Top 5 Reasons Digital Transformation Efforts Fail
A growing number of businesses are going digital to be more efficient and effective, serve customers better, surpass the competition, and improve their bottom line. Unfortunately, most of them fail in their digital transformation efforts.
According to a McKinsey study, a whopping 70% of all digital transformations fail.
One of the biggest challenges of digital transformation is not having an enterprise-wide digital transformation strategy. A Harvey Nash/KPMG CIO survey shows that only 41% of companies have it.
Out of 4,498 surveyed CIOs and tech leaders, 19% say their organization has not been effective in using digital technologies, while 69% rate their use of digital technologies as moderately effective.
Only 18% of respondents say they’ve been very effective in using digital technologies to enhance their organization’s business strategy.
Why do so many businesses fail when going digital? Here are some of the top reasons.
1. Failure to Understand Digital Transformation
Many businesses start making digital transformation plans just for the sake of going digital. Everyone seems to be doing it, so they want to stay ahead of the game.
Looking to stay ahead is a good starting point, but most don’t have a clear digital transformation picture. They don’t understand its impact and all the ways it can help them generate more revenue and profit. They don’t take the time to grasp the value it can provide to their customers and their overall business.
Many assume it has to do with various IT tasks, while others think it’s a set of digital marketing activities.
That often leads them to develop ineffective strategies that don’t focus on the core concepts of digital, including scalability, quality, interoperability, flexibility, and cultural transformation.
In case you find it confusing as well, here’s the simplest definition:
Digital transformation is the process of implementing digital technologies into all business areas to improve existing or add new business processes.
By doing so, you can keep up with the latest market requirements, adapt to consumer behavior changes, and provide exceptional customer experiences. You can progress continuously, stay relevant, and seize more growth opportunities.
Digital transformation is not a separate, one-off strategy for implementing new tech in one department or different silos across an organization. It’s an organization-wide strategy for reinventing all or most of your business practices.
2. Disagreement Among Top Managers
When top managers aren’t looking in the same direction, they are highly unlikely to reach digital transformation goals.
Transformation starts at the top of the chain, which means that all C-level executives in a company need to be on the same page. What prevents them from having a shared direction?
More often than not, it’s a failure to understand the process of going digital. Many don’t have the necessary technological insight to understand what needs to be done and how it would impact their bottom line.
To overcome this challenge, you need to communicate all the opportunities of digital technologies, including the problems they can solve.
When presenting your plans to the board, tell an engaging story that inspires them to make a change. Crunch the numbers beforehand, but focus on storytelling to paint the big picture and help everyone align with the goals.
3. Lack of Talent and Resistance to Change
Your employees are the critical factors for a successful digital transformation. If they lack experience or certain skills, they will ultimately make mistakes that could undermine your entire strategy.
Resistance to change is another issue that often prevents businesses from succeeding when going digital.
You need people who can accept and support the change, have the necessary skills to deliver on all your targets, and lead your organization to success.
That doesn’t mean you need to look for outside talent. You should train your employees on the new integrated technologies to empower them and bridge the skill gaps. That way, you’ll boost employee morale and job satisfaction and build a skilled workforce that goes above and beyond to reach your goals.
To ensure employee adoption, build a customer-centric culture and explain the positive impact of digital. Explain why and how new practices can transform the business and provide customers with real value.
Zappos, an online shoe and clothes retailer, is an excellent example. The company addressed the skill gap and resistance to change by focusing on employee training and development, company culture, and customer service.
It invested in its people, put customers first, inspired customer loyalty, and later got acquired by Amazon in an $850 million deal.
4. Failure to Deliver Omnichannel Customer Experiences
These days, consumers expect an omnichannel experience when engaging with a brand. They want the convenience of getting in touch with a brand through multiple channels.
To meet their needs, you need to enable them to shop on your website from desktop and mobile devices, contact you via email or phone, and connect with you on social media.
If you have a brick-and-mortar store, most consumers might first browse your products or services online before visiting the store. Others might check out your store before purchasing online.
If you don’t provide multiple sales and customer support channels for omnichannel experiences, you risk losing many customers.
Going digital isn’t having a website only. It’s establishing multiple digital touchpoints to build an effective customer engagement system that brings more revenue and profit.
IKEA is an excellent example of embracing digital to deliver omnichannel experiences. Apart from offering omnichannel shopping through its mobile catalog app, it bought TaskRabbit to help customers with assembling IKEA furniture, handyman work, cleaning, running errands, moving, and more.
It later started developing its own smart home products.
5. Poor Data Analytics Capabilities
Data is your most valuable asset. With the right data at your disposal, you can improve business processes, learn more about your target audience’s needs and pain points, personalize customer experiences, and gain a competitive edge.
But if you have insufficient data analytics capabilities, you may end up working with inaccurate or incomplete data. Your digital efforts may not bear fruit because you may not drive actionable insights from the collected data.
You need to build a robust data pipeline to streamline how you collect, store, and analyze data and drive valuable insights for enhancing your business strategy.
What is a Data Pipeline?
A data pipeline represents a set of connected data processing activities for gathering relevant, real-time, raw data from multiple sources and creating a structured database for analytics.
A data pipeline architecture helps you cleanse or transform data, move it to storage systems such as data warehouses and data lakes, and analyze it to drive insights for strategic use.
To make the most of your data pipeline, you should add an AI infrastructure to your company. AI and machine learning can help you learn from unstructured data, streamline and optimize data, simplify business processes, boost efficiency, save money, and drive actionable insights.
Coca-Cola Bottlers’ Sales and Services (CCBSS) partnered with Ripcord to digitize its document lifecycle using Ripcord’s robotic automation software based on machine learning. The software scans and processes documents, sends accurate data to customers and unlocks revenue growth opportunities.
Digital transformation can be a huge step forward that leads your organization into long-term success. But if you let the challenges become overwhelming roadblocks, you risk falling into a pitfall that takes you back to square one.
So, follow these tips, conquer the obstacles with innovation, and turn challenges into opportunities.