Why most Digital Transformation Projects Fail

Posted by Rick Yvanovich

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Despite all the hype about Digital Transformation, most companies are still in the very early phases of digitalisation. According to a 2016 report from analyst firm Forrester, only 11 per cent of companies surveyed are digitally mature.

The State of Digital Transformation

The State of Digital Transformation

Another survey by McKinsey confirms digitalisation has just started to penetrate industries to varying extents. There is only one sector in the survey – media and entertainment – where digitalisation is reaching mainstream.

Most have just witnessed some minor or core changes as a result of Digital Transformation, and none has come close to the stage of being fully digital. Across the industries, the average perception of digital penetration is only 37 per cent.

Read more: Manufacturers adapt to Industry 4.0

On one hand, these results imply there is still a lot of space for disruption in most industries. On the other hand, digital transformation still presents a massive challenge to businesses. Failed or cancelled digital projects are actually very common and have cost companies dearly.

A recent global survey of 1,625 decision makers by Fujitsu found 33 per cent of all organisations have cancelled at least one digital project in the last two years at an average cost of US$660,000.

In 2015, Forrester also reported more than 60 per cent of digital marketing projects fail to deliver the CMO’s expected results.

What are the best practices that separate digital leaders from laggards? What should companies do to help their digital project gain tractions?

Studies suggest there are common traits among leading companies in Digital Transformation.

Case study: Digital Transformation: The Samsung Cloud Print Case Study

The State of Digital Transformation

What Digital Winners Do Differently

Strategy, not technology, will win the day

It should come as no surprise that studies have shown the majority of companies do not have a digital strategy in place. And those who do usually end up being the digital leaders.

In the McKinsey’s 2016 digital survey, 55 per cent of respondents from digital winners said their organisations’ digital and corporate strategies are closely tied. Only 23 per cent from other organisations said so. More important, winners are willing to alter their corporate strategies in response to digitalisation.

Infographic: GE vs Siemens for the Industrial Internet of Things

Similarly, when MIT Sloan Management Review and Delottie University Press conducted a global study about Digital Transformation in 2015, they found only 15 per cent of respondents from companies at the early stages of digitalisation said their organisations have a clear and coherent digital strategy. By contrast, more than 80 per cent from the more digitally mature companies do.

The State of Digital Transformation

Launching a new mobile app, connecting your website to Apple Pay, moving data to the cloud, these are all typical examples of digital initiatives. But Digital Transformation is a lot more than just a collection of disparate IT projects. Instead, these projects should be directed by an organisation-wide effort, with the buy-in from all business functions.

In a new report from The Economist Intelligence Unit (EIU), which surveyed more than 800 senior executives at multinational corporations, while just 21 per cent of respondents say they have defined and implemented organisation-wide digital strategies, up to 93 per cent of these respondents describe their digital projects as highly effective.

One crucial aspect of an organisation-wide digital strategy is the alignment between business and IT. Without it, companies cannot realise the full potential of digital transformation. It requires a certain level of digital literacy among senior executives. At the same time, CIOs and the IT functions must have a better grasp of what other lines of business are doing and what they need.

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The CEO leads the way

Because Digital Transformation should be driven by an organisation-wide digital strategy, it makes sense the buck stops with the CEOs.

Organisations whose digital transformation effort is led by the CEO tend to perform better than their peers. According to the aforementioned Forrester’s study, 59 per cent of mature digital organisations have CEOs who understand and support digital transformation.

The CEO alone, however, cannot lead the charge. The digital vision and strategy need buy-in from other members of the C-suite as well as key stakeholders, both external and internal.

Read more: 7 questions a CEO should consider before starting an ERP project

The idea of Digital Transformation can be overwhelming and the implementation can be very costly. How can the CEO make sure the digital initiatives soon get traction and do not lose momentum over time? Stay tuned for the answer in the 2nd blog post. 

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 Rick Yvanovich
 /Founder & CEO/

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