Digital transformation projects are notorious for not always being 100% successful, but have you ever wondered why this is? According to research published in MIS Quarterly Executive, 87% of digital transformation projects fail to achieve their original goals. Where are leaders going wrong that could be contributing to the downfall of their projects?
1. They confuse disruptors and disruption.
From a strategic perspective, leaders often confuse two important areas of focus: disruptors and disruption. “They tend to put too much emphasis on trying to keep up with disruptors,” says Michael Wade, professor of innovation and strategy at IMD Business School and co-author of Hacking Digital: Best Practices to Implement and Accelerate Your Business Transformation. “How many times have you heard something along the lines of ‘we need to figure out what Amazon would do’ or ‘we should become the Uber of our industry?’ The problem with trying to follow or emulate a disruptor is that you’ll always fall short, because you’re not them.”
Wade believes a more productive approach is to “try to figure out the fundamental disruptions that are affecting your industry and become the best at leveraging them for competitive advantage.” But he cautions that while disruptors are easy to see-they have products and brands-disruption is often harder to identify. “Leaders should devote more energy to looking for disruptive opportunities and threats,” he says, “and build their digital transformation projects around occupying the space created by them.”
2. Ignoring their own limitations
Retail is a great example of an industry where many of the big brands – and leaders – are not rooted in digital. As such, it’s important that they recognize their own limitations. “In these cases, the most successful transformations we’ve seen are those where the leader has simply laid out a clear roadmap for the overall business and provided the resources and enthusiasm needed to get buy-in from all stakeholders,” says Mustafa Khanwala, CEO and co-founder of payment app MishiPay.
When MishiPay works with the leaders of innovation and customer experience teams, it sometimes encounters a “silo mentality” that separates these teams from the broader organization, which undermines the impact of the digital transformation project. “The reality is that launching a new technology requires buy-in from all areas of IT, operations, finance, management, marketing and more,” explains Khanwala. “That’s why the most effective leaders are the ones who pull these functions together, even if they aren’t necessarily digital experts themselves.”
3. They forget the importance of relationships
“Digital transformation is as much about mindset change and cultural transformation as it is about developing and integrating digital systems and optimizing data and AI-based analytics tools,” says Simon Robinson, co-author of Deep Tech and the Amplified Organisation and CEO of business consultancy Holonomics.
Robinson argues that the secret to long-term organization-wide agility lies in “transforming the quality of relationships between teams, customers and stakeholders” by working with universal human values. He says, “This avoids wasting time and resources by creating alignment, trusting communication and total commitment to the mission.”
4. They fail to adapt to changing conditions
“Digital transformation leaders often describe themselves as airline pilots,” says Tomoko Yokoi, a researcher at IMD Business School and co-author-with Wade-of Hacking Digital: Best Practices to Implement and Accelerate Your Business Transformation. “As long as you load the plane with fuel, get to the runway and take off in the right direction, you’ll be fine.”
While this mindset may help kick-start a digital transformation, it doesn’t help bring it to fruition, Yokoi argues. “In reality, digital transformations are more like a long hike up a mountain. Leaders have to pay attention to changing conditions, manage diverse expectations, and persevere when things don’t go as planned.”
Yokoi says that, in a changing digital environment, leaders who rely solely on positional authority by telling people what to do, “will quickly run into trouble.” He adds, “Similarly, a leader who never says and only listens, who shares but never has the power, will also struggle to be effective.”
5. They lose sight of the customer
“When I talk to organizations around the world about emerging technologies that are changing the relationship between brands and customers, I’m often asked, “What technology should we use?” says Steven van Belleghem, customer experience expert, and author of The CX Leader’s Manual to Customer Excellence.
“The reality is that it’s really not about the technology,” he continues. “The question should be ‘how can we create more value for customers?’ Then leaders must reverse engineer from that starting point to decide what technology they will need.
Digital transformation projects require the involvement of many different teams, many of which will have their own challenges, agendas and preferences. “The leader’s role in this situation is to make sure the customer is always the guiding star of the project,” says Van Belleghem, “and to keep questioning how each decision will impact the customer experience.”
6. They overlook the “boring” back-end.
“Digital transformation may start with the customer, but it doesn’t stop at the customer,” argues Mark J Greeven, co-author of The Future of Global Retail: Learning from China’s Retail Revolution.
In retail, many of the new models focus on innovating on the front end, looking at new ways to reach the customer or engage them through digital platforms. “But it’s what enables change on the back end that makes or breaks a digital transformation project,” says Greeven. He continues, “This is no more evident than in the world’s most dynamic digital retail market, China. There would be no Hema Fresh supermarket if its owner, Alibaba, had not created a fresh food supply chain through its Cainiao Smart Logistics business. L’Oréal China wouldn’t benefit from live retail if there wasn’t an agile supply chain that reduced the cycle from design to market to days.” The new retail is about the “integration and digitization of the entire supply chain, from factories to end users,” says Greeven. “Leaders must stop obsessing about the customer at the expense of ignoring a more ‘boring’ back-end digital transformation.”