There is a large body of research online about why digital transformation projects fail. The failure rate seems to vary from 70% to 87%, depending on which consulting group or research report you’re considering.
The reasons for digital transformation project failures are numerous, including poor leadership, lack of clear goals, poor technology adoption, losing sight of the customer, and a lack of understanding of the underlying problems, among others. While this information is logical, it may not be necessarily practical for the people trying to figure it out in organizations. Engaging in multiple transformation projects in organizations across different parts of the world, we have seen three key focus areas emerge:
The challenge in business lies in balancing these three areas on a continual basis. It's often the case that businesses are strong in one or two areas and weak in the third area. When a business attempts to transform itself, this imbalance becomes noticeably apparent.
Failing to keep all three in perspective is a bit like sitting on a three-legged stool without one leg – hence the high failure rates of DT projects. Large businesses are often top-heavy in process and technology, leading to a disengaged workforce and high staff turnover or quiet quitting where fewer options are perceived. In fact, change management budgets seem to be some of the first line items to be cut as project costs balloon.
The other mistake large businesses often make is to focus on their people and their processes, which means they keep doing what they have always done, failing to innovate or adopt new technology. This makes them inflexible and open to disruption in the market or competition from innovative competitors.
The third phase is often found in process-light organizations. Being people and technology-focused has resulted in the demise of many a company that was not able to scale, despite being a great place to work and having good people.
The most common approaches to digital transformation:
Start NewCo
Starting the business elsewhere is often a challenge, as it requires creating the business from the ground up, followed by the migration of data and people from the current business to the new structure. This often leads to concerns about people's futures and uncertainties about what the new business landscape might look like.
Run the program alongside the business.
In this approach, the transformation project is separate but consults with the "business as usual team" to carry out the transformation work. This often results in an "us and them" dynamic, with arguments about decision-making authority and the right path for the business.
Run the program in the business
In this scenario, employees have to participate in the transformation process as they go, while doing their regular day job. This can often lead to increased workloads, long hours, and burnout.
The approaches above often deploy an old style of change management, which involves making a big announcement upfront and then trying to onboard everyone and gain traction.
A different perspective:
Greg Satell, author of Cascades: How to create a movement that creates Transformational Change, agrees that "going big up front" on transformational change is the old way of doing things. The company-wide approach (like many quality, safety and lean methodologies) originated in manufacturing, where much of the transformation had to do with the use of physical items in a company (stock, machinery etc.). In post-pandemic reality, 80% of transformation projects are people, process and technology based. Which is why it makes sense to use a more innovation-focused approach.
The thinking goes like this:
• identify a problem
• get "majority buy in" (authority) from leadership to solve the problem at a team level
• work on people, process and tech simultaneously to make the project a success
• tackle the resistance in the business that comes from the success
• help more people succeed at the change, until adoption rate is 10-12% of the company
• begin to scale through the network of teams in the organization
The things to watch out for are inflexibility, lack of discipline and a disengaged workforce. There could be many others. These issues lurk like icebergs below the surface, and will need to be addressed as part of the transformation project. Organizations may approach a project in different ways, but without team level buy-in and adoption of the transformation, the project is likely to be under pressure from the start. With these aspects addressed, the soil becomes ready for sowing the seeds of the future.
Need help with some elements of change? Please get in touch with us.
Check out the previous post, Why 2024 will be a Watershed year for Business.