Companies that adopt digital-first systems across operations, sales, marketing, and more can realize significant cost savings — cutting down on labor needs, leveraging data and business intelligence tools, and even reducing time to market. But, the fact is 70% of complex, large-scale digital transformation projects fail.
Why? A lack of employee buy-in, inadequate management understanding of what they’re getting into, IT systems that fall short, enterprise resource planning vendors that overpromise and underdeliver, scope creep, and the list goes on. Companies worldwide are expected to spend nearly $2.8 trillion annually on digital transformation efforts by 2025, so these failures represent a significant amount of waste that’s piling up on corporate balance sheets.
This reality leads to what I refer to as a type of “tech debt.” Although usually used to describe outdated technology holding a company back, this type of tech debt is more about the fear that can build up within an organization after failed technology projects. This form of tech debt can make it more difficult for management to invest in the right solutions to move the organization forward the next time around.
Too often, digital transformation projects fail not because of any underlying structural problems but simply because the company went into it with unrealistic expectations around time, budget, and employee resources.
The entire organization must understand the magnitude of change that is going to be involved, not only in the implementation but in how much it changes the business. Every functional area of business uses technology in some way. If it’s used incorrectly or incompletely by one or more areas of the business, the organization might fail to capture the full benefits of the technology. Making this fact clear during implementation is critical — the organization needs to understand just how much is at stake, beyond just the cost, in getting it right.
These projects also require significant staff time. Middle-market vendors can fall short when it comes to project management, change management, and project execution. As a result, it’s often on the business customer purchasing the solution to dedicate resources to make it happen. That can mean setting aside as much as 60% of the working hours of your best and brightest to achieve implementation.
Yes, you’ll need to create that capacity. Yes, you’ll need to backfill for staff’s existing responsibilities. Yes, you’ll need to create a deliberate plan for executing the project, with the expectation that timelines and budgets can and will change — as they often do in large-scale technology projects.
Other questions to consider include: What will our weekly cadence look like? How will we track our progress? How will we address any issues that crop up? Many organizations aren’t used to managing projects of this size or complexity, so it is critical to structure the endeavor in a way that makes sense for your team and your capabilities.
The fact is every digital transformation is different for every organization. These projects can be highly variable based on the needs, people, and systems involved. Success is also dependent on multiple different areas of expertise inside and outside the organization.
The team might line up a perfectly effective project management and organizational change structure, only to fall short in the execution by using flawed processes. Or the data analytics may be well configured but the data being collected might be riddled with errors. Or, worst of all, the team fails to get the rest of the organization aligned on using the new systems, causing the entire project to grind to a halt.
That’s why successful digital transformations must function like a three-legged stool: organizational change management to understand the impact the project will have on the organization, a project management plan to provide structure and ensure alignment of the goals for the new technology initiative, and an execution team that turns the project into reality. Without all three of those running effectively, large-scale technology implementations can collapse.
Few experiences can be better motivation for success than a previous, failed digital transformation project. Knowing that failure is not an option is a strong reminder to learn from the mistakes of the past. That way, when the organization embarks on its next technology overhaul, its odds of success are that much better.
Alex Nekritz is senior manager in technology consulting at Plante Moran.