There's no doubt that the pandemic accelerated many organizations’ digital transformation journeys. There was even a joke that the pandemic had been more effective than most CIOs in enabling digital transformation. Let’s be clear, just because your employees can now work from home doesn't mean that your digital transformation journey is complete; in reality, it has just begun… and may have started on the wrong path.
The first thing we need to realize about digital transformation is that most companies fail to transform their organizations digitally. According to a research article from McKinsey & Co. (from October 2018, before the pandemic, but still relevant), only 16% of organizations that had attempted digital transformation said their organizations’ digital transformations have successfully improved performance and equipped them to sustain changes in the long-term. Therefore, 84% of digital transformation projects fall somewhere on the failure spectrum. So while many are talking about digital transformation, only a small group of organizations have successfully transformed their organizations.
Whenever something is failing so abysmally, it's a useful exercise to go back to the start and re-evaluate what it is that we were trying to achieve in the first place. So, what exactly were we trying to achieve through digital transformation? It is right there that we can see the beginnings of why most digital transformations fail.
Most digital transformation definitions are so overly broad that they're not helpful to understanding what is to be digitally transformed. We’ll keep this definition exploration brief, but there are some commonalities between definitions that can help decipher:
1) What is meant by digital transformation as a term, and
2) What organizations are doing when they fail at digitally transforming
Many digital transformation definitions discuss using “digital technologies” (a bit of a misnomer if you ask me) to transform or create new business processes, customer experiences or employee experiences. In distilling these definitions, many have realized that what most mean when saying digital transformation is using technology to make improvements. Therefore, digital transformation has sometimes been a placeholder used for all manner of organizational progress. Some have further noted that digital transformation is, in some cases, in practice, indistinguishable from managing technology projects (and I think there is some merit here).
And maybe that's the point — perhaps that's why digital transformation has become a term that's bandied about in the c-suite frequently, but when the ‘rubber hits the road,’ the practitioners are finding failure more often than not.
I'd suggest, many CIOs (CTOs/CDOs/CXOs) are tasked with achieving digital transformation because CEOs are demanding digital transformation happen without genuinely understanding what needs to be accomplished.
This plays out in that same Mackenzie study where they’ve identified five categories as keys to digital transformation success:
- Having the right, digital-savvy leaders in place
- Building capabilities for the workforce of the future
- Empowering people to work in new ways
- Giving day-to-day tools a digital upgrade
- Communicating frequently via traditional and digital methods
Many digital transformation projects are led by seasoned professionals who may not have the digital savviness to accomplish transformation projects, despite their experience, or they’re unaware that they’re taking on more than they can handle by overscoping projects. Experience implementing legacy technology doesn’t seem to correlate with digital transformation success. In either of these cases, failure becomes a certainty. Seasoned professionals need to partner with more technologically savvy professionals to properly scope and execute any digital transformation project to combine experience with technical know-how. Until this happens, success will remain elusive for your organization.
Building capabilities for the workplace of the future is the second category identified by Mackenzie. Our crystal balls have become quite murky on what the future workplace even looks like through this pandemic. Today we must engineer digital transformations for a potential myriad of outcomes that could include work from an office, work from home and hybrid workplace futures. I believe that today this is likely to be less of an issue as the pandemic has forced us to think about our workplaces’ futures more significantly than before.
Their third finding is that organizations must empower people to work in new ways through digital transformation. Where this tends to fall apart is a cohesive vision of what those new ways will be. There's certainly no single definition here, and at the surface, it seems that vendors of software products are primarily the ones that are driving what those new ways of work will be. This vendor leadership is in direct opposition to organizations understanding their business requirements and those requirements leading to digital transformation.
People, we are putting the cart before the horse! To empower people to work in new ways, you need to understand what they are before moving into software selection. Unfortunately, with this mad dash to digitally transform, many organizations abandoned their requirements gathering phase and simply selected the software provider that they were most comfortable with previously. Yes, we can largely give the pandemic credit for that situation; however, before we get too far down the road, we must take a step back to look at our business requirements. It is only there, in those business requirements, that we can find our path towards digital transformation success.
McKinsey also found that one of the categories of keys to digital transformation success was giving day-to-day tools a digital upgrade. Here is where we introduce massive risk into the digital transformation equation. When pairing everyday tools with an unfettered scope and a lack of requirements gathering, you’re putting your organization's core business processes and functions at risk. Did everyone forget about project management?
The last category of keys to success identified by McKinsey gives us what I believe is the largest clue why digital transformation projects fail so frequently. The category is communicating frequently via traditional and digital methods. Why does communication become such a strong indicator of future success with digital transformation? It's because digital transformation is about technology enabling people. People must come first. In any digital transformation project, you need to understand what the people (employees, customers, partners, etc.) need alongside what the organization needs. I have found more frequently in organizations that any implemented technology is called a “digital transformation” to meet a forced requirement that an organization must “do a digital transformation.” Simply providing Office 365 to your employees is not digital transformation (although it could be a part of it). Digital transformation is more than mere technology; it’s about meeting people’s needs through the use of technology. You cannot meet their needs without understanding their needs, and you cannot understand their needs without gathering business requirements.
So how do you hit the gas on your digital transformation journey? In most cases, it's about tapping the brakes before pushing down on the gas pedal.
Likely, your organization should not be entirely digitally transforming right now. I tend to think that none should, but instead, all should be looking at specific processes and specific experiences that they want to transform, based on need.
To move forward, it is likely a slower process than folks seem to accept today. Digital transformation occurs project by project, and you transform the organization from the ground-up based on your organization’s specific needs.