8 Reasons Why Digital Transformations Fail (11 CIOs Weigh In)
By Myles Suer
Published on December 20, 2022
The future of business is digital. But that future is already here.
To remain relevant, organizations seek “digital transformation,” a business philosophy steeped in change and in which technology plays a heavy hand supporting business models and value propositions.
Although digital transformation can mean many things, it’s the businesses with integrated and digitized business processes that are more adaptable, agile, and armed against threats from more recent pure-play, digital-native competitors with often superior data capabilities.
That means it’s no longer about offering the best products and services. According to Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future, Paul Leinwand and Mahadeva Matt Mani argue that customers increasingly demand experiences with those products and services — while scale is less important.
Noting where products and services — as well as scale and experience — reside (or don’t!) in the hierarchy of consumer importance, Cynthia Beath, Jeanne Ross, and Martin Mockera thrown down the gauntlet in the opening of Designed for Digital: How to Architect Your Business for Sustained Success (Management on the Cutting Edge): “Digital technologies are game changing because they deliver three capabilities: ubiquitous data, unlimited connectivity, and massive processing power.”
Therefore, one assumes, digital transformation will always lead to success, right? Well, not always.
Why Does Digital Transformation Go Awry?
Most digital transformations fail, but why? I asked several CIOs for their thoughts on what could go wrong — and how to avoid these mistakes.
1. Focusing on sexy technology versus solving real customer problems.
Pedro Martinez Puig, head of Americas technology at Edenred, says that “putting technology at the center of the transformation instead of the customer is a classical cause of failure.” Technology must support the “how” of solving a customer problem — a maxim that should be especially followed by the purveyors of that technology. Art and Wellness Enterprises CIO Paige Francis concurs, “Digital transformation often sounds sexy, and people are left wanting to see something amazing when an improvement is delivered. Unfortunately, oftentimes leadership, without storytelling, doesn’t see the improvement because their staff reaps the benefit. For this reason, the impact luster wanes.”
2. Failure to label the benefit of the digital transformation.
Strategic advisor and former CIO Tim Crawford argues that “digital” is a misnomer, when the real focus should be on the business. “A ‘digital focused’ change misses the point,” he argues. “Business transformation is the goal. Transforming technology in the context of business transformation makes more sense. The No. 1 reason I see transformation fail is it does not clearly solve a business problem. Modernizing technology is not a business problem. Increasing revenue, going after a new market, etc., are business problems.”
3. Failing to measure the impact of digital transformation against corporate strategies and OKRs.
“The measurement of an improvement and transformation is important,” Shaun Guthrie, senior VP of IT at Peavy Industries, points out “ Not just whether you improved revenue, efficiency, etc., but by how much. If you cannot measure the improvement, maybe don’t do it.” Not surprisingly, consultant and virtual CTO/CIO Anthony McMahon poses the eternal question: “What’s the problem we’re trying to solve?”
4. Management and leadership.
Digital transformations often fail because “they are poorly led, managed, and communicated,” argues to Miloš Topić, VP of IT and CDO at Grand Valley State University. Common errors are not breaking down transformations into manageable and measurable steps and projects — and with execution, insufficient and poorly executed training, and then storytelling the value.”
5. Executives fail to embrace the change.
Several years ago, the CIO of a major nonprofit told me that everyone in the organization — including the people who would be impacted — understood the reason for a change, but some were worried about how their day-to-day roles would be impacted. To ensure the success of what author Geoffrey Moore calls “the transformation zone”, everyone needs to be on board with the changes. Isaac Sacolick, president of StarCIO and former BusinessWeek CIO, notes that the top reason digital transformations fail is because “executives fail to embrace that it’s a bottom-up transformation that will require change across the organization over a three- to seven-year period.”
6. They ignore the writing on the wall (AKA the Kodak moment).
Beyond top leadership, transformations can fail when the middle doesn’t embrace the needed change. This happened at Kodak with digital photography. The middle did not support the strategy change senior leadership launched. Contrast that with its competitor Fuji, which pivoted and is now — among other things — making iPhone and Google phone screens. Adam Martin, IT Director at American Structurepoint, says that “while there are a number of reasons that digital transformations fail, a common reason is internal resistance to change or a lack of buy-in from the middle or bottom-up.”
7. A failure to execute or to consider the unknowns.
According to Walt Carter, CDO/CIO of Homestar Financial Corporation, digital transformations fail for two reasons: “First, insufficient understanding of what is needed to succeed and second, inadequate protocols for deciding when encountering the unknowns and unpredictable elements of change during execution,” he says.
8. A lack of workforce experience.
This issue is why balanced scorecards have a forward component called “learn and grow.” CTO and strategic advisor Stephen diFilipo says that “part of the iceberg below the surface is a workforce lacking maturity with 21st century skills.” No place is the risk higher than data. Organizations without data skills can’t make decisions at the speed of business, rewire their business processes so they are relevant, and use data to transform the value delivered to customers.
Clearly, failure is not a simple on or off condition. “There are degrees of failure,” says Jim Russell, CIO and VP for digital strategy and planning at Manhattanville College. “The change can be adopted — yet the change does not improve the organization as much as expected. The change can be partially adopted yet realizes some benefits. The change can fail and reveal insights into the organization that leads to better future transformation.” Clearly, the winners going forward are learning organizations that can quickly diagnose failure and do something about it. These organizations use experimentation and constant market testing to learn and invest.
Successful digital transformation requires more than avoiding the above pitfalls. Proactively, you need to become an open, adaptable organization empowered to learn from both failure and success. To learn more about launching and maintaining digital transformation at your organization, read our white paper on the role of data — and the related skills and technologies — for digital transformation success.
- Why Does Digital Transformation Go Awry?
- Parting Words