Thought Leadership Articles

    Why Digital Transformation Fails & How to Help It Succeed

    Jul 6, 2020 | Posted by David Lee

    If there is anything that recent events have confirmed, it is that digital technology will continue to be a primary driver of change for the foreseeable future, making IT leaders the defacto change leaders in most organization. However, the elements and process that produce successful change, digital or not, are often poorly understood and the efforts and resources required grossly underestimated, leaving IT leaders in a risky situation.

    Digital transformation of any kind is not simply about the installation of new technology. Rather, it is about catalysing continuous, potentially disruptive change that cascades throughout the organization affecting business processes and mission critical operations, effectively changing the way a company functions and thinks. Digital transformation cuts across business units, departments, and functions; it requires large capital outlays and an even bigger drain on social capital; and the combined stakes represent high risk for the organization and the leadership at the helm.

    To say that most digital transformation efforts fail to meet their objectives is almost cliché, but unfortunately, it is cliché for a reason. The most recent research shows that only 12 to 25 percent of digital transformation efforts approach the expected level of ROI, and these statistics do not even take into account the delayed realization from poorly executed strategies and their associated costs of re-works.

    Despite this failure rate, the expectations for digital transformation are high. According to International Data Corp, spending on digital transformation is forecast to grow 10.4% in 2020 to $1.3 trillion (a number likely underestimated when account for Covid-19 impacts). At the same time, 59% of companies remain mired at stage two of digital transformation maturity known as “Digital Impasse.” This illustrates a material gap between investment and realization of benefits which puts IT leaders under a microscope.

    What creates this gap between Digital transformation expectations and results? According to almost any survey of executives, the top roadblock to success is organizational culture. Many companies are just incapable of responding to the breadth of changes that they are frivolously launching. In fact, according to a Gartner survey, CIOs view culture as the largest barrier to scaling digital business over resources or talent.

    In this age, technology is more than just a tool, it is an amplifier of the organizational culture. Technology determines the flow of information, it enhances and changes the ways people interact, and it drives operational behaviour. But, implementing new technology does not transform a business on its own. If people behaved one way before the new technology, they may not necessarily adopt new behaviours because of the technological change. For digital transformation to succeed, managing the people side of change is critical.

    As a result, the introduction of new IT solutions has increasingly become the driver of organizational change. The application of Change Management methods is on the rise (in 2019 Prosci® claims to have certified over 60,000 Change Management practitioners, up from 30,000 in 2015), and Change Management is fast becoming a norm on major technology projects.

    Digital transformation requires IT leaders to move beyond the role of a service provider of technical expertise to adopting the role of a sponsor of change. Again, according to a Gartner survey, 95% of CIOs expect their role to change as a result of digital transformation strategies, 78% believe it is about making their organization better prepared for change, and 29% see their most significant future role as a becoming a change leader.

    But if Change Management is already an expectation, why are the results not improving?  While the discipline of Change Management has been increasingly recognised, the standards of application and maturity of thought within organisations and across industries remain generally low and inadequate for digital transformations.  

    When effective Change Management methods are applied to projects, it has consistently shown that it can vastly improve adoption and utilization, ultimately delivering project benefits and driving better business outcomes. One company we know that provides technology solutions for thousands of organizations saw a five times difference in the adoption rates when implementing the technology with Change Management using the Prosci® methodology.

    For all of its worth, though, project level Change Management alone is not adequate to address the level of change that digital transformation requires. As we have discussed, digital transformation is almost biblical in the way it breaks through organizational barriers and creates change. Failure manifests under these conditions because IT leaders are often ill equipped to manage the full digital transformation journey, nor are they able to foresee all the potential consequences. With so much uncertainty, they cannot predict the extent of change, so they do not adequately prepare the organization for it.

    The first step to managing change in a digital transformation is to measure and understand the scale of it. Digital transformation requires a multifaceted approach on four levels:

    Enhance IT Change Leadership Competency

    Building IT change leadership capabilities means ensuring they have the skills to manage ongoing change at the Enterprise level. IT change leaders need to see beyond business requirements to driving desired business outcomes. This requires a combination of strategic, technological, and Change Management knowledge and experience that is hard to find. IT leaders often come up through the IT organization which may not emphasize the people side of change. This is a skill that needs to be developed.

    Enterprise Change Strategy & Structure

    While most change methods are designed to drive change in a single project from point A to point B, Enterprise Change management goes beyond the project level and focuses on building the capacity to carry out multiple changes simultaneously. Change Management is lifted to a strategic function. Enterprise-level change means looking at the talent from leadership to people managers with an eye on their capacity for driving change.

    Developing Your Change ManagementFramework

    Building a framework that fits your business is a change in itself. The framework should be holistic and flexible. At this level, the role of Change Management needs to be extended to educate the organization on the framework, coach them through it, and gather feedback on its application.

    Growing Organizational Capacity for Change

    To fully realize and sustain the benefits of digital transformation, a company needs to be able to drive incremental continuous change over time and build an ability to respond to disruptive change that can arise unexpectedly. This means integrating Change Management mindset and skills into the organizational DNA through training, talent, and structure deep into the organization. Digital transformation presents a unique opportunity to build the capacity for organizational change.

    Digital transformation is a massive undertaking but one that sets up an organization to tackle an uncertain but exciting future. To realize the full benefits of the opportunities that can result, organizations rely on their people to not only adopt and utilize new technology, but to see the potential of transforming the business processes, operations, and business model. Leaders and employees need to be enabled to adapt and respond to incremental as well as disruptive change, and to build the competency for managing it continuously. Only then would they be able to make their organisations truly faster, better, and cheaper.