86% Of Digital Transformation Projects Fail – How To Make Sure You’re In The 14%
According to an IDC report published in 2018, it’s estimated that businesses will spend over $2 trillion on digital transformation projects this year but another report (from McKinsey in 2018) states that over 86% of Digital Transformation projects will fail.
That means across all regions and industries, including businesses of all sizes (SME’s and Enterprise level) only 14% of Digital Transformation projects will succeed; or put another way, $1.7 trillion potentially wasted, causing digital chaos within the organisation that started the project. We’ve never wasted $1.7 trillion here at cloudThing but can imagine feeling rather sheepish if we did!
Clearly then, the ideal is to be in the 14% that make a success of their Digital Transformation project but with so many companies failing it does beggar the question of how best to go about it…
It’s a complicated issue that won’t have a single, ‘silver bullet’ of an answer; with multiple variables depending on the industry, individual business or type of transformation required, but it can loosely be simplified down into four interconnected topics.
It’s 2020 and you keep hearing buzz words like Cloud Based Migration, Dynamics 365, Automation, Microsoft Azure or AWS, Data Science and Big Data… of course your business needs a complete digital transformation… Right?
Far too many business leaders however are starting their Digital Transformation projects without first correctly defining why they want/need to change or even what success might look like when they have.
Once you’ve decided on the case for digital transformation you need next to decide on the Solution Architecture of how you’ll actually go about transforming your business to best future proof it.
The need for rapid deployment of changes in an ever changing digital market is why many leaders will choose to transform their business, but few realise that it’s less a piece of hardware/software that needs implementing and more a fundamental change to mindsets and cultural approaches within their organisation.
A digital transformation can’t and won’t happen in isolation.
Questions will need to be answered around your current workforce, with the amount of upskilling that will be needed as well as the shortfall in digital skills addressed from new process and systems being introduced.
Getting a digital transformation project started is only half the battle. To see it successfully completed will also require the right kind of leadership, with the ability to understand and implement sweeping changes to an organisations systems, people and processes.
Do You Know Why Your Business Needs A Digital Transformation?
Gone are the days of ‘digital dabbling’; digital transformation projects in 2020 have the power to transform entire industries almost overnight.
It’s a bit of an overused example now but just look at the success of Uber, a taxi company that owns no cars, or Airbnb, an accommodation business that owns no properties.
One good idea good idea from an AGILE start-up combined with the right deployment of technology can revolutionise an industry and leave established competitors scrambling to catch up in the wake of it.
Are you aware of the things that are likely to change your industry in the next 12/24 months?
Is your business ready to compete with them when they occur?
It’s surprising how often wide sweeping changes can take established industry leaders by surprise, with competition from smaller, more agile competitors that will often have a business model not reliant on turning a traditional profit in their first few years.
It’s not just the scope of the changes though; oft times it’s the speed in which they become the go to choice of end users that’s hard to adapt too.
Perhaps the most fundamental questions to ask however, when questioning why you’re Digitally Transforming your business, is what that the transformation will look like and how you’ll be defining success within it.
Will your digital transformation be a form of digital enablement; doing away with your onsite servers to a PaaS/SaaS based Cloud model whilst you migrate your current CRM onto it or will it be fundamentally changing how your business operates and competes within your industry?
The first, known as Digital Enablement, can certainly speed up certain processes within your business and reduce operating costs but if not done right runs the risk of leaving you with a tangle of digital ‘things’ that don’t talk to each other and with no one in your organisation really knowing how they work or worse, what they’re truly capable of.
The second type of Digital Transformation, if done well, has the potential to revolutionise your business and keep you relevant in a world of start-ups disrupting traditional markets.
The most important questions you need to answer have to be:
- What and why is the case for doing this?
- What does success look like?
If you can’t answer those there’s a very good chance your Business Transformation project will either not deliver the results you were hoping for, fail completely or leave you with digital chaos within your organisation.
Digital Chaos is what a lot of businesses are left with after a badly run Digital Transformation process, with a multitude of new systems, applications and abilities but little or no strategy on how to implement them within the current business structure.
Worse, this new ‘Digital chaos’ can actually slow existing processes down.
Imagine after your business transformation all your previous applications (internet access, email, CRM access, email builder etc) had different authentication methods. If no one has stepped back during the process and asked;
- What are these systems for?
- Can they talk to each other?
- Can my staff use one log in to access them all?
Then you’ll end up with a form of Digital Chaos. Everything’s now in the Cloud and is undeniably faster but your staff will be spending twice as long to accomplish previously easily accomplished tasks with no clear strategy on going forwards.
Taming that Digital Chaos is a big step in a digital transformation and requires thinking about from multiple angles.
How Can You Digitally Transform Your Business?
Change is never easy but once you’ve made the bold decision that your business needs a Digital Transformation to stay relevant for the future then the process of how you go about that change becomes paramount.
The first thing to realise in adopting an AGILE business model is that your transformation shouldn’t have an end point.
The idea is to adopt a system or culture of Continuous Improvement within your business which will enables real gains immediately through a series of ongoing smaller releases over time rather than one large release that could take 12/18 months before it’s completed (by which time it’s most likely outdated anyway).
This Agile model will also leave you in a much stronger position to respond to changes (threats to your business) as they occur either internally or externally.
How best to approach making those changes happen though?
According to a study conducted by Gartner, companies will move twice as fast in bedding down Digital Transformation projects when there’s a shared buy in amongst the senior leadership team, strategists, other individuals involved in the project and the organisation as a whole.
It’s important they all know the purpose of the transformation and understand both the road map to accomplishing it and their role within it.
True Digital Transformation Isn’t Easy.
It will most likely require looking at solutions far outside the scope of your current business practices by envisioning changes, not from a starting point of where you are now, but by defining the ideal future point of the business and then retroactively working out how that ties in to the present and how best to realise getting there.
But that approach won’t be easy…
It means leaving preconceptions and long held assumptions by the wayside whilst deciding where and how to allocate spending and resources for investing in the future (without jeopardising current business profitability, of course).
Once everyone is onboard and you’ve understood/accepted that change will require cultural as well as process and system changes the next step is in transforming your business.
Things that will require extra consideration are if you have the skill sets within your organisation to make those changes or if you’ll need an external partner to help you.
There’ll be pros and cons either way.
The skill sets required for a Digital Transformation are, unfortunately, in short supply due to a digital skills gap here in the UK.
If you’re lucky enough to have someone within your organisation that can accomplish your transformation, it’s important you plan for what happens if they leave.
Have you upskilled your other staff enough within your organisation to manage the different functions they’ve implemented if they do?
Siloed knowledge is anathema to an agile business model!
The other option is to work with a partner to manage you through the transformation process which will address the skills gap issue and mean it will most likely happen a lot quicker than an internal project but, even if the management of most of the functions created can eventually be taken in house, you’ll probably end up needing that partner on an ongoing basis for any changes, which obviously has ongoing cost implications that need to be considered carefully.
In their recent report, Speed Up Your Digital Business Transformation, Gartner recommend these three steps:
- Question tried and trusted approaches to business model transformation.
- Emerging digital trends invalidate many of the common assumptions you operate under and impact how you select and execute critical transformation initiatives and activities.
- Look to anchor transformation efforts around potential areas of future competitive strength. Identifying those areas takes a new approach — one that goes far beyond just implementing new technology.
How Do You Bring Your Current Staff With You On A Digital Transformation Project?
As we’ve already mentioned, an intrinsic part of any Digital Transformation is changing the culture within your organisation, not just the processes and systems it uses.
Those changes will create a slew of issues with your current workforce though and you’ll need to decide which are relevant to you and how you’ll be addressing them ahead of time.
If you’re going down the Digital Enablement route you’d be forgiven for thinking that not much should change, however, even with a small amount of automation you’ll need to decide what’s to be done with the extra staffing capacity that’s been created.
If all of your systems do migrate to the Cloud you’ll need to manage the roll out to your staff and make sure they’re all fully trained on it.
As we mentioned earlier, no one likes change, and you’ll need to lead them through the transformation process as well as manage the frustration with new systems in existing members of staff who may have been using your current system for years.
An important step in managing that frustration will be in empowering your staff by democratising their ability to take the business forward.
Citizen Developer is a relatively new term but can be defined as a user who can create new business applications in the Cloud by using Microsoft’s Power Platforms.
These apps need no previous design experience or the ability to code but let the people in charge of the day to day running of the business make tangible changes.
Oft cited examples are a small team at G&J Pepsi who, with no previous app development experience, created auditing apps that saved the company over $500,000. Another is an individual at Auto Glass who designed an app to help his own workflow processes which, when was noticed by his supervisors, was rolled out company wide. He now manages his own team of citizen developers in house, making other apps for the company.
This approach will also help a business address the digital skill gap and mean solutions can be reached in a timely and agile fashion (where they can make a real difference) but will mean the right building blocks and architecture need to be laid down as part of your original solution.
The second type of Digital Transformation involves fundamentally changing the way you do business but then the question needs answering, do your staffs existing job roles even exist in the new structure?
If not, can they be retrained, or will you need to make mass redundancies? If that’s the case, you’ll need to plan for how that can affect the morale of the staff you’re training as well as the years of BI (Business Intelligence) you’ll be losing with the staff that go.
Do You Have The Correct Leadership Skills For A Digital Transformation Process?
A good leader will need to be able to embrace change but the key in a Digital Transformation is to be able to recognise the need for change ahead of time and be able to drive it, reacting proactively rather than reactively.
Digital Disruption and Business Transformation will be/are the driving factors in this new era and those that are best able to utilise cloud-based technologies with AI driven data will be the market leaders that others scramble to emulate.
A strong leader needs to be flexible and agile, willing to work within organisational structures that are much more horizontal than vertical; taking advantage of the possibilities remote working offers for the recruitment of key skills needed by the business to move forward.
However, implementing new technologies for technology’s sake will most likely be pointless unless cultural changes to the business can also be instituted.
Whilst the leaders of tomorrow need to be able to identify and make use of emerging technological trends in sectors such as AI, Automation, Big Data and Cloud Computing (combined with sufficient expertise and vision to use these resources most effectively) they’ll also need to be able to inspire their teams into embracing change before their competitors disrupt an industry with their own tech savvy workforces.
Good leaders then will need to encourage early adoption behaviours by empowering their staff to gain qualifications in relevant skills and engage their workforces in wanting to actively transform the business for the better.
An effective Digital Transformation will touch all points within a business and its success will rely on internal support for a lot of its execution within wider functions.
If a leader doesn’t understand their own role in enabling that change and align their thinking with that then the transformation will falter with the leadership team becoming an obstacle, rather than an agent, for change.
- When considering the types of changes made within your businesses Digital Transformation it’s vital to have a clear understanding of why you need to change with a clear view of where you wish to get to; a solid understanding of how you’ll get there and what skill sets will be required (and if they’re available internally or if a third part will required); and finally have a clear picture of the leadership teams role within the transformation process.
- Understand the extent of change to your existing business model how the changes will affect existing workforces and if you’ll be upskilling existing staff to fulfil newly created capacity gaps or downsizing staff and how you’ll cope with the loss of valuable business intelligence as well as how you’ll monetise your business going forward with your new model.
- As the majority of business realise the power Digital Transformation has to disrupt existing markets it’s important a good leader stays abreast of the possibilities new technologies offer and finds ways to accelerate their early adoption into their business model.