To round off our theme of topics surrounding digital transformation on our blog that started with Digital Transformation: 5 Trends For Product Roadmaps and How to Do Digital Transformation, in this article, we would look at why digital transformations fail. 

According to a McKinsey study, a whopping 70% of all digital transformations fail. Most of these failures come from several shortcomings which include but are not limited to the following.

What is digital transformation?

Digital transformation, in simple terms, is the process of using modern digital technologies to enhance or create new business processes and a culture that constantly improves customer experience and efficiency throughout a changing business landscape. 

In practice, digital transformation just means adopting a culture centered on providing constant and iterative value enhancement for the product or service your company offers its clients in a way that:

  1. Begins with having regular hypotheses about the product’s value to those clients,
  2.  Identifying arising needs
  3.  And then constantly exceeding it with newer solutions powered by modern technologies as those customers’ needs become more dynamic each passing day.

Lack of urgency

One pressing problem with implementing digital transformation is how long it has traditionally been to fully kickstart it. 

Before the pandemic, it is the norm to see organizations set 3 to 7 years’ strategies to transform their processes and be fully digitized.

The problem is that these long-term plans always become obsolete even before completion and as newer technologies become available.

In the current age and with the pace of technological advancement where new and more digitally prepared businesses can move to dominate an established one’s market almost overnight, multi-year strategies need to be dropped for a more iterative one. 

According to Val Sribar, Gartner’s Senior Vice President, “many businesses are stuck running digital projects.”

He advised CIOs and other senior IT executives in charge of initiating digital transformation initiatives to embrace the urgency.

Employees resistance to change

Zappos

In some cases, CIOs and other senior IT executives in charge of initiating digital transformative efforts don’t realize that there is not enough talent in the current pool of employees to successfully implement their digital transformation strategies.

Employees are crucial to the success of digital transformation efforts and If your employees lack experience in areas of newer technologies or are averse to change, it may prove disastrous to your effort.

Historically, to ensure employee buy-in, businesses typically train their employees on the newly integrated technologies to empower them and bridge their skill gap while explaining why and how these new technologies will transform business and improve customer satisfaction.

An example of a company that did this to its advantage was Zappos. In the process to transform its business, the company uncovered and addressed the skill gap and resistance to change it was facing from employees by re-training them in the company’s culture, and customer service before getting acquired by Amazon for $850 million.

Having no clear end-user goals

According to Patrick Ostiguy of Accedian in an interview with Forbes, the failure percentage of digital transformation is high because some companies fail to set clear goals in terms of end-user experience.

As we mentioned in How to Do Digital Transformation, setting a clear end-user goal is the crux of every digital transformation effort.

As a custodian of digital transformation initiatives, ask how your effort will translate to concrete gains for your customers. 

If you need any motivation to do this, take this: In a 2019 study, Everest Group found that an astonishing 73% of companies failed at providing any business value from their digital transformation initiative. 

Failure to understand Digital Transformation

Not properly understanding what you need to change in your company to constitute “digital transformation” is perhaps the biggest reason why the majority of digital transformation efforts fail. The 2019 Everest Group study mentioned previously proves this. 

Because factors that combine to make a business what it is, differ from one business to another, the exact thing in your company that should change to positively impact the level of customer value delivery and a further optimized business process needs to be thought deeply about and identified before planning to carry out any digital transformation efforts. 

In several cases of failed digital transformation initiatives, there has been the consensus that the custodians of those efforts didn’t have a full understanding of digital transformation, and as a result, could not have achieved any other result than failure. 

Conclusion

Digital transformation initiatives fail due to these and several other reasons not listed here. 

Although digital transformation drives competitiveness for businesses and has the potential to make your company more money than it would have made otherwise, it is still really important to be aware of the risk that could ruin its implementation in your company and we hope that this article has done a good job at uncovering a few of those risks. 

Eduardo Mello

Eduardo Mello

Co-Founder & CTO @alabamasolutions | Software Architect | Digital Transformation