Brand Insights

Where do most companies go wrong in digital transformation?

Overview

Digital transformation is essential for any business to remain competitive in today's rapidly changing world. However, many organisations make mistakes when undergoing their digital transformation journeys that can significantly damage their performance and profitability. This article outlines six of the most common mistakes we've seen businesses make when going through a transformation of their own.

Scope

Exploring the importance of strategy and data analytics in digital transformation, and how to ensure that you bring people on the journey, not getting too hung up on specific technologies.

These days digital transformation is an essential aspect of modern business. Staying competitive is getting harder. Costs are rising. Consumers have less disposable income. Budgets are being squeezed. It makes sense, then, that the race is on to embrace new technologies and adopt new business models to achieve greater efficiency and effectiveness. 

With the rapid pace of technological advancements, companies are constantly seeking to transform their operations and stay ahead of the curve, and many are turning to digital transformation initiatives to help them move into the digital era.

The marketplace is filled with innovative digital tools that claim to improve performance and increase profitability. But even after implementation, businesses often struggle to realise the full potential of these digital tools.

In 2018 an estimated $1.3 trillion was spent on digital transformation projects. Approximately $900 billion of this was wasted when initiatives didn’t meet their goals[i]

Digital transformation strategy

Too often this comes down to the company's digital transformation strategy (or lack thereof). They invest in the best digital transformation tools, but don't look at the transformation needed in their business processes. That's why so many organisations that undergo these kinds of transformation see far less benefit from them than they expect.

 According to Deloitte, 87% of businesses expect digital to disrupt their industry. However, only 44% are prepared for the disruption[i].

But being a digital first business and utilising high quality digital marketing can create operational efficiency, engage new markets, increase sales and help companies to attract the best talent. But all of this requires proper implementation of the right tools, consistent data collection and analysis, and often a full process audit.

Common hurdles for digital transformation initiatives

Embracing new innovative digital technologies for your organisation can hold rewards like better customer service and customer experience, improved business outcomes, increased customer retention and overall revenue growth. But there are also some significant common pitfalls to avoid.

A lack of budget is a key problem that often unseats a project before it even gets started, so before undertaking digital transformation, make sure you've had a realistic exploration into the costs for your business, and set aside a contingency budget in case anything changes. Assuming that this hurdle has been overcome here are some other obstacles that need serious consideration:

  1. Lack of strategic planning

Organisations often jump into digital transformation without having a clear plan in place. Creating a digital transformation strategy is a crucial step in the process, as a lack of strategy can lead to a range of issues down the road.

It could lead to choosing the wrong digital technology or digital tools for your business needs, for example, or more commonly, ineffective implementation of that digital technology. Without a strategy in place you could find yourself missing opportunities for low-hanging fruit in terms of increasing productivity, or early sales opportunities.

Most importantly, it's vital to have a clear understanding of your goals for the digital transformation before starting the project. These goals should be SMART:

  • Specific,
  • Measurable,
  • Achievable,
  • Relevant,
  • Time-bound.

So, it's important to take time to assess your current situation, understand where this sits in relation to the wider business strategy, and set clear goals to determine the best course of action to achieve the right outcomes for your business.  

  1. Focusing too much on digital technologies

 This may sound contradictory when talking about digital transformation, but what many businesses don't realise is that while digital technology is an important aspect of digital transformation, it shouldn't be the primary focus. The digital tool itself is far less important than the process it is a part of and the team adopting it.

It's easy to believe that simply adopting the latest technology will be the silver bullet to solving all your problems, but this isn't the case. Technology is simply a tool. The way it's used makes all the difference in whether a successful outcome is achieved.

Digital transformation tools will always have the most success when used by cross functional teams with the ability use them effectively. Before buying in or building new innovative or digital tools, first assess your business processes.

Not all innovation is digital and creating more efficient or collaborative processes first will give you a higher chance of success. In doing so, you may find that you can already automate tasks that are taking up too much time. Or it may reveal that you are in desperate need of project management tools or cross-department communication tools.

Your management team should think about the wider picture and develop a healthy context into which they can place new technology. Only then will you be able to successfully leverage your chosen technology tools to improve operations whilst meeting your customers' needs.

  1. Failing to involve employees

 Another common mistake that companies make during digital transformation is failing to involve employees, or not properly assessing the impact of digital transformation on their people. In 2019 Forbes noted that 70% of digital transformations fail, and the most cited reason for failure is resistance from employees[i]. Digital transformation isn’t just about technology; it involves changing the way people work, and can have a knock-on effect on job roles, the skills needed within teams, and can lead to wider cultural change. After all, artificial intelligence is only as useful as the user.

An organization's digital transformation is more likely to be successful if management has involved the team on the ground in the early stages. After all, they will play a critical role in the implementation and use of these new digital tools and processes. The CEO needs to be a champion for the change, then the transformation plan should be cascaded to every level of hierarchy in the organisation, along with the vision of the role they will play and impact they will have in the implementation.

Bringing the whole team on the journey is important to ensure employees are on board, as well as providing everyone with the training and support they need to adapt to the new ways of working.

When employees aren’t involved in the digital transformation process, they're likely to resist change, making the transition much harder. Ensure that your employees understand how digital transformation will impact their day-to-day work but also how they will benefit from it too; this will help to reduce confusion and increase employee engagement.

It's also crucial for them to understand the changes that will impact customer experience, so those who have customer interactions can properly explain the benefits to them.

Cross-functional teamwork will help to avoid resistance to change and overcome any lack of trust issues. Neglecting to involve your employees in the earlier stages of digital transformation will make it much harder for your organisation to fully embrace all the necessary changes and reap the rewards later on.

  1. Failing to measure success

It’s vital to measure the success of your digital transformation efforts to determine what’s working and what’s not. Without metrics, you’re in the dark and unable to know if you’re making progress or if you need to adjust your strategy. Tracking return on investment (ROI) is vital to ensure that your digital transformation strategies are worthy of your investment.

This means beginning with a full audit of your position in the market, the customer demands that your business currently meets and those it doesn't, and the current business strategy and goals. It's then useful to put in place a framework, for example arranging your transformation project around five imperatives to measure against, such as:

Experiences for customers and employees
Insights that create value and improve competitiveness
Platforms that enable better information flow
Connectivity for improved communication
Integrity for data security and operation resilience

Once this is done, as you choose your digital transformation tools, project management tools, communication tools and other tools, you can attach each of them to one of your imperatives and give each one the key performance indicators that will ensure they are being utilised properly. Smart technology will provide data analytics that can be measured against your initial audit, and then measured month on month to track progress.

  1. Not providing the necessary resources

Your digital transformation plans may require significant resources, including time, money and personnel. Underestimating those requirements can lead to delays, poor results and disappointment.

If you want to utilise social media marketing to engage with your customers as part of your digital transformation strategy, you will need the correct tools (for example a scheduler, design software), the necessary skills (someone who understands social media channels, someone with design skills or video skills, someone who can create short-form digital content), and the budget behind it.

Without these resources, your use of social media is likely to be haphazard, inefficient, and unlikely to yield any tangible results, meaning ultimately the that has been invested in it is wasted.

It's likely that this will be the case for any digital transformation projects that you undertake, whether that's an app to improve customer experience, a new website for better lead generation, or project management software to increase efficiency and productivity.

While all of these will come with an outlay upfront, it's important to weigh this up with the increased revenue and other benefits gained from improving efficiency, lead generation, and customer experience, ultimately leading to more sales.

Allocating the necessary budget and providing adequate training and support to upskill your team members will ensure a higher likelihood of success. Any new software should have champions in the business that know how to use it and can support others to learn it. It's also worth considering putting incentives in place to encourage your teams to follow new processes and use new tools.

  1. Not keeping up with the pace of change

Digital technologies are constantly evolving, and companies often find themselves grappling to keep up with the pace of change to remain competitive in the market today. It’s commonplace for businesses to make the mistake of focusing too much on the short-term benefits of digital transformation and not considering the long-term impact.

Digital transformation should be iterative so that they can shift their focus alongside their customers' priorities. Companies that fail to adapt and innovate in line with the customer need will fall behind, leaving their competitors to seize the advantage. Therefore, it’s important to continuously assess your digital transformation efforts, regularly gather customer information and opinion, and make the necessary changes to stay ahead of the curve.  

Digital transformation fits well into agile structures. Agile teams are excellent at quickly responding to changes in the market, evolving customer needs, and emerging technology.

This ability to pivot quickly is essential for digital transformation projects that are often complex and rapidly changing. Choosing and implementing digital transformation tools and software for a company needs to be able to evolve and change if the company wants to move away from the status quo.