10 Reasons Why Digital Transformation Initiatives Fail

Digital transformation remains fashionable. CIOs are stitching together cloud, APIs and microservices into platforms to augment business processes. Agile architectures, they believe, help streamline operations and better serve customers.

Forty-seven percent of 510 business and tech leaders claim that their organization is advancing digital transformation plans across the enterprise, according to research conducted by consultancy TEKsystems in late 2019.

The harsh reality is that such transformations often feel like mirages: cool and inviting from afar, but less real as they progress along the path. Often the biggest misstep is the inability to account for the cultural change required to pull off enterprise-wide transformation.

Getting blindsided by the COVID-19 isn’t doing organizations any favors on their transformation journeys, but even those who keep most of their budgets intact, there are very specific impediments to driving wholesale enterprise change. Here are 10 stumbling blocks derailing digital transformations.

1. Culture shock

For many organizations, the culture change required for transformation can prove insurmountable. Thirty-nine percent of organizations say that their organizational structure is not aligned to support transformation, according to the TEKsystems poll.

“Technology is at everyone’s fingertips but realizing how to optimize its potential is complicated,” says Jason Hayman, market research manager for TEKsystems. “That narrow mindset — lacking a common vision and failing to consider the entire ecosystem — is exactly where digital initiatives go wrong.”

2. Lack of CEO sponsorship

Transformation starts from the top — in theory, at least. But, according to a 2017 Wipro Digital survey, the 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 Rajan Kohli, global head of Wipro Digital, who adds that the CEO is often to blame.

“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.

3. The problem with siloes

Thirty-two percent of leaders surveyed by TEKsystems cited too many competing priorities as a transformation hurdle they are struggling to clear.

“There’s a disconnect in expectations,” says Hayman. “COVID-19 likely highlighted that for many organizations. It’s critical to secure consensus among senior leaders and stakeholders regarding business goals.”

Alignment problems often stem from siloes between business divisions, says Herb Schul, who leads EY’s advisory markets, business development, sectors and solutions. A product owner who can’t see inside the supply chain because they aren’t allowed access will find it difficult to serve customers. Moreover, a siloed organization isn’t going to respond nimbly in a crisis such as the coronavirus pandemic.

“It’s about success in transcending or traversing the organizational siloes and constructs to transform all of the business processes to get the outcome you desire,” Schul says.

4.Trouble with ‘what and how’

Assuming they get over their resistance to change, most companies don’t exit wait-and-see mode until lackluster financials and pressure mounts from the board — and rivals. Still, most leaders 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.

A major stumbling block for transformations involves the failure to understand the technology required and the talent necessary to operate it, says Laura LaBerge, a senior knowledge expert at McKinsey. Does a business need a new operating model for digital? How many Scrum/agile experts or DevOps engineers does this require?

Business unit leaders must liaise with their CIOs to get a handle on these knowledge gaps. The pace of digital change makes this a difficult but necessary ingredient for success.

5. Wait-and-see trap

Indecision over the “what and how” puts companies in binds, as they delay transformation, says Martin Reeves, managing director of BCG’s Henderson Institute.

“The single biggest predictor of success of transformation is the promptness of their start,” Reeves says. “Digital disruption happens fast and most financial metrics are lagging indicators of potential.”

Ironically, while COVID-19 has ground a lot of businesses to a standstill, it’s also accelerated transformative tech maneuvers in a matter of weeks instead of months, says Schul. “COVID-19 is driving us through barriers,” he adds.

6. The technology trap

Neither the willingness to change nor the perfect alignment of tech and staff can save CIOs from falling into the technology-centricity trap, aka shiny new toy syndrome. While technology is a critical driver of transformation, applying tools that don’t help satisfy customer demands or enable new digital business models adds little value, Reeves says.

Another problem: picking favorites, such as cloud, predictive analytics, blockchain, artificial intelligence or internet of things (IoT). Sometimes CIOs can fall in love with a single tool in their kit and obscure fundamental competitive and customer considerations, says Reeves.

“The clients we see that are doing well focus less on the new shiny toy or new tech component and more on looking for the right place to apply it,” Schul says.

7. Big Bang theory

Organizations that find common ground on a strategy and show a willingness to change tend to treat transformation with a Big Bang approach, rather than as a series of iterative shifts shaped to change the business process.

Often, this results in “too many expectations on too many outcomes,” says Schul. And if the culture isn’t aligned right, the strategy falls down, he adds. “It’s about how you create wins on a repetitive basis versus that big milestone … that never comes.”

8. Lack of velocity

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.

LaBerge says that the scale and pace of digital acceleration compound the issues, making it hard to close the gap between incumbents and rivals. For instance, companies that are starting version 2 of a digital service find themselves competing against disruptors that are on version 78.

“Scale or network effects can make failure seem even bigger,” LaBerge says.

9. 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.

Nine out of 10 organizations believe they need at least some new types of talent, and 37 percent believe extensive talent structure changes are needed for their digital transformation efforts to be successful, says Hayman.

But 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.

10. Lack of continuity

You’ve seen this movie before: A CIO’s LinkedIn profile morphs from “Global CIO of X” to “Global CIO of Y,” or, worse, “looking for my next opportunity.” The impact of such transitions is hard to quantify, but they tend to set efforts back.

“Senior-level leaders don’t want to inherit a transformation,” LaBerge says. “They want to start from scratch to leave their mark.” LaBerge also says turnover among the rank-and-file staff and other managers is as much to blame for the issue.

With CIOs and their staff jumping ship (both voluntarily and involuntarily), enterprises stand little chance of executing their digital strategies.