- 70 – 80% of all digital transformation programmes fail
- Technology is an enabler not the solution
- People are the most important determinant of success
Despite the rate of digital transformation failures, the race to become digital is on the rise. It’s no secret that a lot of digital transformation programmes fail. However, there remains a lack of consensus as to why these digital projects fail, and the rate of failure.
Mckinsey suggests that 70% of transformation programmes fail, while Forbes puts the figure at 84%. Genpact opines that the rate of failure is at 75%, which implies that 2 out of every 3 digital transformation projects/programmes fail. In monetary terms, Consultancy UK estimates that large enterprises throw away an average of $400 Billion (£258 Billion) per year on digital transformation programmes that fail to deliver promised benefits. If so many digital transformation projects are failing, why do firms keep investing without achieving desired return on invested capital (ROIC)?
For example, in 2013 £100m was written off BBC’s Failed digital transformation Project and their technology chief was suspended. This transformation was supposed to ‘improve production efficiency by enabling staff to develop, create, share and manage video and audio content and programming on their desktop’. The technology chief was held responsible for the loss, even though successful products such as the BBC iPlayer were created as part of this failed transformation project. Subsequently, PwC conducted an audit of the failure and heavily criticised BBC for “serious weakness in project management and reporting, as well as a crippling lack of focus on business change”. This audit highlighted that the BBC assumed digital transformation was all about technology or a technological problem whilst failing to realise that a cultural, behavioural, and capability transformation was also required. However, 3 years later in 2016 BBC announces another digital transformation programme with initial investments of £289 million.
You may ask, why are they going ahead with another transformation project after the previous one was a failure. The answer is quite simple: they want to remain relevant and competitive in the market and the potential benefits far outweigh the cost. By making an investment of £289m, they expect to have a market reach of 500million people, create 1,300 new jobs, expand their translation service to cover 40 languages and have 12 new digital TV bulletins.
Putting it all in context:
So, what lessons can we learn from digital failures, and how do we increase our chances of success and become part of the successful 20%?
Lesson #1: Leaders shouldn’t assume that digital transformation “programmes” have a beginning, and an end. They don’t. To remain competitive, organisations must be continually seeking to improve and innovate.
Lesson #2: Recognise that Digital transformation ≠ new website. Too often, you hear people design a new website and refer to it as “digital transformation.” A new website can aid in improving customer experience, but that alone does not equal digital transformation. Digital transformation is achieved by changing the modus operandi of your organisation (processes, people, technology, and culture) and automating some processes using digital tools.
Lesson #3: Be open to change. Traditional capabilities such as research, strategy, project & change management, are still required for any digital transformation programme to be successful. However, leading firms are fully aware that they need to adapt their approaches if they want to survive in the digital era. The rapid changes in technology, changing consumer behaviour, and competitive climate, make it impossible to rely on old laurels. This means that traditional approaches that once worked just don’t work anymore. Instead, there needs to be a shift to embrace a more iterative (agile), customer-centric process which enhances both your customer and employee experience.
Lesson #4: Remember that software implementation ≠ successful digital transformation. Most companies focus too much on the technology. They believe that once the technology (whatever, it is: cloud, social, big data & analytics, mobile or even IOT) has been implemented, it will function as smoothly as the demo. However, they fail to remember that a software demo does not take into consideration the people, data, processes and culture of their organization. For example, the UK NHS Digital Service messenger bot mistakenly sent out 850,000 emails to patients leading to server shutdown and chaos. This resulted in the NHS “blaming” their consulting partner (Accenture) for the problem. However, who is really responsible?
Lesson #5: Plan for life after the programme go-live. Most times leaders fail to plan for life after the consultants have left. No one is planning for the period after product launch – How is it going to be launched? Is it just a big red button? Why should/would people accept the new process or use it? Which are the most important business units or teams to be impacted? What does success look like and how do we measure it? As simple as this may seem, most businesses begin thinking about life after the programme 1 or 2 weeks before the delivery date. This leads to knowledge gaps, slow employee adoption and in some cases abandonment over time.
Once your digital transformation programme has been successfully delivered, you can begin taking steps to continuously improve and innovate by reading: Are you truly digital?
Although the above lessons do not represent a one size fits all approach to minimising digital transformation failures, they provide a guide and highlight some of the most common mistakes businesses make. Understanding these lessons make the difference between the 20% success and 80% failure.