Despite today’s increasing interest and investment in digital transformation, the long-term trajectory of most initiatives doesn’t inspire much confidence.
According to McKinsey & Company, roughly 70% of today’s digital transformation efforts end in failure. Yet, a diverse pool of 1,350 global businesses surveyed by Accenture reported new digital transformation investments totaling over $100 billion between 2016 and 2018.
Why are so many digital transformation efforts falling short?
Let’s take a look at five of the biggest reasons — along with some real-world examples — for a better understanding of what’s required for digital transformation success.
After identifying a promising transformation opportunity and gaining buy-in, organizations often move quickly to validate it as a pilot. But amidst the excitement of launching something new — and the anticipation of what it could deliver for the business — scalability becomes an afterthought.
And unfortunately, successful pilots are never guaranteed to easily scale. No matter how enticing a new opportunity may be, scalability must be a consideration from the very beginning. Otherwise, businesses risk wasting resources to validate opportunities with no long-term viability.
Harvard Business Review reports a clear example:
“Take one sportswear brand that bet big on customization. This company spent heavily on robotics, machine learning, and 3-D printing at a new manufacturing plant. It wanted to give customers the option of ordering personalized athletic shoes and getting them fast. Leadership hoped for a win that would fuel transformation across its other manufacturing locations. But operations and new technologies never meshed, and rapid production proved to be illusory. After three years, the company shut down the facility.”
Naturally, businesses tend to have a strong inward focus during the consideration phase of a new transformation initiative. But it’s critical to step back and consider the broader landscape before moving forward.
That isn’t to say external factors will entirely derail plans for a promising new initiative. But, as you gain a deeper understanding of what’s happening outside the business, your strategy may evolve dramatically.
For example, Proctor & Gamble launched its first major digital transformation effort in 2012 as a set of broad initiatives to become “the most technology-enabled business in the world.” But P&G was already well ahead of its competitors in every sense, and a tumultuous global economy was working against the company from day one.
P&G’s ambitious approach to push transformation across the entire business was unnecessary from a competitive standpoint and poorly timed with respect to the market. As a result, the initiative was soon rolled back.
Today, P&G has a very different outlook on digital transformation, pursuing smaller, targeted initiatives with strong ties to valuable outcomes and in-context to what’s happening both inside the business and out.
All too often, transformation initiatives are birthed from enthusiasm around new technology and nothing more. Leaders across the business become seduced by the latest, trendiest technology, rushing to implement and avoid missing out — with little strategy for how it will ultimately be used.
A desire to adopt new technology shouldn’t be the primary motivator for any new initiative; businesses must be careful to avoid transformation for its own sake.
Technology is a means to an end, no matter how new and amazing it may be — and regardless of how many other companies are reporting fantastic successes with it.
In recent comments to CIO.com, principal analyst for Altimeter, Brian Solis, explains further:
“Most companies start with the technology. They need to stop and ask themselves how their customers are making decisions, where they start their journey, where they go from there, and why. Then they need to figure out the technologies that will get them there, and the strategies need to make those technologies effective.”
There’s a fine line between strategically incubating new transformation initiatives and keeping them too isolated from the rest of the business. Consequently, there should always be a long-term vision for how new initiatives will eventually connect across the enterprise.
Without a clear action plan for integration, new initiatives can become problematic islands of sunk resources — no longer able to deliver value back to the business.
Forbes contributor Blake Morgan recounts Ford’s experience with this problem back in 2014:
“In 2014, classic American car company Ford attempted a digital transformation by creating a new segment called Ford Smart Mobility. The goal was to build digitally enabled cars with enhanced mobility. The issues arose when the new segment wasn’t integrated into the rest of Ford. Not only was it headquartered far from the rest of the company, but it was seen as a separate entity with no cohesion to other business units. As Ford dumped huge amounts of money into its new venture, it faced quality concerns in other areas of the company. Ford’s stock price dropped dramatically, and the CEO stepped down a few years later.”
If you ask five people to explain digital transformation, you’re likely to receive five very different answers. Even within the same organization, leaders rarely share the same perception of what digital transformation truly means.
But that shouldn’t be a surprise, because the formal definition itself leaves ample room for interpretation: “Digital transformation is the use of new, fast and frequently changing digital technology to solve problems.”
The point here is that the meaning of digital transformation, in practice, means something very different from one organization to the next.
That’s why it’s so crucial to reach a consensus on what digital transformation means for your organization, as well as the supporting strategies and tactics.
Without a shared definition and vision, digital transformation often devolves into a shotgun approach of disjointed projects — yielding new bells and whistles with no connection to broader goals or organizational value, and rarely driving measurable ROI.
Executing a successful digital transformation is no easy feat. Even with the best laid plans, the potential reward always carries some degree of risk.
However, there are ways to calculate that risk and shoulder it strategically.
Understanding the most common pitfalls and learning from others’ mistakes is a wise first step.
But a healthy ITFM/TBM program can offer additional risk mitigation in several key areas:
To learn how other organizations are partnering with Nicus to leverage ITFM/TBM for difference-making transformation initiatives, reach out today to start the conversation.