How to save a failing digital transformation

With organ­i­sa­tions fore­cast to spend tril­lions on dig­i­tal­ly over­haul­ing their busi­ness mod­els over the next few years, get­ting it right first time is at the fore­front of most exec­u­tives’ minds. It’s wide­ly observed, how­ev­er, that most busi­ness­es that attempt dig­i­tal trans­for­ma­tions fail.

Glob­al spend­ing on dig­i­tal trans­for­ma­tion is fore­cast to reach $2.8tn (£2.15tn) in 2025, accord­ing to the Inter­na­tion­al Data Corporation’s World­wide Dig­i­tal Trans­for­ma­tion Spend­ing guide. Yet, McK­in­sey research sug­gests that most attempts at dig­i­tal­ly remod­el­ling organ­i­sa­tions fail. Why are busi­ness lead­ers fail­ing to learn lessons?

One of the first rea­sons could be that all organ­i­sa­tions had to accel­er­ate, or in many cas­es begin, their dig­i­tal trans­for­ma­tion projects under a cloud of glob­al pan­ic as the world shift­ed to remote work­ing in ear­ly 2020.

Any change pro­gramme attempt­ed in a rush will inevitably face risks. And dig­i­tal trans­for­ma­tion projects have poten­tial­ly even high­er risks because of the daz­zling array of new tech­nolo­gies avail­able, the urgent com­mer­cial need to recon­fig­ure post-pan­dem­ic and the chang­ing expec­ta­tions of staff and cus­tomers.

The myr­i­ad tech­nolo­gies now avail­able to trans­form busi­ness process­es and sys­tems can bam­boo­zle exec­u­tives with their lofty promis­es of rev­o­lu­tion­ary change. A com­mon mis­take in change pro­grammes is invest­ing in tech­nol­o­gy for technology’s sake with­out under­stand­ing the align­ment with the over­all strat­e­gy. But experts agree that dig­i­tal trans­for­ma­tion is rarely about the tech­nol­o­gy, but rather about peo­ple and busi­ness mod­els.

“Peo­ple focus on the tools and not the busi­ness mod­el that sits behind. It can become dis­tract­ing. The big­ger ques­tion is how to use a tool valu­ably, whether it will add val­ue and whether cus­tomers will gain from it,” says Matt Spry, founder of con­sul­tan­cy Emer­gent.

Take a seem­ing­ly sim­ple exam­ple of a planned out­come of a larg­er dig­i­tal trans­for­ma­tion that affects employ­ees on a dai­ly basis – such as hot-desk­ing – where employ­ees have no allot­ted desk. The fun­da­men­tals of the con­cept are clear – new tech unchains staff from seden­tary work­ing life and can cut office space costs. But evi­dence shows that unless lead­ers engage the staff it affects and under­stand people’s behav­iours, hot-desk­ing will fail – and repeat­ed­ly has done – as well as result in mil­lions wast­ed.

“Senior lead­er­ship has to lis­ten to and empathise with both vocal detrac­tors and the insid­i­ous detrac­tors. The insid­i­ous detrac­tors are the most dan­ger­ous so the lead­er­ship team should be antic­i­pat­ing resis­tance because it will hap­pen,” says Lau­rence Parkes, CEO of dig­i­tal expe­ri­ence agency Rufus Leonard.

The rea­sons for fail­ure are var­ied and mul­ti­fac­eted but abun­dant­ly clear, experts say. Typ­i­cal­ly, most dig­i­tal change projects fail because of a weak­ly for­mu­lat­ed vision and strat­e­gy, a lack of lead­er­ship expe­ri­ence, an absence of cross-col­lab­o­ra­tion, lack­lus­tre com­mu­ni­ca­tion, poor employ­ee engage­ment and weak imple­men­ta­tion, among oth­ers.

“The lack of engage­ment and adop­tion by employ­ees and key stake­hold­ers is arguably the sin­gle biggest rea­son for tech­nol­o­gy trans­for­ma­tions fail­ing,” says Nadim Ahmad, for­mer CFO and founder of con­sul­tants Clyde Moray.

When the prospect of miss­ing the goal aris­es, instead of plough­ing on and fudg­ing prob­lems, man­age­ment should pause the project and take stock. 

“My start­ing point would be how accu­rate is my cur­rent assess­ment of where we are on the jour­ney. Review exist­ing sta­tus reports and gov­er­nance meet­ing notes to high­light some of the fail­ure points,” Ahmad says.

A review of time­lines, bud­get, con­tin­gency funds, the orig­i­nal busi­ness case and its scope should all be car­ried out at this point, experts say. The poten­tial for scope creep and bud­get con­straints can top­ple the most well-made plans. 

At this point, com­mis­sion­ing an exter­nal assess­ment may be an option to avoid inter­nal pol­i­tick­ing. But this could also raise the issue of whether man­age­ment failed to appoint the right peo­ple at the start, and it’s often dif­fi­cult to acknowl­edge pre­vi­ous mis­takes, espe­cial­ly if fail­ure is not an option.

“The oth­er thing that I would look at to get back on track is to make sure the project report­ing and fre­quen­cy is accu­rate. Make sure that you’re con­tin­u­ous­ly report­ing and con­tin­u­ous­ly inter­vene when you start to see prob­lems are aris­ing,” Ahmad says. 

The project’s gov­er­nance frame­work is also crit­i­cal to cor­rect­ing errors. If the steer­ing com­mit­tee isn’t made up of senior deci­sion-mak­ers that can help unblock some of the chal­lenges that a deliv­ery team tends to face, then project lead­ers may strug­gle to get back on track.

Oth­ers sug­gest, how­ev­er, that nur­tur­ing a space to fail should be fac­tored into any change pro­gramme. 

Jen­ny Burns, CEO of inno­va­tion con­sul­tan­cy Fluxx, says: “A lot of organ­i­sa­tions try to tack­le the whole thing in one go and make com­mit­ments to investors about mile­stones on a quar­ter­ly basis. The best way is to test and iter­ate and then scale up. Quite often, we see busi­ness­es with­out the mind­set to be able to make mis­takes, learn from them, move on.”

A bet­ter start­ing point, Burns says, is to talk about a sequence of events, indi­cat­ing how the bud­get will be drawn down at spe­cif­ic times to man­age risk and invest­ment based on evi­dence rather than assump­tions.

“Not only are peo­ple not learn­ing from their own mis­takes with­in an organ­i­sa­tion, but we’re yet to have the strength and con­fi­dence to learn from oth­er peo­ple in the same indus­try, or even out­side the indus­try,” she says.

Anoth­er option to cor­rect the course of action is to revamp the com­mu­ni­ca­tion strat­e­gy. Week­ly email updates might not be the best com­mu­ni­ca­tion chan­nel nowa­days when there are so many dif­fer­ent forms of media avail­able. “If staff and cus­tomers feel that change is forced upon them, they may strug­gle to embrace it,” Spry says.

Some good old-fash­ioned com­mu­ni­ca­tions tools still work, though. Reg­u­lar bi-week­ly or week­ly town hall meet­ings, for exam­ple, where the whole project team can field ques­tions and answers, rather than just a sin­gle exec­u­tive. 

“Com­mu­ni­ca­tion is essen­tial. Find­ing moments to reflect on the progress that you’ve col­lec­tive­ly made, prais­ing those peo­ple that are fun­da­men­tal at enabling change, and prepar­ing peo­ple for the next wave of pos­si­bil­i­ties will also help get things back on track,” Parkes says.

Nar­ra­tive shorts (mini-films) instead of mul­ti-page doc­u­ments can also help peo­ple digest and visu­alise the change. Alter­na­tive ways of sto­ry­telling will also show­case an organisation’s inclu­sive approach because not every­one absorbs infor­ma­tion in the same way.

“The oth­er pit­fall we notice a lot is the lack of sto­ry­telling in busi­ness­es. The test-learn-iter­ate approach means you can talk about what you’ve learned as you go; what you’re aim­ing to suc­ceed, what you’ve parked, or what you’re going to move for­ward with. Lead­ers often tell that sto­ry once and think that’s enough, where­as it needs to be repeat­ed,” Burns says.

Change always takes longer than expect­ed. Bud­get over­runs are com­mon­place and peo­ple, gen­er­al­ly, don’t like change. Unless busi­ness lead­ers begin to learn from oth­ers’ mis­takes and pro­vide space to fail, the next 10 years of dig­i­tal trans­for­ma­tion may prove a tumul­tuous and expen­sive decade. Acknowl­edg­ing fail­ure as part of a learn­ing process is some­thing we drill into our chil­dren to build resilience. Isn’t it time the grown-ups learnt this les­son, too? Small steps, done well, can lead to big changes.