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DIGITAL TRANFORMATIONS ON THE BRINK

12 reasons why digital transformations fail
Lack of CEO sponsorship, talent deficiency, resistance to change — if you’ve encountered any of the following issues, you may want to rethink your digital transformation before it grinds to a halt.

By Clint Boulton
Senior Writer, CIO
MAY 20, 2019 03:00 AM PT

Digital transformations are fashionable these days. You won't find a CIO that isn't leveraging some combination of cloud, analytics, artificial intelligence and machine learning to better serve customers or
streamline operations.

Now for the inconvenient truth: The fruits of IT leaders’ labor have failed to ripen. Only 14 percent of 1,733 business executives polled by McKinsey in September 2018 said that their digital transformation
efforts have sustained performance improvements, with only 3 percent reporting complete success at sustaining change.

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“The hit rate is so low that it’s discouraging,” says Laura Laberge, senior knowledge expert at McKinsey. “They feel like they’ve been doing this for four years, spending millions of dollars on technology and
people capital and nothing has changed.”

Experts surveyed by CIO.com say there are specific impediments to driving the requisite change that transforms an enterprise. Following are 12 issues derailing digital transformations today.

1. Lack of CEO sponsorship

Lack of a clear transformation strategy was cited by 35 percent of executives as a key barrier to achieving its full digital potential, according to Wipro Digital. And that strategy starts with the CEO, many of
whom are failing to design a coherent strategy, says Rajan Kohli, senior vice president and global head of Wipro Digital.

"Digital transformation efforts are coming up short on intended ROI, in part because digital transformation is as much a leadership issue as it is a strategy, technology, culture and talent issue,” says Kohli.

2. Lack of consensus on what digital transformation means

The CIO may view digital as a way to drive operational efficiency, while the CMO may see digital as the answer to boosting customer engagement. A true digital transformation requires both.

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The key to a successful digital transformation often lies in creating a new, unique customer experience. Doing so is an enterprise-wide endeavor, and it's incumbent on the CEO to take the reins and drive
focus that unites IT and the business.
3. Wait-and-see trap
One of the biggest binds companies put themselves in is delaying transformation, says Martin Reeves, managing director of BCG’s Henderson Institute.

“The single biggest predictor of success of transformation is the promptness of their start,” Reeves says. “Digital disruption happens fast and most financial metrics are lagging indicators of potential.”

Forgive the cliché, but disrupt or be disrupted is a harsh reality. According to Reeves, however, companies would be better served by disrupting themselves, a little something he calls preemptive
transformation.

4. Trouble with ‘what and how’

Most companies exit wait-and-see mode after lackluster financials and pressure mounts from both the board and rivals. Still, most leaders struggle to figure out what they need to change and how to go
about it, says Kohli. This indecision can create inertia or, worse, wrong decisions.

One of the chief challenges enterprises face is reconciling their digital change strategy with short- and long-term financial goals, particularly for publicly traded companies beholden to shareholders and
Wall Street. "Sometimes decisions made for the short term are not the best for the long term," Kohli says.

5. Failure to align tech and talent needs

A major stumbling block for transformations involves the failure for businesses to understand both the technology they require and the talent necessary to operate it, says LaBerge. Does a business need a
new operating model for digital? How many Scrum/agile experts or DevOps engineers does this require?

Business unit leaders must liaise with their CIOs to get a handle on these knowledge gaps. The pace of digital change makes this a difficult but necessary ingredient for success.

LaBerge summed up the issue facing CIOs, “I’m stuck with a lack of talent and I don’t understand the technology, but if I wait I’m screwed.”

6. Resistance to change
Change can be challenging in enterprises where corporate leaders have enjoyed a certain degree of comfort. "People built their careers and power on what they know and it's hard for them to let go," Kohli
says.

Indeed, 43 percent of 4,500 CIOs surveyed for the 2017 Harvey Nash/KPMG CIO survey cited resistance to change as the top impediment to a successful digital strategy. Resistance to change can grind
transformations to a halt.

7. The technology trap

Neither the willingness to change nor the perfect alignment of tech and staff can save CIOs from falling into the technology-centricity trap. While technology is a critical driver of transformation, applying
tools that don’t help satisfy customer demands or enable new digital business models adds little value, Reeves says.

Another problem: picking favorites, such as cloud, predictive analytics, blockchain, artificial intelligence or internet of things (IoT). Sometimes CIOs can fall in love with a single tool in their kit, obscuring
more fundamental competitive and customer considerations, says Reeves. This trap also impinges potential of using sensors, data, analytics to improve decision making.

8. No balance
Even with the right tech and talent mix, CIOs focus on infrastructure overhauls at the expense of customer-facing innovation, Kohli says. A true digital transformation tackles both sides of this coin in
parallel, he says.

For example, companies should allocate teams to migrate to cloud infrastructure while experimenting with mobile applications, chatbots, blockchain or IoT.

9. Lack of velocity
Only 4 percent of respondents to Wipro Digital's survey said they realized half of their digital investment in under one year, with the majority of respondents saying it has taken their company two to three
years to see at least half of these investments come to fruition.

LaBerge says that the scale and pace of digital acceleration compound the issues, making it hard to close the gap between incumbents and rivals. For instance, companies that are starting version 2 of a
digital service find themselves competing against disruptors that are on version 78.

“Scale or network effects can make failure seem even bigger,” LaBerge says.

10. Talent de cit

Digital transformations require new talent, including software engineers trained in the latest programming languages and product managers who know what customers want in a virtual assistant.
Companies are paying top dollar for user experience design whizzes, DevOps engineers, data scientists and artificial intelligence professionals — when they can find them.

But demand far outstrips supply, and most enterprises find it hard to lure seasoned software developers, product managers and other tech professionals away from Apple, Google or Facebook. "There is a
massive talent gap," Kohli says, adding that scarcity and attrition can kill digital transformations.

11. Lack of continuity

You’ve seen this movie before: A CIO’s LinkedIn profile morphs from "Global CIO of X" to "Global CIO of Y," or, worse, "looking for my next opportunity." The impact of such transitions is hard to quantify, but
they tend to set efforts back.

“Senior-level leaders don’t want to inherit a transformation,” LaBerge says. “They want to start from scratch to leave their mark.” LaBerge also says turnover among the rank-and-file staff and other
managers is as much to blame for the issue.
With CIOs and their staff jumping ship (both voluntarily and involuntarily), enterprises stand little chance of executing their digital strategies.

12. Focusing on the wrong rivals

It’s tempting for an incumbent to train their digital guns on those mortal enemies with which they have competed for decades. Banks, for example, tend to think of their competition as other banks.
Reeves says that companies should be benchmarking against the disruptors — the Amazons or Ubers that hail from other industries.

“The competitive standard should therefore be set by overall digital leaders, not the other companies in your industry,” Reeves says.

More on digital transformation:

7 secrets for getting digital transformation right
An inside look at 16 real-world digital transformations at today's leading organizations
7 skills of successful digital leaders
15 ways to salvage a troubled digital transformation
7 digital transformation myths
Digital KPIs: Your keys to measuring digital transformation success
6 hot digital transformation trends — and 4 going cold
4 things successful CIOs know about digital transformation
Digital disruption: 10 ways to survive and thrive
What is digital transformation? A necessary disruption
What is design thinking? The secret to digital success

Next read this:

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The 9 new rules of IT leadership
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7 key IT investments for 2019 (and 3 going cold)
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CIO resumes: 6 best practices and 4 strong examples
4 KPIs IT should ditch (and what to measure instead)
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Clint Boulton is a senior writer for CIO.com, covering IT leadership, the CIO role, and digital transformation.
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