Why Digital Transformation (Sometimes) Fails

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Digital transformation is the process of using digital technologies to create new, or modify existing business processes, culture, and the customer experience, to meet changing business and market requirements. Some even refer to it as the “reimagining of business in the digital age.” But the best way to understand it, is by dividing it into four key elements – technology, data, process, and organizational change. Digital transformation involves optimizing processes and making workflows faster, easier, and more efficient, because instead of spending hours processing paperwork, you can create digital workflows which increase efficiency and allow employees to focus on other activities.

Although billions of dollars are invested in digital endeavors by organizations of all sizes, they often fail to meet their goals. According to a study from Boston Consulting Group, an astounding 70% of digital transformation initiatives fall short of their objectives, often with profound consequences. The most common issues that enterprises face are lower-than-expected ROI, reduced productivity, deficits in intra-organizational communication, and inability to scale digital capabilities.

While there are a number of reasons why digital transformation fails or yields only partial success, here are the five key factors that drive digital transformation, often literally, off the rails.

Unclear goals

Organizations are often ambiguous about their digital transformation goals. While most think about the process as a way of modernizing their approach towards conducting business, the devil is often in the details. These details (goals, and the factors that influence them) vary between organizations, and also at different points in time. Whether it’s to improve one’s marketing ability or to enhance manufacturing capacity, goals should be clearly stated along with different factors that may affect them. An intelligent approach is to conduct an external audit of your company’s existing infrastructure, first, and only then, based on the results, carefully assess and propose your digital transformation goals.

Resistance to change

As digital transformation brings enormous changes to an already, usually longtime existing system or systems, resistance usually comes from various areas. From employees to decision-makers, and everyone in between, people are often skeptical about any type of organizational change, let alone those driven by technology. Coupled with deficits in expertise and physical infrastructure, digital transformations often fail due to a lack of coordination, cooperation, and organizational collaboration, or in lay terms, where everyone is on the same page at the same time. A possible solution is to delegate an internal digital transformation team that works with external vendors who will make the transformation as seamless and as hassle-free as possible.

Customers in the dark

Although digital transformation may (and should) result in enhanced operational efficiency and productivity, your customers may be resistant to change as well. In addition, digital transformation managers may forego customers’ needs, forgetting that they too, need to learn new digital tools to enhance the customer experience. Digitization efforts should have a positive impact on customers, and make their processes and workflows faster and easier. One way to asses customer attitudes and aligning your technology goals with customer expectations, is to survey your customers, get a real sense of what they need and what they want. Based on the results, you’ll be able to structure your digital transformation to satisfy your customers.

Noise at the top

What can often slow down or hinder digital transformation is disagreement among decision-makers. There are several reasons why senior management may disagree amongst themselves. While most reasons are practical and rooted in objective realities, many stem from interpersonal conflicts and past experiences. Senior management should ensure that there’s a consensus first, before deciding on transformation goals, and they must work closely with their internal digital transformation team. It’s also an opportunity for decision-makers to ensure that digital transformation processes will not disrupt business continuity nor workplace dynamics, and this can only be achieved when everyone’s on board, and when objectives are clear from the get-go.

Mixed signals

Perhaps the number one reason why so many digital transformation projects fail, is that an organization’s digital capabilities don’t match transformation goals. A Harvard Business Review (HBR) article states that a divide between the potential to scale and existing digital capabilities can result in long delays, unwieldy changes, and unexpected results. The article lists this as one of the two major reasons why digital transformations fail, along with disagreement among key decision-makers. Further, the authors suggest nurturing internal teams that work alongside external experts who can help fill the gaps. The bottom line? It’s essential to first conduct an audit with the help of an outside vendor, understand the real makings of your organization’s infrastructure, assess your needs, and only then, outline how to successfully fill the gaps. It’s easier said than done, but rest assured, it can be done.

 

Planning, planning, and a bit more planning

Although company-wide digital transformation projects are undertaken with great optimism and hope, they often fail due to a number of factors. The most important reasons, as mentioned here, are unclear objectives, resistance to change, ignoring customer satisfaction, disagreement among top-level management, and inadequate capabilities. It’s vitally important to state the goals clearly right from the outset, and work with an external vendor who is skilled and experienced and capable of working closely with your internal digital transformation team.

 

To learn more about how you can achieve your digital transformation goals, contact us for a no-obligation call with one of our ERP implementation experts.

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The Author
Efrat Nakibly
Director of Consulting, Priority Software U.S.

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