Why enterprises struggle with digital transformation and what should they do differently
The historical failure rate of enterprise digital transformations is alarming. The reasons for these failures are clear and provide insight into recommended best practices, which include balancing strategy, culture and technology.
Research shows numerous reasons for failed digital transformations. The most prevalent are:
- Unclear strategy: Employees don’t understand why change is happening or their role in that change
- Cultural obstacles: Enterprise collaboration and change readiness may impede or halt progress
- Overemphasis on technology: Leaders focus on new technology but not adoption by the people that will use it
- Major change starts with the enterprise strategic plan, which must be communicated throughout the organization to align employees
- Digital business requires an innovative, change-ready culture and technical
proficiency across the enterprise
- Technology is not the starting point for digital transformation. It must be aligned with the enterprise strategy and supported by the necessary culture and talent across the enterprise
Companies are increasingly turning to digital transformation to improve their customer experience, drive industry disruption or, at the least, defend against disruption. Yet most enterprises continue to struggle with their transformation efforts.
Anthony Abbatiello, principal, Deloitte Consulting and global leader of Deloitte Leadership said “There’s $400 billion wasted every year in failed digital transformations… 80% of them that start, fail.” According to Forbes 84% of companies fail at digital transformation and they estimate the cost at $900 billion.
Why are companies struggling with digital transformation and what should they do differently?
Some may argue that there is no proven roadmap for digital transformation. Yet, this current imperative is really no different from other major paradigm shifts that many businesses have already successfully executed.
Enterprise leaders should focus on three imperatives.
Enterprise-wide change requires a balance of strategy, culture, and technology. Whether it’s introducing a new product line, integrating an acquired company, or evolving to a digital business, change must be planned and managed.
Transformation starts with strategy. Simply stated, strategy identifies what our customers need and want, differentiates our business, describes the operations and organization required to deliver that great customer experience, and clarifies how success will be measured.
Expanding on that summary, strategy leads us to an understanding of the culture, skills, systems and information required to implement the operational improvements that create the differentiated customer experience.
Less obvious is that strategy is the guiding light that aligns the enterprise. Every employee must understand his or her role in achieving the strategic vision of the business. Organization structures and performance objectives should support that
Once the strategy is defined and communicated, focus on culture and technology to increase the likelihood of successful execution.
Digital transformation, by its very name, implies major change. Most organizations and people struggle with change. HR, Marketing, Corporate Communications and IT can team up to drive an adaptive, agile, innovative culture.
Culture change takes time. It must be incorporated into the strategic plan and measured frequently. This change begins with the leadership team through development of the digital transformation strategy. With sponsorship by the leaders, change must be cascaded throughout the enterprise with deliberate, focused programs and actions that are aligned with the technology initiatives.
Through learning development and strategic workforce planning, HR guides the path to the appropriate levels of technical proficiency for each business unit, department, team and employee. Development of technical skills supports cultural change by enabling each employee to adapt to the new digital business.
While cultural change is progressing across the enterprise, the operational and technology changes can begin to take place.
Overemphasis of IT’s role in digital transformation can be catastrophic. IT may not lead the transformation.
Rather, IT collaborates with business leaders on strategy and with HR on culture and talent development.
Increasingly, IT does not dispense technology anymore. Rather, the role of IT is to partner with the rest of the business to understand the customer experience, help define operational changes, and advise on the technology to support those changes.
IT may develop all or part of the digital solutions. It is more likely, however, that IT will help business leaders select and implement solutions. IT will focus significant effort on integration of those solutions to create a seamless customer experience and
streamlined operations and reporting.
In summary, the failure of many past digital transformations provides insight and lessons to improve an enterprise’s chances for success. Research shows that focusing on strategy, culture and technology will help enterprises avoid the most common obstacles.
Strategy must be communicated to all employees so they understand their role in the
transformation. A culture of change-readiness and development of digital proficiency prepare the workforce for the transformation. Finally, technology is collaboratively selected and implemented with IT advising business leaders and then providing the integration to deliver a seamless customer experience.