5 Reasons Why Digital Transformation Fails (And How to Avoid Them)

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Juuso HämäläinenFounder and CEO at Tangible Growth

Friday, April 16, 2021

Taking the leap into digital transformation has become necessary for the survival and growth of businesses in the last year, but with so many failing in their efforts, being aware of the most common mistakes can help you ensure this process is successful.

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Confused IT leader looking at laptop trying to understand why digital transformation isn't working
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Equipped with new budgets for 2021, organizations are looking to continue making strides in their digital transformation journey. A staggering 90% of IT leaders said their company’s revenue will be negatively impacted if they fail to complete digital transformation initiatives in the next 1-5 years, according to a 2020 report by MuleSoft.

But the road to change is rife with pitfalls that ultimately lead to your digital transformation efforts failing. Here are 5 reasons why digital transformations often fail and how to avoid them.

1. Failing to measure clear strategic outcomes/focused on measuring output

Uncertainty and a lack of strategic clarity from leaders around the purpose of the transformation are by far the most common mistakes organizations make when approaching digital transformation. Management teams need to be carefully aligned on the transformation’s strategic intent and outcomes, mapping out clear business targets and the transformation’s impact on processes, people and tools.

Once it’s been mapped out, it needs to be communicated down to the employees, external stakeholders and end-users to prevent discord and poor experiences. If the goal or target isn’t one sentence that everyone can articulate easily, then it’s not clear enough. It needs to be on a high enough level – for example driving efficiency, meeting the compliance needs of our customers or enabling cost-savings – in order for it to gain traction in your organization.

2. Changing too much simultaneously

Nothing is important if everything is important. Companies often fail at digital transformation because they fail to take an iterative approach. I once spoke with the CIO of an organization that had 15 changes happening simultaneously.

The number of touchpoints each change had made life extremely complex for individual end-users. This was exacerbated by the fact that they didn’t fully understand why the change was even happening.

This can be avoided by measuring the strategic outcomes your organization is looking to achieve and communicating them from an outcome-based perspective. For organizations to make good decisions on prioritization, good measurement is needed. If the transformation doesn’t fit within your strategic goals, KPIs, or Objectives and Key Results (OKRs), it’s better that you press pause and decide to terminate the idea or save it for later. Make sure you communicate clearly to your employees which tasks take priority and what can be left for later.

3. Not giving it enough time and expecting results immediately

There’s often haste from management to get transformations implemented immediately, and employees are often expected to master new digital tools instantly. A common mindset is that digital is faster and better. However, the first two months of the digital transformation will most likely be occupied by tackling all of the different problems and bugs that the tool or process has. To avoid frustration and make sure that employees remain productive, allocate enough time for training and in-person support.

4. Treating digital transformation as an IT project

It’s a common misconception that digital transformation means being more digital – actually, it’s a change in the behaviors of your employees, end-users and customers. It relates to the human factor in the digitalization process, and this will ultimately determine if your transformation efforts fail or succeed.

Organizational dynamics have to be a part of the implementation plan. How will people’s roles change, and will there be power shifts once it goes through? Ask questions like ‘what will people be expected to do more or less of after the implementation’ and ‘is the transformation removing something particularly meaningful from people’s work?’ By taking a strong people focus, managers can help mitigate people’s feelings of burnout from the rapid adoption of new tools and provide assurances that combat any feelings of insecurity regarding the organization’s future by listening and facilitating more open dialogue with employees.

5. Only measuring good (or bad) feedback

Measuring feedback and your employees’ experiences is essential if you want to know if the change is moving in the right direction.

Positive feedback is often easy and helpful for most organizations. However, receiving negative feedback is equally important to help you shape your transformation processes and build something that truly solves problems and creates efficiencies. Like most things, too much of one thing can hurt your progress and could be an indicator of a wider cultural problem inside your organization. Either you focus on just the positives and choose to sweep the negative feedback under the rug – thereby creating a culture of fear of receiving criticism – or you concentrate solely on negative feedback, forgetting to celebrate the positives that you’ve done well. This can ultimately destroy motivation and create a culture fueled by complaints.

Transparent reporting and open communication will help to mitigate these problems. By focusing on the experience of employees and end-users instead of purely on their output, you gain a much more holistic view of your organization and have greater justifiability to other C-level management who’d like to find out how things are progressing.

Finally…

Before you begin your next transformation, start by answering the following questions:

  • What’s the desired outcome of your transformation?
  • What are you looking to achieve?
  • Can you explain the value of the change clearly enough?

If you don’t have a clear, precise answer to these questions, don’t start your transformation until you’ve had a chance to dive deep into the strategic goals of your company and re-evaluate how you plan to execute them.

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Juuso Hämäläinen

Founder and CEO at Tangible Growth

https://www.tangible-growth.com/

Founder and CEO at Tangible Growth, Juuso helps companies be more purpose-driven and gain execution confidence in an ever-changing world. He is the founder of Tangible Growth, a SaaS company focused on strategy execution and culture transformation. He is a guest lecturer at Maastricht School of Management on strategic agility, and has written a book on OKRs in Finnish that is being translated into English and other languages.

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