4 percent of respondents to Wipro Digital's survey said they realized half of their digital investment in under one year, with the majority of respondents saying it has taken their company two to three years to see at least half of these investments come to fruition.
"The pace of change is so fast," says Miller. "You need to move strategy much more quickly and not take two years to get everybody on board." Miller adds that changing the culture to encourage new ideas — which includes creating a psychological safety net that assumes there will be failures — is key.
7. Talent deficit
Digital transformations require new talent, including software engineers trained in the latest programming languages and product managers who know what customers want in a virtual assistant. Companies are paying top dollar for user experience design whizzes, DevOps engineers, data scientists and artificial intelligence professionals — when they can find them.
Demand far outstrips supply, and most enterprises find it hard to lure seasoned software developers, product managers and other tech professionals away from Apple, Google or Facebook. "There is a massive talent gap," Kohli says, adding that scarcity and attrition can kill digital transformations.
8. Back-end focus can crimp customer innovation
Even with the right talent mix, CIOs focus on infrastructure overhauls at the expense of customer-facing innovation, Kohli says. A true digital transformation tackles both sides of this coin in parallel, he says.
For example, companies should allocate teams to migrate to cloud infrastructure while experimenting with mobile applications, chatbots, blockchain or IoT.
9. Integration woes
Many CIOs who embrace shiny new technologies, including IoT, chatbots and other AI or ML tools, implement them piecemeal rather than building them into a cohesive platform, says Ruben Mancha, an assistant professor of information systems at Babson College. "They see technology as individual pieces to implement, but don't have a value proposition that integrates all of them," says Mancha.
As a result, he says, many companies fail to reinvent their value proposition for customers. Mancha says successful digital transformations will use emerging technologies to harness a contextual computing experience that offers customers highly personalized and innovative services.
10. The digital moat
Another big problem is that some enterprises wall off their digital initiatives, arguing that they require the speed to operate independently from the more deliberate corporate mothership. This tends to be a digital accelerator or innovation lab running outside the headquarters.
While operating with more speed and freedom has its advantages, failure to holistically inject those digital capabilities and drive the transformation into the rest of the business wastes valuable money and resources.
11. Strapped for cash
Digital transformations can die a slow death once implementation or operational costs eclipse savings or revenue growth, tapping a once princely budget.
“Leading companies start by targeting quick wins to unlock value so that the effort funds itself, often within the first three months,” according to McKinsey.
12. Lack of continuity
How many times have you heard about a CIO discussing their ongoing digital transformation only to leave before it's completed? Overnight, their LinkedIn profile morphs from "Global CIO of X" to "CDO of Y," or, worse, "looking for my next opportunity." You could chalk this up to the lack of a deep tech talent bench, but with CIOs jumping ship both voluntarily and involuntarily, enterprises stand little chance of executing their digital strategies. Initiatives started under the aegis of transformation often join the Pile of Big IT Project Failures.
But ultimately, digital transformations require leadership from the top and are doomed to fail if they don’t have it.
"Digital transformation efforts are coming up short on intended ROI, in part because digital transformation is as much a leadership issue as it is a strategy, technology, culture and talent issue,” says Kohli.