Unfortunately, 3 out of 4 large-scale initiatives of this kind will not achieve their goal according to McKinsey & Co. Why?
More than half of the retail, financial and healthcare companies have embarked on a formal digital transformation initiative across the organization. To these are added the 20-25% who have a gradual approach, transforming an element of the organization, step by step.
In this article we will present 8 reasons why digital transformation initiatives fail and 8 solutions to these problems.
1. You haven’t really defined ‘digital transformation’ yet
There is no definition of digital transformation that applies to any organization. A WiPro Digital study conducted in 2017 showed that 1 in 4 executives surveyed acknowledged that people in their organization cannot agree on what digital transformation really means . Digital transformation is not a motto, but the name of a strategy that belongs only to your organization.
Finding a common definition that all members of the organization can agree on in terms of processes, culture, technology and use is a challenge. The problem is that ‘digital transformation’ becomes a kind of slogan of any IT project, without a general strategy to guide them.
Solution: Instead of focusing on IT projects, organizations need to define their transformation initiatives around bigger and ‘more fundamental’ issues. We encourage organizations to focus on the essence: to understand the customer experience, the steps they need to take, the interactions they need to have and to seek to improve this experience, these processes, these interactions.
Technology must always be the way to achieve the goal, not the goal itself.
2. Treat digital transformation like an IT project
Organizations that treat digital transformation as an IT project are doomed to failure. Technology is just the way to reach a ‘big’, holistic goal. Organizations that view TD as a transformation of the organizational mindset as much as a technological transformation are the most successful. Organizations that believe that TD begins and ends with the IT team and the CIO cannot talk about digital transformation.
Solution: Organizations need to stop focusing on technology and start focusing on what the customer wants.
Most organizations start with technology, and using that technology tries to improve the customer experience. We believe the opposite is true: we look at customer needs, customer issues, customer travel, and we begin to ask ourselves, ‘What technologies can improve their experience and make our product better?’
3. The IT department and the rest of the organization speak different languages
Even when digital transformation is a collaborative effort, the differences between the way IT people and business management define terms can lead to frustration, delays and unsatisfactory execution.
For example, when IT uses the term ‘minimum viability’, they focus on the word ‘minimum’, while management admires ‘viability’. When the director says that an application must be able to be used by 100,000 users simultaneously, even if in the first years of use it will not have more than 50, IT will take this requirement literally.
The outcome? The IT team will build either products with extremely limited functionality when management expects a complete application or over-complex solutions when management wonders why a simple thing takes so long.
Solution: By defining terms such as ‘minimum viability’ or ‘simultaneous’, the transformation team will reach the same expectations at the same time.
Simply ask questions like, ‘What does viable mean in this case?’, ‘Why would we need an acceptable product and not a complete one right now?’. In this way the expectations will be synchronized and the project will be able to go on successfully.
4. The transformation team does not have the necessary skills
A big mistake organizations make is to start a TD effort without having the necessary ‘in-house’ skills. This problem becomes even more serious when we consider the crisis on the global labor market (and in Romania). Digital transformation is a long process that requires advanced technological and business knowledge.
Digital transformation cannot be improvised, it leaves no room for solutions built today or tomorrow or patched platforms where there is no necessary knowledge for development. Investments in systems that cannot, during the understanding and learning process, be adjusted and modified to accommodate new needs and knowledge are not justified.
The solution: The most ‘cost-effective’ and safe way to achieve the goals of digital transformation is external help. That’s why we exist, for example. It is clear that the digital transformation is not done with half measures, but it is very difficult not to resort to half measures when the field of activity of your organization is other than the digital transformation. That is why we appeal to those who, day by day, year by year, for many years, make digital transformation in a professional way in the morning, at noon and in the evening.
Problem? We know that digital transformation is a comprehensive, holistic, specific issue for our organization. And then, how can we rely on an outside company to understand our needs in depth and look at things with our own eyes? Well, here’s the difference between an IT partner and a system vendor / developer.
5. Employees do not support the project
It’s a classic problem of any change: people’s resistance to change. Even the best thought out digitization initiatives can simply fail because employees do things the way they know how, instead of adopting new methods.
Solution: Explain to employees in the clearest way why these transformations are happening and what their ultimate goal is. All these transformations benefit the organization, and therefore the employees. However, one must also understand their problems and needs, one must understand the reasons why they are reluctant to adopt the novelty. All of these things need to be done early so that the solutions themselves are built around both customers and employees.
6. You are not willing to make difficult decisions
Adopting new technologies and processes can lead to painful staffing decisions. This is because some people view transformation as an enemy and will do everything they can to prevent it. Any transformation process will expose the problems in departments, processes and intra-departmental relations. When the sources of problems are discovered, there is a good chance that some people will not be very happy. If some of the opponents of transformation are allowed to oppose, this can have a negative impact on the general perception of the organization about the transformation itself.
The solution: In line with all the business theories written in the last 50 years, people who oppose the road must go down at the first stop. It can be painful, but it is the right solution for long-term success.
7. You tried to hit all the rates with one bullet
Although the digital transformation is holistic and must encompass the entire business, excessive ambition from the start is a recipe for failure – especially if you try to bring down internal skepticism ( 1 in 5 executives believe that transformation initiatives are a waste of time ).
Solution: As with any organizational initiative, it’s a good idea to start by selecting manageable targets that show positive results early on. That doesn’t undo everything I’ve said so far:
The journey must be long and comprehensive, the steps must be small and concrete.
8. You think you’re done. (You’re not done.)
Many companies approach digital transformation as a destination, when it is actually a kind of endless journey (it sounds much sadder than it actually is).
“In reality, we’ve been on this journey since we implemented the first computers to automate processes, and candidly, that transformation isn’t, and probably never will be, complete.” says Regina Salazar, CIO of the Global Product Organization at Whirlpool.
Solution: Accept that the digital transformation is the new normal, and adjust accordingly. It is better to have an endless stream of opportunities for improvement and growth than to have no such opportunity.
You need to diligently ask the entire organization to constantly improve, to become faster and more efficient. After all, competitors do exactly the same thing. It depends on who wins.