This series of articles is focused on helping organizations transform better through providing knowledge, tools and techniques to address the practical challenges that create failure.
Most organizations know they will have to implement significant technology-driven change to survive the Fourth Industrial Revolution, yet we know most digital transformation projects are unsuccessful. Indeed, according to McKinsey, 70 % fail. For organization leaders, the future is insecure— don’t change and the organization faces a bleak future, attempt change and have a high probability of failure.
Failure doesn’t just have consequences for individual organisations and the people they employ but it also impacts their communities and nations. It’s essential that we increase the probability of digital transformation success and give organisation leaders confidence to engage in technological innovation in the future.
At the University of Waterloo, we have worked to understand why digital transformation fails. Our research reviewed the work done by others and combined that with our own to identify the issues that implementing companies experience and the reasons they fail.
This research allowed us to create our Watspeed Digital Transformation Online Certificate program. An instrument has been created based on the research that helps participants analyse and mitigate the challenges they will face, giving participants more confidence to pursue their own technological change.
The issues we identified are classified in four areas:
People
Organizations frequently report that people and culture are key to successful digital transformation. We examined why and found many reasons. For employees to feel safe to support technological change there needs to be a relationship of trust between them and the company. Past history of change, which may have negatively impacted job security and quality, erodes trust and makes change difficult. Digital transformation is impossible without it.
Trust is necessary for employees to participate in continuous improvement—an essential element for digital transformation. Change projects require an enthusiasm to identify and solve implementation problems and to maximize exploitation of the capabilities of new technology. These also require employee flexibility and willingness to help out where change requires and not just within narrowly defined job descriptions.
Technical skills are a frequent cause of failure with many organisations struggling to retrain existing employees or recruit to fill gaps. This is compounded by the retirement of boomers, and the subsequent loss of organisational knowledge that is essential for understanding the link between technology and business processes. Permanent expansion of training activity is necessary for digital transformation to be successful in most organisations.
Organizations also often report that their culture is not transformational. We have developed a Digital Mindsets tool that supports analysis of existing mindsets and culture together to help develop your cultural transformation strategy.
Technology and Processes
Adopting new technologies requires integration with existing technology and processes and the challenges this creates are often under-estimated. Integrating new technology with your existing technology can be difficult, for example, where data needs to be shared between equipment or where old equipment needs to be retrofitted to be work with new.
Existing infrastructure, such as wired and wireless connectivity can be insufficient for the new technology and require costly and time-consuming installation of new connectivity infrastructure. Cloud services can be very helpful in addressing this problem and others but often has its own challenges with cost and security.
Management of the installation process and its subsequent maintenance and support often strains information technology department capabilities and resources as well as their relationship with operations.
Leadership and Leadership
Substantial organizational change will fail without strong, skillful senior management leadership – including for the stressful implementation process. Most CEOs have never led large scale change and struggle with this new aspect of their role. One of their key areas of focus must be on elimination of the silos that limit cross organizational collaboration that is necessary for effective integration of technology-based change.
In recent years, many companies have tried to become more innovative, recognising that it is more important today to constantly become better. Some have created innovative cultures and processes, but many others have not. Innovation and continuous improvement are essential in digital transformation, in the design process, to address challenges in implementation and to enable exploitation of the new technologies to be maximised.
Most digital transformations stall in mid implementation and many do not proceed beyond the pilot stage. Confidence to move beyond the pilot projects to organization wide adoption is difficult to achieve at all levels and requires large scale education and training on a continuing basis.
Privacy, Security, Regulation and Political and Economic Factors
All organizations must increasingly consider privacy in their digital transformation because of the increased role of customer, employee and corporate data in their new technology and the potential consequences of data breaches and misuse. Privacy implications need to be considered from the design stage until after the implementation process winds down. Data security should be constantly reviewed and updated.
Most managers know that digital transformation requires new ways of thinking and working, and this has made them hesitate with their own change. Our work at the University of Waterloo is focused on developing confidence through simple tools and models that all managers and leaders can comfortably use, which will increase the probability that their digital transformation. The instrument we have developed based on our research on the common challenges faced in digital transformation is available to participants in our Digital Transformation program and others. Please contact me if you would like to discuss it.
