In this blog, we will highlight the reasons for digital transformation failure and why digital transformation projects can be unsuccessful. We have identified the top 5 reasons for failed projects. If a company can keep an eye on these 5 culprits, it can have success with digital transformation projects.
Our top 5 list of reasons for project failure include the following: resistance to change, lack of executive or CEO buy-in, siloed organizations, misaligned expectations, and lack of talent.
We mentioned in an earlier blog that studies have shown that 94% of business respondents believe digital transformation can provide a competitive advantage … but that studies also revealed that 50% of AI and digital transformation projects fail. Those failures are overwhelmingly when companies opt to do them in-house. Failure in implementing digital transformation can still occur when competent consultants are engaged. Consultants however can often mitigate these factors and help organizations help themselves.
Before we dive into our list, let’s take a moment to level set on what is digital transformation. Especially what is digital transformation for the SMB clients Valenta serves?
What is digital transformation and why is it important?
Digital transformation is made up of different technologies that are all offshoots of AI. These technologies are used in business to automate and optimize processes.
- RPA, or robotic process automation, is software bots performing business processes (using multiple software applications and potentially databases and document types) in an automated and typically unattended way.
- Conversational AI provides the ability to let humans and machines, or more appropriately software, communicate via written or spoken language.
- Cognitive AI allows software applications to mimic human behavior to solve complex problems and is closely related to machine learning or ML.
- Machine learning also simulates human behavior to learn and solve increasingly complex problems, just like humans do.
- IPA is using these forms of AI in combination, and it stands for intelligent process automation.
All of these can have an enormous business-changing impact on an SMB. Implementing digitalization for SMB can be a tricky matter though. Now that we have completed our level set, … let’s move on to our list!
Why Digital Transformation Projects Fail
- Resistance to change
Resistance to change can be one of the single biggest reasons for digital transformation failure. Bringing in trained consultants, and not just letting a tech vendor implement a project, can be a game-changer. Consultants with experience in a business process are typically adept with change management. Consultants can also be key to setting up and even potentially staffing Centers of Excellence or COE for SMB clients. A COE can enlist feedback from all stakeholders in an organization. They can take a top-down and bottom-up approach to project planning. Consultants can also engage in process mining and task mining before project implementation, to let the data speak for itself and define where a company should start.
- Lack of executive buy-in
Lack of executive buy-in is another huge reason for digital transformation failure. Digital transformation failure examples are abundant in this area. This problem is particularly acute when there is no CEO buy-in. Consultants can help with this buy-in issue and can provide outside unbiased counsel. The setting up of a COE also can aid buy-in. A COE will be able to document the ROI on each project. It will also ensure that projects are done the same way every time and adhere to proper project management practices. If there is a lack of CEO or SMB owner buy-in or buy-in at an EVP/SVP/VP level, most projects are doomed.
- Silos in organizations
Organizations that have silos also provide numerous digital transformation failure examples. Enlisting the support of different departments and including them in the COE can help departments work better together and all buy into automation. In SMB where this COE function might be outsourced to a consultant, a smart consultant will involve different departments and endeavor to get them working together. Once one department starts to see other departments having success they will want to participate and drive down their costs and increase their own efficiencies.
- Misaligned expectations
Another big reason for failure in implementing digital transformation is misaligned expectations. Frequently companies want to start big and do everything at once they can not see the forest through the trees. They do not know where to start and lack any level of focus. A competent consultant can also help here. At Valenta, we target the processes that are causing the most pain, the most annoyance, or waste the most time. We try to tackle one of these projects first, then move to the next, and then the next, and down the list. Completing automation one at a time, and by knocking off the biggest game-changers first, provides organizational clarity, demonstrates value and success, and typically creates an automation flywheel effect where ideas and efficiencies increase dramatically.
- Lack of talent
A lack of talent can also be a reason for digital transformation failure. In this regard, we are speaking primarily about in-house talent. RPA, Conversational AI, Cognitive AI, and Machine Learning are all super recent technologies. It is not a surprise that skills and knowledge in these areas may not exist in the IT department of a Banking, Financial Services, Accounting, Telecommunications, Manufacturing, Supply and Logistics, Medical, Legal, Consumer Goods, Education, Energy, or Utilities company. If left on their own, if these teams are tasked with digital transformation projects, and have never done one before, the failure rate is high. In-house skilled IT professionals can be a tremendous asset and a partner to any outside resource that is brought in to help to avoid failure implementing digital transformation. Usually, these professionals can be trained quickly in automation and can be key members of a COE team. The key takeaway on the lack of talent topic is that while it may exist if a clever SMB brings in outside resources these projects can succeed. Furthermore, frequently in-house staff is highly competent and can be trained. Alternatively, staff can be maintained on the jobs they do best, and digital transformation can be outsourced.
Failure in implementing digital transformation is not only found in the reasons on our top 5 list. However, resistance to change, lack of executive or CEO buy-in, siloed organizations, misaligned expectations, and lack of talent make up the bulk of the reasons. When it comes to digital transformation solutions there is a lot to keep in mind and get right. Valenta is a digital transformation consultant, and we can also provide digital transformation as a service in a SaaS model making it easy for small and medium-sized businesses to get started with digital transformation. Valenta provides offshore or near-shore virtual staff for digital transformation and can be an outsourced COE. Here is the main page for our consulting services in the area of digital transformation : Consulting Services. If you would like to get in touch with us on any of these topics, please feel free to reach out here. Contact us