Why Digital Transformation Programs Fail
Are you a board member of a company that undertakes the digital transformation initiatives? Do you struggle to achieve the expected results with your activities? There may be various reasons behind it, but based on our experience, we've identified the five most common ones. You're probably making these mistakes too, just like many other managers.
That's why in this article, I'll not only present the most common reasons behind the failure of the digital transformation programs but also explain how to avoid them and what to focus on.
1. Lack of vision and determination
An executive team needs to have a clear and coherent vision about what the company wants to achieve and determination in making the necessary changes. In fact, it's an essential condition for successful digital transformation. If the initiatives are not well-thought-out and the board doesn't believe in them, even the best internal innovation team or external advisors won't be able to break the silos and change the culture and approach to work. As a result, the organization won't see the attempts of transformation and may even become discouraged towards the change. When the executive team is committed, investors and employees at all levels better understand transformation. That's why an initiative, understanding, and giving the digital transformation the right priority by the executive team are all crucial.
Digital transformation cannot interrupt any current business operations. Moreover, the traditional C-level team usually doesn't have time for managing the transformation actively. That's why to give the digital transformation initiatives some traction; it's a good idea to hire a new middle management member or even a new board member. This should be a versatile person who combines knowledge about the business, customers and technology. Such a person should be mainly responsible for overcoming the main obstacles to transformation, such as:
Breaking silos between the company's departments to improve workflow and data usage.
Improving digital skills within the company by creating a development program for transformation leaders.
Changing the organizational culture, so that employees are encouraged to be proactive, experiment and to propose ideas for improvement.
2. Lack of focus on the value innovation for customers and employees
Of course, digital transformation is not the answer to every problem and implementation of digital tools into the existing products and services won't necessarily help your business. Every digital initiative needs to be coherent with the company's strategy and to bring value. This principle should be the fundament of managing digital transformation initiatives in any organization.
It's very easy to fall into the trap of 'digital transformation theatre'. Implementing technologies that have only helped a company's PR, presentations with no value, hiring 'innovation sherpas' and building startup incubators that are completely detached from the company, won't change anything. The overriding goal of transformation is more difficult as it means to offer more value to customers and employees. How to do it?
On the client relationship side, by analyzing and restructuring the portfolio. In addition to the standard criteria, such as the market size and its growth potential, when analyzing the product portfolio, you should investigate whether there is a chance to personalize the service better, to provide seamless customer experience, and to implement additional services. In the context of the entire portfolio, it is worth looking for synergies between products or adding a new one to build an ecosystem. Always think about the new data you can collect thanks to these initiatives and how to use it.
On the internal side, every repetitive activity (even if it repeats twice) needs to be automated. Maybe you don't have to treat it literally, but in every company, there are many repetitive processes and automating them would unlock the employees' time they can spend on more creative work. Unfortunately, not everyone constantly looks for a room for improvement and tries to fix bottlenecks. That's why analyzing the processes and searching for the possibilities of digitization and automation should be done by people who own this mindset. Moreover, always remember about data - combine silos in your organization to get better insights.
In both cases, teams that introduce the change should be focused on a user and leverage the power of User Experience and research. It's always advisable to approach improvements with focusing on users' and employees' needs by listening to them and testing new iterations of solutions together with them.
3. Introducing solutions based on the most "innovative" technologies
Introducing a new product, communication channel or a tech tool should always lead to an increase in the scale of the business or to the reduction of costs. It's not about bragging about the first implementation of technology, but about higher customer satisfaction and profits. Therefore, you should focus on using features of the technology that have already been massively adopted. It will help you increase the value of the offer and the scale of the business.
When analyzing technologies and trends, it's worth using the existing tools and frameworks. To evaluate whether a trend is indeed valuable or it's a buzz, it's worth following the Gartner Hype Cycle. In turn, to assess the scale of technology adoption by consumers, it’s worth using the New Product Adoption Curve framework described in the ‘Crossing the Chasm’ book by Geoffrey A. Moore. The author divides the market into five types of clients due to their attitude towards new technologies. Every new technology can 'cross the chasm' only when it starts to be adopted by the early majority, which means that at least 16% of consumers need to use it.
On the other hand, you can't wait too long, as the theory of S-curve technology cycles proposed by Ray Kurzweil explains. It shows that when a current technology achieves its highest efficiency, another one emerges. In the beginning, its productivity may be lower, but it has the potential to displace the leading technology. Nowadays, mobile is such a technology. That's why it's so important to be aware of how technology develops. Without it, you may not be able to jump on the right wave at the right time.
4. Lack of understanding of how the digital and the digital economy work
The digital economy also enforces different rules. You may compete or collaborate with tech companies that have a different approach to customer relations, that build platforms and entire ecosystems, blur the lines between industries and change the rules of cooperation and competition. Understanding the opportunities and threats related to this new economy will let you use it for successful business development.
Technology companies and those that have undergone digital transformation no longer create new ‘baskets’ to diversify their businesses. What they do is they build ecosystems of services that provide added value and strengthen customer relationships. Additional services gathered around the main activity not only affect its sales growth but also generate significant revenues themselves. A good example is Ping An Insurance, the world's largest and most valuable insurer that, in addition to insurance, offers ‘One account’ platform including medical consultations, car and real estate sales and online banking services.
Another advice is to compete skillfully. If a startup has introduced a product innovation or a new distribution method (Sustaining Innovation) that you find viable then don’t hesitate to copy it. Your scale will help you to introduce it to the market more effectively. The best example from the technology industry is copying Snapchat features by Facebook and introducing Instagram Stories. However, if a startup enters the market with an entirely new business model (which you find it viable) and creates a new market (Disruptive Innovation), try to take it over as quickly as possible. Otherwise, you’ll lose the opportunity if it starts scaling fast.
5. Lack of effective implementation and continuous development
Interestingly, startups rarely face technology-associated threats as developers are usually free to choose technologies and tools and access to countless APIs. However, for corporations that run their business on legacy systems and want to introduce new products, technological limitations are a serious challenge. Moreover, it may be even more difficult with operational improvements.
For the implementation of new solutions to be effective, you need to carry out technical analysis to ensure the most effective integration of data between the latest product and legacy systems and to accelerate the development process.
Digital transformation is a process. Even after its end, you have to follow the new rules, and for that, you need the right approach and new competences. The broadly understood 'digital market' has to be constantly monitored to search for opportunities for new products or acquisitions. Moreover, you need to develop and iterate the products implemented during the transformation. Otherwise, they will become irrelevant. You won't be able to maintain a sustainable competitive advantage without continuous development, research, and experimenting.
To put it in a nutshell. Define the vision, strategy and choose the right leaders of change. Then equip the organization with digital skills and focus on providing valuable products and services that respond to the needs of digital consumers; and finally, improve work inside the organization. Remember about continuous development and experimenting to stay relevant and maintain a sustainable competitive advantage.
Originally published here.