looking at empire state building
Roughly 70 percent of digital transformation initiatives fail. Here's how to prevent that PHOTO: Maarten van den Heuvel

The enterprise world is littered with jargon. One of the buzzwords du jour is “digital transformation” — a term I'm sure you’ve heard by now.

But what does digital transformation mean? It’s like Dan Ariely’s comment on big data, “everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.”

At a high level, digital transformation is easy: It’s the adoption of digital technologies to transform your business. 

So just choose the digital technology you want, and use it to change how your business operates. Done!

Why Digital Transformation Fails

Sounds easy, but it’s not. 

Multiple sources report roughly 70 percent (ranging from 66 percent to as high as 84 percent) of digital transformation initiatives fail. Clearly it isn't as simple as deploying a digital technology (given such high failure rate), even though this could pose a challenge in some cases.

So why is digital transformation so difficult? 

The reason is a true business transformation requires more than just the adoption of new technology. Digital transformation usually starts with some kind of technology upgrade, but that’s only the first step. 

True transformation also requires changes in your business processes, your employee and leadership behavior, and ultimately, your corporate culture. Changing technology might be easy, but changing the people, processes and culture is hard.

Digital transformation is not a digital or even a technological problem, it’s a business transformation problem. The most common causes of digital transformation failure boil down to the following 4 categories:

Technology

  • Using outdated technologies
  • Failure to integrate with legacy or other digital systems
  • Believing that it’s only a technology problem

People

  • Lack of clarity and vision
  • Lack of leadership support
  • Too much top down imposition without grassroots support
  • Lack of a digitally savvy workforce

Process

  • Silo effort that didn’t engage the broader stakeholders
  • Process misalignment
  • Not agile enough for faster innovation

Culture

  • Short-term thinking
  • Not customer centric
  • Too little cross-functional collaboration

It only takes one broken link to break the whole chain, so any one of these failure modes could undermine the success of your digital transformation initiative. Every one of them must be addressed, which is a lot for businesses to undertake.

But here’s the bright side: Although all of the common failure modes must be addressed, not all of them need to be addressed at once. And if you are embarking on a digital transformation journey, not all of them need to be addressed at the beginning. So where should you focus first?

3 Areas of Focus for Long-Term Digital Transformation Success 

When you analyze the natural dependency among these failure modes, only three stand out that must be addressed from the start.

1. Customer Centricity

A customer centric strategy is imperative if only for the simple reason that every business needs customers. Moreover, in an increasingly service-oriented subscription economy, businesses struggle to retain customers due to intense competition and minimal switching costs for consumers. 

While this is a given from a business standpoint, digital transformation initiatives depend on customer centricity for several reasons.

Rallying support is easier with a customer-centric strategy. Very few people would argue against serving your customers. A well thought out customer-centric strategy could easily win both leadership and grassroots support. While you will still need to sell the strategy within your enterprise, it shouldn’t be a hard sell.

A customer-centric mindset also makes it easier to create processes with cross-departmental alignment. 

Traditional business processes are created to optimize some business KPIs while meeting operating constraints. However, different departments and teams often operate under disparate constraints and have unique set of KPIs, resulting in misaligned processes. 

Customer-centricity is the glue that binds different departments and teams together. It helps create processes that focus on giving customers a great experience.

Aligned processes facilitate cross-functional collaboration, or at least don't add friction which hinders collaboration. Although this doesn’t automatically drive collaboration, it makes it easier when there's a business need to do so. When that happens, your digital transformation is no longer a siloed effort. 

Finally, a customer-centric mindset fosters long-term thinking because most businesses want to have loyal long-term customers, especially in a subscription economy. 

2. A Clear Vision

Despite the simplicity of the definition, digital transformation causes confusion because it’s different for every company. Myriads of digital technologies are on the market which can change any one of the multitude of business operations within your enterprise. 

Digital transformation for one company may be using iPads to scale onboarding of new employees (an HR function). It could also mean using social media to engage and support your customers throughout their customer journey (a marketing and customer support operation). It could even be using big data to predict sales, using IoT and augmented reality to improve customer experience, or anything in between.

Digital transformation means many different things, so you need a clear vision of what it means for your enterprise. 

Which digital technology are you using? And which part of your business operation are you trying to improve with these technologies? Most importantly, what business outcome are you trying to achieve? 

Remember, a customer-centric mindset could help you answer some of these questions and shape your vision.

Armed with a clear vision of what digital transformation means for your business makes it even easier to garner both leadership and grassroots support. And if you are a leader, a clear vision probably means you are committed to supporting this change.

3. The Right Technology

Since digital transformation almost always starts with a technology upgrade, your priority is to choose the right technology from the beginning. 

Having a clear, customer-centric vision of digital transformation helps with the choice, but other factors come into play too.

What functionality does your specific digital transformation project require? Does the software meet your enterprise's security, reliability and legal compliances? Does it have the ability to scale in the longer-term? These factors are table stakes. 

But businesses often overlook two elements when choosing technology which may impact the long-term success of the initiatives.

First, the right technologies should easily integrate with the rest of your company’s technology ecosystem. And that includes both your legacy systems and other newly adopted digital systems. 

When you kick off a digital initiative, your core business will still be running on your legacy system. Failing to integrate with these systems means your project will remain a siloed effort. While digital transformation initiatives often start small, in one area of a company, eventually they must permeate your enterprise to achieve lasting transformation. 

Second, the right technologies should be so simple and intuitive to use that even your non-digital workforce should be able to pick it up and immediately carry out rudimentary functions without much training. Of course, training and education will be required to reach proficiency. 

The efficiency gained by launching a new digital technology cannot be offset by the learning curve, even for the “digital-illiterates.” Furthermore, a residual efficiency gain, even during the adoption phase of your project, will give innovative minds within your enterprise the cognitive surplus to innovate and be more agile.

Transformation Means Lasting Change

Digital transformation is a journey. The journey always starts with the adoption of digital technologies, but must also change the people, process and the culture to be truly transformative. 

While initiatives typically begin as a siloed project, they must eventually permeate your enterprise. 

Although digital transformation can seem difficult, starting with the above focuses will help pave the road for long-term success.