There are many benefits of digital transformation, so few organizations anticipate that such a promising initiative could ultimately fail.
However, there are several issues that can cause these projects to go off-track (and stay there).
If you know what issues to expect, you can take steps to minimize the risks and fortify your digital transformation initiative. Today, we’re looking at some of the most common issues behind digital transformation failure and detailing how you can avoid them.
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7 Reasons for Digital Transformation Failure
1. Moving Forward Without a Change-Centric Mindset
A successful digital transformation requires a seismic shift in the way you do business. While this is a good thing, your workforce might not see it as such, at least in the beginning. In fact, you might notice pushback and resistance from even your most seasoned employees.
Change can be intimidating, and even more so when it’s associated with sophisticated tools and software that are beyond employees’ skillsets. Therefore, it’s critical to adopt an enterprise-wide change mindset, starting at your C-suite.
If your executives don’t support and promote the change, then it’s unlikely that anyone else will. On the other hand, if executives set the right tone and model the right behaviors, then it will encourage employees to follow suit.
Not only does top-level support set a great example, but it helps you secure the financial and operational resources you need to counteract the myriad of digital transformation challenges.
2. Implementing Digital Change Without Goals
Before you take another step in your digital transformation, make sure your project team asks this critical question: Why are we pursuing this change and what do we hope to achieve?
There isn’t a right or wrong answer to the question, but you should be able to confidently answer it.
Some companies hope to reduce costs through digital transformation, while others want to simplify and standardize their operations. Then, there are those who want to be more agile or ramp up security. Usually, companies outline several of these goals.
Once you’ve established your goals, make sure everyone on the project team understands them and is prepared to work toward those initiatives. Otherwise, you’ll have disparate employees working on individual projects and pursuing their own interests.
Without a cohesive strategy and a clear vision, it’s easy to end up over budget and over schedule, without any type of progress to note.
3. Relying on the Wrong Talent
As you build your project team, think beyond the typical executive team and department leads. You need experts who have deep experience in digital innovation and have helped implement similar transformations in the past.
This is especially the case if your digital transformation includes new and emerging technologies, such as AI or advanced business intelligence.
If there are in-house employees with this skillset, then tap into their collective knowledge. They should intimately understand your industry, as well as your business, and possess the ability to anticipate risks.
In addition, you can hire third-party consultants who have helped companies like yours successfully complete similar transformations. These outside teams can help you optimize your business processes, communicate with stakeholders, and train your team in the necessary competencies.
4. Focusing Only on Technology
When you’re in the initial stages of a digital transformation, it’s easy to lose your peripheral vision and focus solely on the technology in front of you. ERP vendors often showcase the latest bells and whistles, and you may think you need to implement all of them to keep pace with the competition.
However, during the technology selection phase, it’s important to prioritize your business needs and understand how the features you’re considering will help you meet those needs.
You should also consider any industry-specific issues that may affect your decision.
For instance, some niches are highly regulated, and you’ll need to take security and compliance measures into account before pouring money into a new stack of technology.
5. Underestimating Project Costs
Most companies expect to realize cost savings after they complete a digital transformation. The idea is that by automating and improving various business processes, you can boost productivity, reduce manual labor, and create better products and services that drive more revenue.
If that’s the case, then why do so many organizations find themselves over budget with no foreseeable cost savings? The answer lies in their mindset.
A digital transformation budget isn’t the same as a standard business budget or even an IT budget, but many teams treat it as such. They keep the numbers small and conservative, looking for ways to cut costs where possible. Then, they wonder why the result isn’t as transformative as they imagined.
With the right people on your team and a strong business case, you can convince your company’s budget holders to allocate adequate funds to the project.
6. Underinvesting in Company Culture
Is your company culture conducive to change? If you aren’t sure, then the answer is likely “no.”
A change-driven, continuous improvement culture encourages, appreciates, and rewards innovation. It makes every employee feel empowered to speak up, suggest ideas, and look for opportunities for improvement.
The success of your digital transformation will hinge on how well your workforce can embrace both change and collaboration. This is a team-based project, so it will require employees in different departments to work alongside one another to identify pain points and discuss solutions.
7. Setting the Wrong Success Measures
Once your digital transformation is live, you’ll need KPIs in place to track the success of your new systems. You might think that it’s enough that you got to the finish line under budget and on time, but that’s the bare minimum.
Now, you’ll need to track how well your systems are meeting your goals. This requires a long-term perspective.
Are the systems allowing you to increase the ROI of future projects? How have you improved production times? Did you see any change in customer service ratings?
In order to track these benefits over time, you must first define the metrics you’ll use to gauge digital transformation progress. Then, you can employ business intelligence tools to turn that data into visual reports and forecasts.
Avoid Digital Transformation Failure at Your Organization
These seven catalysts of digital transformation failure are not unlike the causes of ERP failure. In both types of projects, a business-focused mindset is essential and a focus on end-users is paramount.
Our digital transformation and ERP consultants can help you set your project up for success. Contact us below for a free consultation.