Clark: Three reasons digital transformation initiatives fail

“Digital transformation is the rewiring of an organization, with the goal of creating value by continuously deploying tech at scale,” according to a 2023 McKinsey & Company article. 

Simply put, it’s optimizing processes and products through computer-based technology. Unfortunately, the effort to digitally transform an organization doesn’t always meet with success. In a 2021 study, McKinsey found that 70% of digital transformations fail.

That’s a highly disappointing number, but the question is, why do they fail? At a recent NationaLease meeting, Ryan Schreiber, chief growth officer for Metafora, detailed the three significant reasons these initiatives fail.

1. Not defining business goals: One of the biggest mistakes businesses make is plowing ahead without identifying why you’re taking the initiative. According to Schreiber, businesses need to:
   1. Figure out which direction they want their business to take. That means defining long-term and short-term goals, creating realistic timelines, and defining where they see themselves within the industry.
   2. Be realistic about what they can take on at a specific time. How much will it cost in time and money to purchase (or build) a solution, as well as the cost of implementation and ongoing maintenance?
   3. Define success. This requires businesses to identify metrics to track performance. Success is measured differently for every business, so setting an unattainable goal is self-defeating. It’s also important to “understand customer and employee needs to build user-focused value.”
2. Improper planning: This is the next area where businesses can fail. Like any other initiative a company undertakes, planning is everything. Schreiber goes into great detail here, but the main foundational work that needs to be done is to:
   1. Define business imperatives, workflows, and needed organizational changes. Schreiber recommends that companies identify pain points and potential failures through communication with users. It’s also necessary to map user workflows and organizational changes.
   2. Identify technology capabilities needed. Gaps need to be identified and documented to be handled. If the gaps are numerous, priorities must be set regarding which technology will be implemented first. Make an organizational chart of who is in charge of what steps along with their team.
   3. Define success. Much like the first reason above, an organization must identify how to measure success and what metrics to rely on. It’s important to be very specific about what is expected of each stakeholder.
3. Neglecting people: Sometimes, we become so enamored with technology that we minimize the importance and value of people. Schreiber warned businesses not to follow this route when undertaking a digital transformation. He noted, “You have to be willing to invest in the ‘non-technical’ to get the value of technology.” To pump up enthusiasm, businesses should:
   1. Enumerate the benefits to be realized. Whether it’s sales, fleet managers, or load planners, once each area understands how the technology will make their jobs easier, more efficient, and more productive, they’ll be inclined to get on board. Inform them that this technology will reduce the burdensome, time-consuming, costly, and error-prone manual processes they currently use.
   2. Reassure people that this change is actually a positive thing. Change management is challenging. Too many companies implement new technology only to find that employees are still using older legacy processes, thus defeating the reason for the new technology. Schreiber said, “Research shows that change management programs were six times more likely to meet objectives and five times more likely to be on schedule.”
   3. Make training ongoing. Schreiber showed the learning curve in a graph. As they are being trained, workers gain the necessary knowledge. However, that knowledge drops off precipitously after training unless reinforced with ongoing training and expertise. As Schreiber noted, “Don’t forget—everyone forgets.”

See also: Clark: Why change management is so difficult

Understanding why digital initiatives fail is the first step toward ensuring your organization’s digital transformation efforts are successful.