Why do Enterprises Falter in their Digital Transformation Initiatives

The relentless digitisation of the economy makes digital transformation inevitable for most enterprises. Unless enterprises upgrade their systems, they risk the erosion of business.

Most enterprises understand the importance of digital transformation, but only some get it right. Evidence suggests only about three out of ten digital transformation efforts succeed.

Here are the seven top reasons for digital transformation failure.

1. Knee-jerk reactions

Many enterprises approach digital transformation as a knee-jerk reaction when they hit a crisis. The focus during such times is to overcome the immediate situation. The transformation efforts put a Band-Aid over the visible problem, with little attempt to address the root cause.

Opt for needs-based digital transformation. Do not undertake the exercise because everyone else is doing it.
Go beyond digitisation to digitalisation. Digitisation is converting products or processes to a digital form. Seek opportunities from digitised products and processes to transform the business. The transformation project may not yield the expected ROI without digitalisation.

2. Planning flaws

Some digital transformation projects involve sweeping changes, including automation. Other projects seek to upgrade the existing technology. Sustainable digital transformation requires a clear vision and action plan regardless of the objective.

Many enterprises seek shortcuts in the quest for immediate rewards. Avoiding critical planning steps to get things done fast or cut expenses leads to heavy losses down the lane.

Have a clear, top-down road map that makes explicit the primary goals of the digital transformation exercise. The goals may be to reduce costs, boost revenues, improve customer satisfaction, or anything else.
Draw up action plans that ensure accountability for each stakeholder involved in the exercise.
Develop integrated strategies that co-opt goal-driven processes and change management. Harmonise these efforts through digital innovations if needed.
Develop purpose-built systems for onboarding and implementation of projects. Many enterprises try to make do with the regular project and collaboration tools. Such tools do not facilitate the transparency and accountability needed for success.

3. Not digitising the tech backbone

Outdated tech stacks cause digital transformation failure. Implementing new tech onto broken systems will cause the new tech to crumble and the projects to fail. But there are few early or direct rewards in investing in the underlying infrastructure. The IT team often needs to show immediate results to convince the C-suite.

When the COVID-19 pandemic struck, enterprises worldwide scrambled to transition to remote work. Almost everyone succeeded in getting employees to work from home. But most enterprises build work-from-home systems on top of suboptimal platforms and still need to address the issue. The older underlying technologies created instability, security risks, and pandemic technical debt.

Upgrade the tech stack and ensure it can deliver the organisational strategy. For instance, cloud migrations will fail without adequate servers, bandwidth and backups.
Reuse components, processes and data to the extent possible instead of reinventing the wheel every time.

4. Not focusing on the customer

Many transformation efforts fail because they do not focus on the customer. Failure to set clear end-user experience goals leads to a lack of clarity and focus.

Customers include end-customers and employees, who are the internal customers of the enterprise. Both will go elsewhere if they encounter sub-optimal systems and delays.

Prioritise transformation initiatives that make things better or add value for the customer.
Pay attention to the work process. Give priority to automating or simplifying processes as the core of the digital transformation effort.
Make sure the plans include migrating customers to the new ways. For instance, digital banks work great in theory. The tech team may also create a great UX and robust backend for the digital bank. But unless customers use this new version of the bank, the digital transformation is a failure.
Devise shared strategies, objectives and measures that bridge people with the new technology.
Provide training and awareness for customers through crisp and clear communications.

5. Not overcoming resistance to change

The absence of change management can break the transformation initiatives.

Most enterprises underestimate the resistance to change brought about by digital transformation. Even the best-executed projects will only succeed if the workforce embraces the new product. The workforce resents moving out of their cosy status-quos for the sake of someone else’s agenda.

Secure employee buy-in at an early stage of the project. Convince them of the benefits on offer. Bring data into the process instead of trying to convince through hypotheses.
Give workers an early release of the product, such as a minimum viable product or a demo, to reinforce the benefits.
Communicate to the rank-and-file throughout the project duration. When employees do not have clarity on “what’s in it for me,” the digital transformation efforts do not gather traction.
Communicate with other departments and teams. Most of the time, resistance comes from functional departments. When the IT team tries to change the underlying technology, the business teams often do not understand their role. When the business team does not articulate their requirements, the tech team starts making decisions on behalf of a business unit. The situation turns from bad to worse.
Identify resource persons or champions from the workforce who can ‘sell” the change and serve as resource persons for those in doubt.
Lead from the front. Digital transformation success depends on changing the workforce mindsets and behaviours. The onus is on CIOs to act as an engine for change.
Conduct training programs to familiarise employees with the new tools and technologies.

6. Ignoring the skill shortage

Many enterprises reel under acute skill shortages. The skills required to drive digital transformation remain scarce. The skill shortage also means a lack of in-house experts to identify the strategic benefits of new tools and technologies.

Choose the right internal talent and equip them with adequate resources. Put effort into developing talent and teaching them the requisite skills upfront.
Make interventions to realise the general skill sets of the workforce. Digital transformation success depends on a digital-savvy workforce.
Secure talent before embarking on digital transformation projects. Hire talent internally, or make provisions for outsourcing. Most enterprises embark on digital transformation for cloud migrations and improve customer experience. Cloud and CX skills are in high demand and are hard to find.

Here are five ways IT leaders can overcome the skills shortage.

7. Lack of C-suite support

Digital transformation needs funding and support from the top management. Many enterprises commit to the change without the security of complete financing and have to abandon projects midway.

Many-a-times, the project champions overestimate the benefits and underestimate costs. When the C-suite does not find the expected returns, they pull the plug on the project and cut their losses. Such errors often arise due to inaccurate or inadequate information.

It is a mistake to start digital transformation projects without budgetary allocations. Secure C-suite commitments to sustain the project through good and bad years.
Convince the C-suite of the benefits on offer. Quantify the benefits. Often tech leaders reach their position through their competence in implementing technology. They usually do not have the same competence to articulate the value of the project in financial terms.
Align the project with business objectives. The C-suite often has unrealistic expectations from digital transformation projects. Tech leaders remain oblivious to financial cost-effectiveness or practical business considerations. Success depends on taking a middle ground.
Ensure the CFO and other senior executives understand the returns on investment.

Enterprises that approach digital transformation proactively succeed. They work on their mistakes and set the stage to reap the benefits of tremendous growth.

Christopher Khor

Christopher provides technology insight as well as advising & coaching services to IT Professionals. He is also an Adjunct Teaching Mentor with SMU Business School. He graduated with an MBA as well as MSc(Computer Science) and has over 30 years of working experience, serving in critical roles such as IT Director and CIO positions. He believes in the power of relationship building and people development through mentoring and coaching organizational success.