January 31, 2023 Top 7 Reasons Why Digital Transformation Fails Discover valuable insights on why digital transformation projects fail, how to set up your organization for success, and reach the desired business goals. Craig Knighton Chief Operating Officer Denny Royal Chief Design Officer Josh Marquart Chief Strategy Officer If you’ve followed our content for a while, you know we provide digital transformation consultancy and combine our deep expertise with thorough research. We’ve discussed implementing digital transformation at an enterprise scale, the importance of design research, and how successful teams plan and execute ideas. At its foundation, digital transformation is a process of disruptive change that aims to introduce a reinventive force to the industry it occupies. Its goal is to accumulate value for the business and set it apart from its competitors, pushing forward new trends and fulfilling user needs. Yet, with the booming trend of digital transformation, many organizations get stuck mid-process and pour vast budgets and effort down the drain, failing to transform their processes and manage the change that comes with digital transformation. This piece is about the key reasons why a digital transformation might fail and what to look for in a software vendor partner or a strategic partner. We’ll share valuable insights from the perspective of the strategy, design, and engineering that work in tandem to help organizations succeed in their digital transformation. Before we dive in, we must first acknowledge one key fact — and a huge reason why a digital transformation either succeeds or fails: Any company attempting digital transformation work must first adopt a product organization mindset. No matter what industry you’re in, the moment you decide to begin your digital transformation journey, you need to see yourself as a digital product owner. Now, let’s look at some of the other factors that hinder successful digital transformation. Digital Transformation Failure #7: Unsuccessful Agile Transformation In many cases, digital transformation fails to take off simply because of unsuccessful Agile transformation. Even companies with great ideas often get stuck on their inability to execute them because their IT organization simply isn’t agile enough. Shifting to Agile is not merely a technological effort but a holistic mindset shift throughout the organization. But there are some pitfalls to be mindful of in this initial process: Attempting to transform the whole IT organization before behaving in an agile way or making an initial product or system-related digital transformations happen. Assuming you have to convince everybody to go Agile and not establish a digital product organization with product owners capable of developing your business ideas alongside your traditional IT. Not beginning the transformation with a much smaller team with people empowered to adopt the key agile roles like Product Owner and Scrum Master running those teams in an agile way. Ignoring pushback and lack of organizational behavior change. Teams may adopt the names of Agile roles and ceremonies but simply take a waterfall process and break it up into sprint-sized chunks. That approach prevents your organization from successfully shipping your MVP, acting, and planning according to user feedback. Ultimately, it sabotages your digital transformation. It is worth having a program manager familiar with Agile who can shield the team and provide the more traditional tracking and reporting expected. In contrast, the Agile team stays focused on using Scrum for managing the work. Also, if the team does planning/estimation and tracks velocity, these can be mapped into the project and financial data needed to monitor the program. Digital Transformation Failure #6: Setting the Bar Too High Our eyes are often bigger than our stomachs, meaning we put a lot of stuff on our plates because it looks tempting, but then we find it impossible to eat it all. Being overly ambitious with your planning and setting the bar too high makes it very difficult to have a working plan that makes sense for your business and your teams. Stretching vast goals ahead into the future prevents you from accurately forecasting that far ahead and results in a loss of focus simply because the target is too broad. Digital Transformation Failure #5: Not Setting up the Right Success Metrics Digital transformation is driven by your business goals. You need to set up your metrics at the beginning to measure your ultimate success or failure. Often, in the scramble to put some metrics together, you’ll likely start looking at metrics that only partially reflect the transformation that needs to happen. There’s no shortage of things you can measure. But it’s critical to set metrics that indicate if something is off track and, even more importantly, tell you where to investigate the problem. Have tracking, logging, and detailed information so that you can chase down problems easily Measure the things that you’re most interested in, and they will tell you what requires more investigation and help you utilize your data better The right metrics can reveal the root cause of a problem and identify if it was: A bad requirement Wrong user information Problem with the code Problem with the quality of the environment You also need leading and lagging indicators that assess how well the solution performs against the business objectives. Digital Transformation Failure #4: Following a Roadmap Without Learning the Landscape By following a roadmap that prioritizes and balances incremental business and user value, you set up your digital transformation process for success. Future steps are properly executed, measured, and corrected when your team can focus on specific goals and a time frame around them. However, following a roadmap sometimes leads to a distorted view of what is actually happening on the ground. The result is a misinterpretation of the actual landscape of your organization’s business area. When you think about data, numbers, and slide decks that show up in meetings about digital transformation, they use facts and figures that have been abstracted to tell a particular story. But they may not convey what’s really happening in the true landscape. After all, you can’t use a metro map to guide you around an unfamiliar city above ground, right? Digital Transformation Failure #3: A Lack of Efficient Decision-Making Process When there are decisions to be made, people like to be involved. They want their voice and opinion heard and respected. And that has become a classic hit in almost every digital transformation project. Too many people having a voice and opinion is great for user research and creating diverse data sets, but always a problem when an organization needs to shorten its decision-making path. Having too many people making decisions leads to: A slow decision-making process that wastes time, money, and effort Higher chance of people making decisions based on feelings rather than facts Missing the ultimate point that the end-users are the ultimate deciders and not the people within the organization Longer time to value The bottom line is you need just enough of the right people with the authority to make decisions and the humility to recognize their own missteps and correct them. Digital Transformation Failure #2: Poor Change Management The hardest part of digital transformation is the people. How are we getting people to adopt new systems and work in new ways when they’ve been entrenched in their processes for decades? Yes, you can tell people to follow a new process, but habits are a part of human nature that are slow to change. It all comes down to rolling out your plan and gradually introducing new ways of thinking and working with the teams in your organization while keeping the human aspect top of mind. Digital transformation is not an isolated technological effort but a holistic and reinventive process. That process should never be a shocking surprise to the teams with whom you work. You must inform people about organizational changes impacting their professional development and the business’s success. Proper change management includes: A discussion with HR on how incoming changes might impact people Ideally, bringing in a consultant specializing in organizational change Paying attention to the needs of the teams in your organization and your customers and users Bringing enough of the right people on board — coach the management teams, executives, and team leads. You need strong leadership to bring everyone on the same page To build things that solve problems for both external and internal users while changing how teams work, you need to base your approach on small iterations and stay close to your users. Managing the change in your organization and having teams understand the process beforehand helps chase the right problem. It also allows you to control the transition successfully. Digital Transformation Failure #1: Not Solving the Right User & Business Problems Here we are—the number one reason why a digital transformation effort might crumble to pieces. Together with optimizing and improving your enterprise’s digital transformation workflow, you need to understand the problems you’re trying to solve for your business and your users. What is the right problem we’re trying to solve? What do human beings on the other side of the screen truly need? How does the workflow look? How do we make people’s workflow better? How do we think about it differently and reimagine it for a digital world? How do we deliver on that within the constraints of the technology, budget, and timeline we have? Answering those questions prevents your organization from ending up with the wrong requirements and building solutions that don’t address people’s true needs. It’s not about taking what you already have and digitizing it but instead reinventing it to fulfill an unmet need. When we look at work inside any organization, we need to acknowledge the desirability, feasibility, and viability factors. Desirability: Look to the users to discover the problem. Focus on their needs to accumulate value for your business and imagine the entire user experience you want to provide. Viability: Think about the business strategy. What does the business need? Can we do this? Can we deploy this? Your strategy and business consulting partners are vital to the process here. Feasibility: Bring user and technical requirements to the conversation with the engineering teams. Blending strategic insights and user-centered design with exceptional engineering is key to creating durable technical solutions that deliver digital transformation at scale. Digital Transformation is NOT a One-and-Done Affair Digital transformation is never done. It’s a continuous process that requires an iterative mindset. It isn’t about how many features your organization can deliver but how valuable those features are to the users. Organizations must: Account for new technology versions and maintenance Account for user expectations shift Iterate to improve features Adjust to achieve the desired traction Include the continuous digital transformation needs into the organization’s budget and thinking Be adaptive, not reactive Be patient Realize owning a digital product is more of a business lifestyle change and not a project Adopting the iterative mindset of a digital product organization helps you keep failures smaller and more containable and able to adjust more quickly. A modern product development cycle protects you from significant failures and vast financial losses in the long run. But you need to iterate, move forward, test and iterate, test and iterate, test and iterate. Final Thoughts Managing change and keeping goals realistic while adopting an iterative mindset is critical to preventing digital transformation failure. A product mindset, strengthened by business strategy, human-centered design, and efficient engineering, will help your organization keep your failures small and your success massive. Digital transformation requires a change in your business’s lifestyle and a partner who knows how to navigate the pitfalls. Because doing it alone and without the knowledge of how to do it can be a costly mistake. Tags Digital Transformation Share Share on Facebook Share on LinkedIn Share on Twitter Over-Engineering Learn the causes and costs of over-engineering your solution and how to avoid it from occurring in the first place. Download Share Share on Facebook Share on LinkedIn Share on Twitter Sign up for our monthly newsletter. Sign up for our monthly newsletter.