Part 2 : Digital Transformations and Why they Fail - 16 Common Issues
Digital Transformation a Structure for Success
There is a huge amount of strategic spend on digital transformations against a backdrop of limited success and significant future market growth.
In 2019 the total enterprise spending on digital transformations was $2 trillion.1
Respondents to a McKinsey survey reported that 70-80% of digital transformations fail to deliver successful outcomes.
The global digital transformation market is projected to grow at a compound annual growth rate (CAGR) of 16.5%
Given the above, we could be looking at a total enterprise spend of circa $1.4-1.6 trillion that did not produce anticipated results.
In this article I will cover:
16 common issues that lead to this lack of success.
In the next article I will cover:
Emerging better practices.
The Galapagos Framework©: An overarching framework that will
Improve the success rate of Digital Transformations
Reduce Operational, Financial, and Delivery Risks in Digital Transformations
Synopsis
Introduction
Much has been written about Digital Transformation Programmes and why real success in this field is elusive.
The pandemic has accelerated digital transformation initiatives and the following article will outline my observations as to the common issues experienced in digital transformation programmes.
Digital Transformation – A Definition
To ensure that we progress on a sound footing, I define Digital Transformation as:
The means by which organisations use technology, people, and processes to find new business models and revenue streams, given accelerating and increasing customer expectations around the products and services they receive.
Common Issues
There appear to be some consistent themes across Digital Transformations that do not deliver success over anything beyond the very short term.
The Human Element
The most significant factors that lead to a lack of success in transformation programmes revolve around people.
Culture
The organization does not have the culture that is required for successful Digital Transformation.
Lack of a collaborative environment.
“…politics, ego and fear are the main obstacles to achieving the collaboration and solidarity needed within companies to make the changes digital consumers want.”
The organsation is heavily siloed, inhibiting cross functional collaboration.
There is a lack of systems/tools in place to encourage and enable individuals and teams to work together and share information freely.
Fear of Failure
This not only stifles innovation but slows the pace of change execution. Individuals/teams and functions over analyse and spend significant time/effort getting bogged down with (often minor) details for fear of getting these things wrong and the inevitable consequences that follow.
The transformation is seen as an unwanted distraction from the core business.
Individuals/teams and functions can perceive the transformation as “just another” new initiative, sometimes overplaying the impact on the core buziness of delivering the transformation.
Communication
The style of communication across the organisation does not support free collaboration and information sharing.
The Frequency.
The perceived wisdom that more communication is better has resulted in many employees suffering from information overload.
The Method.
It is not uncommon for individuals to receive many hundreds of emails per day aswell as instant messages and telephone/conference/video calls. This impacts directly on delivery/performance.
The Volume.
Clear, unambiguous, and targeted communication is critical during any Digital Transformation. However, care must be taken to ensure that employees involved in the transformation are not on the receiving end of a deluge of information that is not directly related to the transformation itself.
Skills
The organisation does not have the capabilities and resources required for effective digital change.
Roles and Responsibilities are not aligned to the Strategic Goals.
Digital leaders are not on the top team.
Scope
Scope is too broad, involving multiple functions/business units or the whole enterprise.
80% of respondents to a McKinsey survey said their recent change efforts either involved multiple functions/business units or the whole enterprise.
Scope is too deep, attempting to solve significant issues with the entire organisation’s operating model.
Transforming the organisation’s Operating Model significantly increases the complexity of the change.
Targeted changes to the operating model will be necessary for success but care needs to be taken to ensure that wholesale operating model change is not in scope.
Failures in Leadership
Strategy and Direction are not clear and are not anchored in the businesses core values and competencies.
It is important for staff to understand where they are heading and why this transformation will enhance the core business.
Complex and sometimes conflicting reporting lines.
Accountability and delivery can be compromised by overly complex/conflicting reporting lines.
Strategy Review cycles are too long and are not data driven.
The perfect strategy no longer exists, and even if it did by the time any strategy is executed on the ground the world has moved on.
Having a mid to long term strategy is clearly still required. However, the frequency with which this strategy is reviewed must increase.
Feedback cycles from transformation initiatives either do not exist or do not deliver clear enough metrics to allow Strategic Initiatives to pivot.
The right mix of “C” level leaders are not involved early enough.
Digital Transformation requires cross-function/department collaboration driven by the CEO, CIO/ CTO/CDO and CHRO.
Frequently, the technology functions have early input, but HR are either late to the table or in some instances not included at all.
Managing Change
The Organisation is running at different speeds
a. Moon Shots: The higher end of what the Digital Transformation aims to achieve
b. Roof Shots: Regular Change Activities
c. Business As Usual (BAU): Change to support the ongoing functioning of the business.
The delivery of these change activities often falls to the same (relatively small) group of individuals.
The Organisational Factors
Closing Thoughts
In the following article, I will cover what I see as some emerging better practices and a framework (The Galapagos Framework©) that will improve the chances of success in Digital Transformations.
If you would like to join the discussion or provide feedback on the article above, you can visit the website www.galapagosframework.com or contact me directly at brian@digitalxform.tech.