September 16, 2022

Article
9 min

5 Reasons Digital Transformation Projects Fail (and How to Avoid Them)

Too often, digital transformation projects are implemented by leaders who recognize its potential impact on their bottom line, that computers and software are involved and little else. This is one of 5 reasons that digital transformation can fail.

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Few phrases are more deeply embedded into the modern workplace than digital transformation.

Yet despite the term’s ubiquity, and its potential revenue impact – according to Statistics Canada, Canadian businesses with five or more employees grossed $398 billion in e-commerce sales in 2021, roughly 30 percent higher than in 2019 – successful digital transformation projects are rare. According to Boston Consulting Group, 70 percent of digital transformation projects fall short of their goals.

That doesn’t mean you shouldn’t pursue them: Organizations that KPMG calls “digital leaders” are twice as effective as competitors at building customer trust, 3.5 times more effective at boosting profits, four times more effective in improving operational efficiency, launch new products or services with five times the speed – and represent only four out of 10 businesses in Canada.

While their analogue counterparts may be understandably slow to take the plunge, there are tangible reasons digital transformation projects fail – and ways to avoid falling victim to them. Here are five.

1. Many digital transformation projects fail because they lack executive buy-in

Digital transformation affects a company’s entire workforce – but it starts at the top.

“You need executive sponsorship, with a clear mandate and measurable goals, for any digital transformation project to succeed,” says KJ Burke, Principal Technology Strategist, Hybrid Cloud at CDW Canada. “It’s then the responsibility of those leaders to educate, communicate and get everyone else on board.”

Too often, digital transformation projects are implemented by leaders who recognize its potential impact on their bottom line, that computers and software are involved and little else, CDW Canada Business Development Manager Wael Abdelmagied says. Rather than trying to digitize the company from top to bottom, leaders are better off choosing an existing line of business and developing a digital strategy designed specifically to improve it.

 “For example, say your company wants to achieve more sales in the market,” Abdelmagied says. “If that’s your main objective, your digital transformation project should reflect that. This means securing executive sponsorship not just from the chief technology or information officer, but the chief sales or revenue officer.”

Many companies begin their digital transformation strategy by investing in enterprise software-as-a-service (SaaS) subscriptions. When choosing this route, Burke suggests that executives consider the employees who will be using a given program and the tasks it will support. A productivity suite such as Microsoft 365 is likely to be a game-changer for the corporate team, for example, but not Sales, which would reap greater benefits from Salesforce, or IT, which would benefit from ServiceNow.

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From a Sales perspective, many SaaS implementations are about focusing on the persona that’s going to benefit the most from the platform. Executives should think that way too.

–   KJ Burke

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2. Other digital transformation projects fall prey to an undefined scope

Too often, digital transformation projects are attached to unrealistic KPIs such as astronomical gains in worker productivity or revenue without considering how challenging they can be to implement or their impact on how a company conducts business.

The most successful projects, Burke says, have specific, defined, achievable targets that clearly align with a company’s existing plans and operations.

“Projects in general have challenges, so you need to start with something that has a well-defined scope,” Burke says. “And you need to protect that scope. Many companies let their long-term goals get the better of them until the project is beyond their team’s capabilities.”

“You also need to have the ability to fail and not fail long term,” Burke continues. “To learn lessons, revise your plans and then proceed forward again. Which is a big reason I advocate pursuing bite-sized, achievable, transformational goals.”

3. A lack of change management dooms many digital transformation projects

Workers and customers need to recognize the benefits and implications of a digital transformation project, or they’re as likely as executives to drive its failure. One of the greatest challenges facing the many retailers who adapted to e-commerce during the COVID-19 pandemic, for example, turned out to be poorly labelled parking for customers who bought products online and didn’t know where to pick them up in person.

“Too many companies think that when they do digital transformation it just means hiring a company to implement a solution and that’s it,” Abdelmagied says. “They ignore how much it changes their day-to-day operations – and humans are built to resist change.”

“The reality is you need to make sure that your people will accept any new changes if you want your digital transformation project to succeed,” Abdelmagied continues. “There are a lot of ways to go about doing that, but if they don’t incorporate change management, they’re destined to fail.”

A term that sounds more complicated than the process it refers to, change management simply means documenting the ways that, by changing the tools workers use at their jobs, a company is changing the way its people work, and accounting for them during the implementation process.

“There’s a flow that you need to think about,” Burke says. “Who are your people? What are their skillsets? What is their comfort level with change? Have you communicated the value of the change in a way that resonates with them?”

“Too often companies pick the technology and then work their way back towards the people,” he continues. “And then people feel left out or haven’t bought into the value proposition. And at the end of the day digital transformation is about implementing collaborative tools – it’s really critical that those tools be a value add for the people using them or that they believe in the value of those tools.”

Otherwise, Burke says, teams tend to gravitate to the tools – often decentralized and open-source – that work for them. Too often the result is a workflow built around a patchwork of incompatible software – the exact opposite result of what the typical digital transformation project sets out to achieve.

4. Unrealistic expectations plague some digital transformation projects

Much has been written about how artificial intelligence (AI) and machine learning (ML)-powered tools are reducing the amount of time workers spend on rote tasks – but they can’t eliminate those tasks entirely.

To cite one real-world example, medical imaging AI can identify COVID-19-infected lungs thanks to the human players of massive multiplayer online role-playing game (MMORPG) EVE Online, who have saved scientists more than 330 years of research by conducting more than 1.37 million analysis tasks in-game.

Even so, the trained software isn’t capable of identifying COVID-19 infected lungs with 100 percent certainty – just a very high probability.

“AI is not a yes or no thing,” Burke says. “It gives you an estimate. If you’re a stakeholder who doesn’t understand that, then you’re not on the road to success. It can’t suddenly make all of your decisions for you – it’s designed to provide additional insights.”

Using medical imaging as an example, Burke encourages readers to imagine a lab technician who needs to examine 11,000 x-rays.

“When you apply AI to those images, it’s not going to say, ‘this person has cancer,’ or ‘that person has a collapsed lung.’ That’s not what it does,” he says. “What it’s going to do is scan those 11,000 images and flag the images that it’s 95 percent certain have abnormalities. Then if the lab technician has time they can go through the remainder.”

Besides, “Do you really want to have an AI do stock trading? Probably not,” Burke says. “Do you want an AI to flag something in progress that a high frequency trader can examine and make a call on? Absolutely.”

5. How choosing the right partner – like CDW – can help digital transformation projects succeed

Sometimes digital transformation projects don’t fail because of the company implementing them. Sometimes they fail because the organization involved chooses a vendor more interested in selling them every product and service they offer than actually helping them.

“One of the main competitive edges for CDW is that we recommend appropriate vendors, which means that we look out for the customer,” Abdelmagied says. “So if the customer is looking to move to the cloud, for example, we’re not going to tell them they have to go with Microsoft or Amazon or Google. We’ll present the best options available to help the customer achieve their goals and leave the final choice up to them, because we have experts available to support them all.”

Burke says there are two key ways the right partner can help. One is by alleviating the day-to-day pressure faced by IT teams who are tasked with overseeing digital transformation projects but can’t step away from their duties long enough to actually implement them.

“We can help outsource those day-to-day activities, whether it’s backing up data, managing network devices or performing security assessments, so they can focus on digitally transforming their business,” he says, noting that companies are often at their most vulnerable when undergoing digital transformation.

The other way, of course, is through assessments: identifying application and data storage needs, supporting business continuity planning and providing technical expertise.

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It’s important to recognize that digital transformation is not something every team has the skills and capabilities to do.

–   KJ Burke

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