This multipart series will focus on all the ways digital transformation can fail. Sometimes advice that places a light on the road others have taken will keep you from repeating their mistakes. In Digital Transformation Failures Part 1, I look at the issues related to arriving at digital transformation unprepared.
Table of Contents
Digital Transformation Failures Part 1: Not Preparing Properly
Starting off on the right foot is essential. When spending millions of dollars over several years on a project that defines the organization, its employees, and its market, starting off prepared makes a significant difference between success, failure, and taking much longer than necessary to reach business goals.
There is no such thing as a digital transformation strategy. We use that term because the market uses that term. It goes along with Industry 4.0 to describe organizations that abandon paper, manual labor, isolated systems, and other attributes of the industrial revolution and early computing.
Digital transformation is a business strategy. It is not innovative. Many organizations already operate as digital businesses. Most organizations migrating to a digital strategy do so to catch up with their peers. Businesses that do not adopt the latest technology will become less relevant over time as consumer and business-to-business markets move to digital engagement models. Others seek to drive innovation into their products or services.
The business strategy, then—what the business wants to be—how it wants to serve its customers, is the digital transformation strategy. They cannot be separated.
Early on in a digital transformation initiative, organizations need to define their approach to the transformational work—the information technology building and implementing, the training, the updating of process and practice, the reconceptualization of space.
Limited choices exist, the same ones for someone building a house.
Implementing a digital strategy can involve learning, learning from failure, and enhancing capacity. Unfortunately, some organizations may overplay their capability, thinking they can go it alone. But as many home DIY adventures learn, the tools and the techniques require skill and experience, as does understanding the best sequence and the most reliable partners.
Digital transformations often benefit from a strong partner who can help orchestrate turning vision into reality. The organization, however, needs to retain strong management of that partner and recognize that the partner is not accountable for achieving business objectives. They can advise, but digital transformations reach so deeply into an organization that internal people must work in concert with the partner.
Some organizations with deep pockets may take on the role of a general contractor because they can afford to hire someone who likely used to work with one of the potential partners. That works too. The primary issue in that scenario is the career path for people brought in to manage an initiative. If the intent, for instance, is to move that person into a direct operational role, then it may work. The risk for not including career pathing for senior talent brought in-house to work on digital transformation is they may leave before completing the work to join a firm where their future is more certain.
General contractors, or digital transformation partners, often make the most sense as their business focuses on managing transformation projects. General contracting partners own the responsibility and accountability to complete the statement of work at the level of quality specified regardless of their internal personnel shifts.
Regardless of approach, organizations need to recognize the need for specialized knowledge and experience, and respect what they know of their own capabilities and partner where necessary to bring those capabilities to the right level to achieve their goals.
Many projects get enamored by new technology, like customer relationship management, online learning environments, digital twins, machine learning recommendations, or blockchain. If it makes business sense, there is nothing wrong with including any technology in a digital transformation plan.
However, a critical factor in transformation projects failure often arises from leading with the technology—placing an overwhelming need to show a particular technology’s prowess or becoming enamored with a technology that is either unproven or for which the organization cannot yet execute.
Further, a lot of technology might be considered “boring.” The “boring” stuff may include transaction monitors to database engines, schedulers, runtime environments, virtual machines, and the like. Those technologies will prove critical to the success of a transformation because they form the foundation for anything sitting atop them. Fail to make them make sense, and an initiative will likely end up with systems that use different backends because the front-end developer went with what they thought best for a siloed application rather than what was best architecturally for the business. For example, most databases will serve to store data. Pick one and use it everywhere. Do the same for all other foundational technology where possible.
If some cool new, must-have app arises that challenges the technical architecture, it is usually best to hold off on implementing that technology until the foundations settle. By then, the technology may have become more open—or the organization will be in a better position to evaluate either how the one-off app fits or if it knows something you don’t, and perhaps a component of the architecture requires a rethink.
Digital transformation never ends. That is a concept all involved must accept. Neither business models nor technologies standstill. New opportunities for efficiency and increased value will continue to evolve, and new technologies will undermine, complement, or subsume whatever is being implemented. That makes defining success a pretty tricky task.
But defining success is absolutely necessary. It derives from the business strategy. If a business strategy, for instance, focuses on becoming one of the top retailers, that strategy offers a clear metric for business execution. Any digital transformation should contribute to achieving that goal.
There will be technical and adoption milestones that demonstrate progress, but if that progress does not contribute to the measures associated with moving up the revenue rankings of retailers, then it likely isn’t achieving the intended goals.
Defining success does require balance. The strategy and the transformation work may not always align in time. For instance, if a critical acquisition is part of the strategy, and that acquisition moves out in time, the digital transformation project may in some ways be ahead of where it needs to be as it did not stop work when the acquisition got behind because there were likely plans in place to start integrating the acquisition when the deal closed.
Digital strategies will fail when they don’t emphasize business goals over technology measures.
Many digital transformation advisors will focus on getting the culture right. The word “culture” is overused. In my book, Management by Design, I suggest that organizations stop talking about culture and instead focus on policies, practices, technologies, and the use of space that reflect their “cultural aspirations.”
If an organization wants to become a digital-first “culture,” but they just say that a lot without changing the way they work, they will not become digital-first. Every idea, program, marketing effort, and other activity requires a digital-first design, which starts to demonstrate a meaningful commitment to the idea. If digital-first also means integration and leveraging existing technology, then any digital-first idea that doesn’t address integration needs to be held to higher scrutiny because it introduces additional complexity into the technical environment. That may be justified, but it needs to be understood and purposefully adopted (and eventually become part of that technology ecosystem).
Organizations should start with an assessment of their change capacity. The change capacity assessment will identify areas in which the organization, or parts of it, might prove intransigent during a digital transformation project.
There is no right culture for a digital transformation. Every organization starts with the “culture” that exists, and every “culture” will face some need to change. The organization should describe its “cultural” future state in its business strategy, with transformation activities supporting its aspirations. Culture ultimately defines how an organization behaves and how that behavior reflects on it internally and externally.
Going into a digital business transformation effort, the only thing about “culture” that needs to be known is if most people who embark on the journey will thoughtfully accept, nurture, and reinforce the necessary changes to policy, practice, technology, and space. If the answer is yes to that question, then the organization can focus on practical changes rather than hours of abstract discussion about their culture.
It’s likely that many people involved in a digital transformation will recall the last change driven by technology that pointed toward emergent opportunities or revealed new risks. Yet, digital transformation is not new; it has been taking place since the 1980s under various guises and with differing degrees of depth.
IT leaders sold earlier projects with promises of improvement and cost savings. Many of them paid off. People got used to them. Customers got used to them. Old ways of working were retired and forgotten. Bins of hand-maintained cards gave way to terminals. Terminals gave way to PCs. Spreadsheets turned into digital dashboards. And here we go again.
How much holding on to what work affects an initiative depends on the level and pervasiveness of the attitude. A good transformation team can manage a handful of isolated individuals. However, senior leaders who own divisions or functions in which their resistance to change flows down through the organization leads to complex negotiations.
One of the examples that most readers will relate to involves the transition from e-mail to collaborative messaging platforms like Slack or Teams. In most organizations, despite efforts to eliminate e-mail, switching from one communication tool to another can take a long time. Most organizations retain e-mail because people find it a good fallback for lack of response or a lost thread, and most external communications still arrive via that path.
Even tools that connect e-mail with a collaborative conversation app don’t succeed at eliminating e-mail. People hold on to e-mail because it works. Years of research perfected the e-mail experience. There is also a perception that because e-mail is digital, it fits into the strategy—though large amounts of research also point to the negative aspects of e-mail.
Assessments need to look at broad aversion to letting go, identify specific ingrained apps and experiences with a loyal following, and develop strategies to break their hold should they end up in the main transformation sequence.
Assessments offer insight into the state of the organization. They don’t just inform strategy but suggest which strategies may prove vital. Do not ignore this data.
Ignoring assessment data can be an indicator of non-data-driven decision-making, which is a caution flag for digital transformation. If senior executives say the “data just doesn’t match how they see the organization,” then it’s time to reassess the assessment.
Organizations facing dismissive executives should consider stepping back. The first take may involve looking at the assessment and seeing if it missed in how it was designed or executed. If the design and performance of the assessment are good and the team has confidence in the data, then a serious discussion needs to be had about going forward. And that will likely be a tough decision depending on the level of the executives, their influence, and their control of budget.
Some organizations can get around this if a leader is willing to take the brunt of the project despite his or her peer’s objections. But, short of this, an unwillingness to accept assessment results and use them to drive priorities will likely result in a failed initiative.
Most people align their work behaviors with the way the organization measures performance. For example, an existing job description will likely not capture a role in an initiative with clear responsibilities, accountabilities, and activities. In many cases, a vague description like “support business initiatives as required” offers the only anchor to new work.
Given the scope of transformation projects, organizations need to explicitly detail new responsibilities, accountabilities, and activities in each person’s commitments, aligned with the appropriate performance measurements. If commitments and measures don’t show up, the question becomes, “How important can this be if I’m not measured on my part in the project’s success?”
And that is a legitimate question. Integrating commitments will result in senior managers doing significantly more work on the front end of an initiative to define the parameters and the measures of success. Project success improves with clear expectations and relationships between personal success and the initiative’s success.
A digital transformation initiative should be trying to do something. It should be trying to do something the business wants done, something articulated in the business strategy. That something may not appear, at first glance, to be the most strategic statement, such as a mandate to “remain competitive.” However, if others in the market are investing in changing to a digital-first business strategy, then to remain competitive, most organizations would look at that as an inspiration for the transformation.
But every organization is different. And every digital transformation is different. Each organization needs to understand where it sits in the market with its strengths and weaknesses as a business first and then as a digital business. Each competitor may invest in different areas, emphasizing their approach to strategic differentiation. One manufacturer may focus on the supply chain, another on customer experience. A complete digital transformation may eventually touch all parts of the business, but the highest level of early investment should not focus on competitive parity, but what best serves current strategic goals.
For instance, the manufacturer focusing on the supply chain may see an opportunity to reduce inventory carrying costs, improve quality, and eliminate supply chain interruptions. Customer experience benefits may derive from this, but the initial investment proves purely operational. And that is okay. Transformation projects that try to do too much, especially those that attempt to just do something, usually fail. Business needs should always drive digital transformation.
There will likely be a point where the business transformation becomes real to people. It may be so real that people lose their jobs, get reassigned to a new role, or go back to training to relearn how to do something they thought they had mastered. It may be that previously fundamental parts of the business shutter. If those are real possibilities, and the organization fails to plan for them, the impact can cause pushback on the initiative’s remaining work.
Every organization owes an obligation to its employees, partners, and shareholders to plan not just for immediate outcomes, but for long-term ones as well. The smoothest transitions will be those that are transparent. While transparency may frighten some because of the magnitude of some impact, it is better to understand the real concerns and address them early rather than have them derail the project later.