Why Digital Transformations Fail

Most organizations have integrated digital technologies into their way of working, reimagining their businesses for the digital age. Digital transformation (DX) encompasses many things, from minute, non-disruptive changes to company-wide technology updates and overhauls of traditional processes by introducing technology that supports them.

Businesses typically undertake digital transformation to enhance productivity and optimize operations. If you can pull off a successful digital transformation, the benefits are many, including happier customers and increased profits. However, these efforts often fail, which can be costly when they do.

Companies will invest an estimated $3.3 trillion in DX efforts by 2025, yet the vast majority of digital transformation initiatives will fail — as much as 84%. Given the high cost of completing a digital transformation, businesses must understand the potential pitfalls to avoid them.

This article explores why digital transformation efforts fail and what you can do to ensure success in your business.


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In this article:

What is a Digital Transformation Strategy?

A digital transformation strategy is a comprehensive plan detailing how your business will incorporate technology solutions. This strategy aims to help achieve full digital potential in the appropriate organizational areas. When completed successfully, digital transformation efforts enhance business efficiency and collaboration, leading to better delivery speeds and increased customer satisfaction.

Simply introducing technology to existing business functions or digitally revamping traditional operations does not mean you have made a successful digital transformation. A genuine DX initiative requires instilling a digital-first company culture. Only then can a business realize digital transformation benefits and become a more agile and competitive company.

Reasons Why Digital Transformations Fail

Why do digital transformations sometimes fail? A failed digital transformation usually occurs for one of the three following reasons:

  • Regression is when a business attempts to transform and digitally innovate but adopts a technology it should have years ago, ensuring they still remain behind the market.
  • Underperformance occurs when a business inadequately focuses on DX by either underutilizing digital solutions, underfunding the effort, or both. Often the company still benefits but on a smaller scale.
  • Failed digital initiatives happen when companies attempt to introduce a new digital product or service but fail, forcing them to discontinue it.

Here are the main reasons these adverse outcomes occur:

Incorrect mindset

At its core, digital transformation is about reinventing how an organization and its employees operate. If employees resist the change DX brings, the effort will be doomed from the beginning.

Having the wrong culture

Digital transformation cannot occur unless a company’s culture embraces the new products, operations, or technology they will be working with. A lack of collaborative spirit is one of the biggest roadblocks to successful DX. Digital transformation requires different business functions and teams to collaborate more coherently and effectively. Effective change management can help employees or business groups hesitant to embrace digital transformation through training and education.

Hiring the wrong employees

As soon as your company commits to digital transformation, hiring must reflect these efforts. Recruiting talent with DX skills, experience, and knowledge is essential. These employees are usually more open to digital investments than employees that have been with a company for a long time.

Unclear goals

Technology for the sake of technology is a notion that will doom digital transformation initiatives. You must clearly understand what you want the business outcome to be. Is it better collaboration? Faster delivery times? More agile business practices? New revenue channels?

Whatever the motivation behind completing a digital transformation, companies must define clear goals. Without them, aligning departments and instilling the digital culture you need to succeed will be challenging

Lazy technology implementations

There’s no doubt that the right technology can make significant improvements for a business. However, companies that don’t properly think through their tech investments risk introducing a whole new set of problems. Technology is a significant part of digital transformation but can only go so far if the rest of the strategy isn’t executed correctly.

Assuming a fail-fast attitude

Fail-fast attitudes are dangerous because they normalize failure and lead to lazy thinking. Lack of focus and funding are deadly for digital transformation efforts, so businesses should instead invest further in their DX initiatives to ensure they are more successful and impactful.

How to Avoid Digital Transformation Failure

Now you know the primary roadblocks that can interfere with or even sabotage digital transformation efforts. Next, it’s vital to understand the three things any business must have to pull off a successful DX:

Strong leadership: Digital transformation can only be successful with buy-in from employees at all levels. However, good leaders who understand the business goals of digital transformation are pivotal. Here are five qualities that make successful digital transformation leaders:

  • They understand the value and influence of change management.
  • They recognize what can make a change like this successful.
  • They need to have excellent communication.
  • They are willing to be transparent and
  • They can describe the value of what this digital transformation brings to the organization and individual employees and teams.

Creating a culture of innovation: There are not many factors more significant in a successful DX effort than a company’s culture. If your culture doesn’t adequately nurture digital transformation initiatives, employees won’t take them seriously, resulting in their failure. Too often, companies invest heavily in outstanding solutions that fall by the wayside when employees refuse to use them. Once a company culture is suitable for digital transformation, the rest of the strategy will fall into place.

Identify the business goal: Digital transformation is expensive for almost any business. Because of the capital required to do it right, leaders often get distracted by shiny solutions that won’t serve their company or move closer to achieving a critical business goal.

Every digital transformation strategy should outline what problems are being solved. How will this effort help your business? What is the desired outcome? The answer to those questions should dictate every DX investment you make. The last thing you want is to invest heavily in technology that doesn’t help make teams more collaborative and efficient. 

Summary

The steps outlined above will help you avoid the pitfalls that can cause a digital transformation initiative to fail. Remember: digital transformation is a journey but not one that should be taken for the sake of it. It’s a strategic business initiative that should move your company closer to achieving meaningful goals that improve your employee’s work and the service or products you deliver to customers. As the world becomes rapidly digitized, DX is inevitable for most businesses. Each year, companies in every industry are being outpaced, outmatched, and displaced by more agile, digitally native competitors. If you fail to make the necessary changes in your business, digital disruption will see that you are soon obsolete.

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