Digital transformation is an essential part of modern business. Companies need to implement new technologies into their processes, or they will struggle to stay competitive in today’s market.
Despite the incredible importance of digital transformation, the 2020 McKinsey global survey of executives found that a staggering 70% of digital transformation projects fail.
Despite the obvious downsides of a failed digital transformation, there are a lot of valuable lessons that can be learned. Identifying what caused your digital transformation to fail will help find and fix any weaknesses or inefficiencies within your business.
This article will look at the consequences of a failed digital transformation, and walk you through how to recover and learn from these setbacks.
What Happens When Digital Transformation Fails?
What Determines the Success of a Digital Transformation Project?
Over 1.3 billion USD was spent on digital transformation in 2020. This figure, combined with the statistic above showing the failure of a considerable majority of digital transformation projects, implies that money is not the deciding factor in successful digital transformation.
Instead, a company must ensure that it has the right people with the right skills working on digital transformation. A recent survey asked businesses how they jump-started their stalled or failing digital transformation projects. The most popular course of action was to hire a new transformation leader, taken by 30% of respondents.
Rehiring in a leadership position like this combines finding the right talent with creating clearer goals. It’s essential that you’re hiring accomplished people with the right skill set to adapt the existing systems throughout your company. However, you also need to have those people in charge: if someone with expertise is guiding your digital transformation, you’re much more likely to succeed.
By placing an expert in a leadership role, they can also assist with the creation of more precise objectives: broad goals like “updating the company” and “moving online” are unhelpful. Instead, hire someone that can identify exactly which technologies should be implemented and which departments or processes need to be changed to accommodate the digital transformation.
The Consequences of Unsuccessful Digital Transformation
Three in ten UK businesses have lost time and money to unsuccessful digital transformation projects. This will be the most relevant consequence for many businesses, but it’s far from the only one.
Failing to achieve your digital transformation goals can lead to a loss of credibility, particularly if your company specialises in technology or a related field. Customers and clients will likely trust your services less if your failures are widely publicised, and those in charge of the transformation might come off as incompetent. Therefore, a loss of credibility can lead to a loss of income, customer loyalty, and even employee motivation.
Failed Digital Transformation Examples
There have been several high-profile cases of digital transformation failures over the years. These are great case studies to examine so you can avoid pitfalls during your own digital transformations.
One of the more recent cases of unsuccessful digital transformation was Ford Smart Mobility. The idea was to build digitally enhanced cars with more features and mobility. The subsidiary was established in 2016, and with Ford’s influence and money behind the idea, it was expected to be a great success.
Unfortunately, this was not the case. The Smart Mobility unit reported a loss of $300 million in 2017, and the Ford CEO stepped down that same year after stock prices continued to fall.
The core problem was that the Smart Mobility subsidiary was seen as a separate division of the company, and not a part of the whole. Any digital transformation needs to be holistic: the entire company must be aware of the change and work towards its success.
At Ford, digital enhancement wasn’t seen as a concept to be implemented into all its products. Instead, it was treated as something Smart Mobility would deal with on its own. As a result, the division lacked support and continued making losses.
Another high-profile digital transformation was the creation of GE Digital. GE started this new business unit in 2015, following long-established plans to turn GE into a technology powerhouse. Unfortunately, the planned digital transformation did little to improve their stock price, and CEO Jeff Immelt was forced out by unhappy investors.
The issue with GE Digital is that the goal was to innovate, but that was it. There were no specific departments they needed to improve, no particular project at the heart of the division. Without a concrete, long-term strategy, GE Digital could only create minor advances within GE. An effective digital transformation hinges on specific goals and objectives, or it will fail to create any significant improvements.
How to Recover?
Despite the negative impact of failed digital transformation, it doesn’t spell the ultimate end of a company. It’s more than possible to make adjustments to succeed in the future, as long as you know exactly what steps to take.
Monitor KPIs Regularly
The best way to avoid total digital derailment is to keep an eye on your KPIs so you can pivot accordingly. This agility will empower your businesses to adapt if things aren’t going to plan.
If you don’t have measures in place to monitor this kind of data, look into tools such as BlueOptima’s Developer Analytics solution. Analytics tools can provide invaluable insights on whether you’re hitting the expected project milestones, so you’ll know exactly you’re succeeding or if you need to course-correct.
Identify the Root Cause of the Problem
If the data indicates that something has gone wrong, conduct an assessment to understand what is causing difficulties. It may be that you get stuck treating symptoms instead of the disease.
Once you identify the root cause of your digital transformation issues, you can start working on an effective recovery plan with clear goals and vision. Keep in mind that you might have multiple problems to solve, so prioritise based on your company’s needs.
Focus on Quality Over Quantity
It’s critical not to rush in all at once and try to transform every aspect of the business. Small teams, small transformational initiatives, and small wins ensure quality results and deliver innovative value.
Build a Culture That Embraces Change
Updating your company culture is vital for making your digital transformation holistic. A culture that embraces change will make digital transformation projects easier to implement and more likely to succeed because everyone is on board and eager to make their efforts worthwhile.
The Importance of Digital Transformation
Digital transformation is crucial if you want your company to succeed in the modern business world. While the process can be difficult, the benefits of a successful digital transformation project are phenomenal. You can expect improvements across your entire organisation, from increased profits to stronger security.
Even if you fail at your first attempt at digital transformation, don’t abandon the concept entirely. Examine your previous attempt, learn from it, and (once you’re armed with the appropriate data and resources) try again.
Discover Global Insights into the Software Development Industry
At BlueOptima, one of our primary goals is to provide the data your business needs to achieve success. That’s why we publish our Global Benchmark Report. It’s a comprehensive look at the industry, including data from hundreds of thousands of software developers in over 30 countries.
Prevention is crucial to software estates, otherwise catastrophic damage can be caused. This is why we provide the Global Benchmark Report which helps business leaders identify red flags or aspects of failing projects early. The report’s information helps to reduce risks, increase success and aid in preparing projects and teams for the future of digital transformation, both their successes and failures. Why not maximise the effectiveness of your technology investments within your teams, locations and projects today?
To learn more about the BlueOptima Global Benchmark Report, click here.
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