Council Post: Four Most Common Digital Transformation Pitfalls
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Over the past few years, digital transformation (DT) has become essential for many companies. In 2019, directors, CEOs and senior managers said digital transformation was their biggest risk factor, and a growing number of organizations have rushed to perfect their DT during Covid-19.
However, as many of us are aware, 70% of digital transformation projects fall short of their objectives. Businesses spend roughly $700 billion every year on DT with no return, or even worse, they lose money. So what makes companies—not just small, unsettled companies, but even big players—fail when so much is at stake? In my experience building and running a number of companies, most recently a DT consultancy, it comes down to these four areas that separate success.
As technology becomes more sophisticated with innovations in AI/ML, predictive analytics and blockchain, senior executives readily assume that implementing shiny new solutions will naturally drive fruitful transformation. It won’t. Regardless of how much you invest in new tech, if you fail to nail down the ideal business processes or home in on “why” you’re doing the transformation in the first place, your chances of delivering successfully are greatly diminished, as is your return on investment.
Instead, start with identifying the operational pain points and re-architect the most effective and efficient processes. You’ll then be able to design the systems necessary to support those ideal processes. For example, a medical supply company’s biggest pain point could be tedious manual ordering processes that consume resources and delay orders. In this case, it makes more sense to spend time upfront planning how to restructure the ordering process, then decide on a solution to achieve that rather than rushing to implement a new ERP.
When rolling out a new system or technology, most executives focus on the technical side of testing (e.g., ensuring integrations, APIs and database transactions are functioning as expected). However, what matters more is testing the end-to-end user experience with every key interaction along the way. If you validate user acceptance throughout the design process and perform adequate user testing, you will expose hidden issues sooner and before they hit production.
Another consideration: Have incremental rollouts to production, especially when making major system (and process) changes. While this isn’t always feasible or ideal, it’s a way to mitigate risk and provide extra control over a rollout. For instance, depending on geography, department/business unit, role or seniority, there should be a buffer between each phased release. This allows you to focus on a particular user base segment and prevent your resources from being spread too thin for a complete transformation.
Most importantly, don’t make the fatal mistake of rolling out something half-baked. If you roll out big and fail big, it’s really hard to recover the trust you will need later to succeed with user adoption. The near-term impact on the business can be very detrimental to employee and customer goodwill, not to mention a directly expensive lesson.
3. Team Members Out of Sync with DT
Most DT projects take a top-down approach, starting with the executive stakeholder’s vision. Yet it’s your staff, not just your executives, who will need to learn and use the new technology to succeed. Without their buy-in and support, the DT initiative will likely fail.
In the early stages, your frontline employees might think of AI and automation as threats or unnecessary changes that are paving the way for their jobs to be taken over by machines. Senior executives need to educate them that the technology in question is meant to empower their function, not eliminate it. It’s meant to improve their lives, not ruin them. Consider asking your team what systems, processes and tasks they struggle with the most. What tasks are most repetitive? Which tasks require laborious data entry? Involving your employees in the DT planning and ideation process makes it easier to address existing problems and opportunities while setting the framework for bottom-up adoption.
Unsurprisingly, communication is the key to success. Senior executives who communicate openly with their teams about the transformation process are eight times more likely to succeed than those who don't. In enterprise-wide transformations, success is 12.4 times more likely when senior managers communicate continually.
4. Expecting DT To Be Finite Or "Complete"
A technology implementation “go live” moment is not the goal. DT is not a finite game like many other business initiatives. You may feel like you’ve hit a significant milestone after “completing your daunting transformation,” like when you completed that cloud migration or the machine learning deployment for recommending products to your customers. But it’s the small, incremental improvements with a customer-centric mindset that make your DT successful. “Going live” is not the goal; it's just the first leg of the journey. Continuous improvement and evolution will keep systems and processes in line with business needs, customer expectations and market gyrations.
DT is an ongoing journey of continuously adopting changes to meet customer preferences and needs, largely by improving operational processes and customer touchpoints. So instead of overreacting to every market change or temporal decrease in your KPI, executives should focus on understanding unmet customer needs and continually building the solutions and internal processes to address them. This ensures long-lasting relevance and long-term success.
Unfortunately, “digital transformation fatigue” has become a buzzword. I understand the frustration of many executives, DT leaders and their employees with constant changes that don’t bring the desired outcome. Still, I’m here to remind you that successful DT is possible, and even probable, by following these guidelines and committing to a permanent cultural shift centered on continuous improvement and personal fulfillment. Your team will succeed and your customers will reap the benefits.
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