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Why Digital Transformations Fail and What Lessons Can Be Learned.

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The digital transformation agenda is sweeping across corporate boardrooms. Harvard Business Review surveyed 1,350 businesses between 2016 and 2018, and found that, during this time period, these businesses had invested $100 billion in digital transformation initiatives. This kind of digital investment is being replicated throughout the global business community.

However, while corporate digital transformation is an exciting and awe inspiring prospect, (due to the speed and scale of change), it can be equally turbulent and foreboding.  For example, HBR found that most of those organizations surveyed, (across 17 countries and 13 industries), reported poor returns on their investment. This was backed up by alternative industrial research from Everest Group, which showed that 78% of digital transformations fail. This failure rate is both surprising and worrying. So, why do so many digital transformations fail and what lessons can be learned?

Fatigue from continuous change 

We have been in a culture of continuous change and reorganization, probably since the 2008 financial crisis. It’s no surprise to find then that, as we go through this 4th industrial revolution to digital, employees are suffering with change-fatigue. The Everest Group researchers found that ‘fatigue from continuous change is a top reason why HR digital transformations fail.’ The researchers proposed two key ways to potentially counter this fatigue:

  1. Build up-front commitment with a convincing vision and a set of searching, but exciting goals to combat fatigue.
  2. Adopt an agile change management approach rather than a waterfall method, so you have an adaptable, (rather than rigid strategic plan) that can weather roadblocks and unpredictability.

Can’t scale digital innovation beyond the pilot

The Harvard Business Review research found that a key reason for failure was the, ‘inability of a business to take its original pilot digital innovation and deploy it business-wide’.

Two factors that were undermining progress were, ‘unspoken disagreement between top managers about goals’, and an, ‘inability to scale up human resources sufficiently so the technology can be rolled out across the business’.  

The first takeaway from this is that with, transparent and socially agreed goals between key influencers, your digital transformation initiative will have a much greater chance of success.

The second takeaway is ‘think innovatively’ about digital talent acquisition. Successful digital transformers are looking beyond traditional recruitment with many acquiring business to bridge digital talent gaps. Others are funding academic research in innovation hotspots like Silicon Valley to accelerate innovation in desired technologies. A few are also setting up innovation hubs within their enterprises, which sport a start-up culture, in order to attract top digital talent.

A top-down inflexible culture

Michael Wade, Innovation and Strategy Professor at IMD Business school who, has uncovered a 95% failure rate with digital transformation projects, believes that digital innovation initiatives are being suffocated by the inflexible culture and process that characterize many pre-digital transformation enterprises. A big takeaway from this is that there must be a HR digital transformation, (involving a move to collaborative, agile working and thinking),  occurring in parallel alongside the technological innovation process to ensure success. 

Lack of understanding of digital transformation technologies

Research from Censuswide shows that the main cause of failure of digital transformation projects is a, ‘lack of understanding of technologies available to support digital transformation projects’. Other main reasons for failure were poor technology selection decisions, lack of skills and lack of budget.

The key takeaway here is that the HR Digital Transformation, (that is being able to attract and/or upskill digital talent in sufficient numbers to scale your initiative) is crucial to a successful digital transformation.  The HR Digital Transformation must not be an afterthought, but it must be a front and centre priority from the outset.

Finally, digital transformations have a worrying failure rate. But,  by using the learnings from 1st generation digital transformation projects, current and upcoming digital transformation projects have a much greater chance of success.

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