There is huge room for error in the digital transformation of a company, but here are five top pitfalls to watch out for
Digital transformation is high on the corporate agenda, but for many businesses it remains a challenge. The IDC FutureScape: Worldwide Digital Transformation 2016 Predictions report indicates that by 2018 two-thirds of the chief executives of Global 2000 companies will have digital transformation at the heart of their corporate strategy. Drivers include the ability to compete with emerging technology and business models, and uncover new opportunities and revenue streams. IDC also predicts that 70 per cent of digital transformation initiatives will ultimately fail because of insufficient collaboration, integration, sourcing or project management. For many businesses, the initial hurdle is to define what digital transformation means for their organisation.
As Dave Thackeray, head of digital at Inspiring Healthy Lifestyles, observes, this is an ongoing challenge. “We are planning for an uncertain future,” he says. “The pace of change, particularly around technology, means that digital transformation has to be a long-range strategy that includes future disruptors.” This lack of a clear definition underpins five main pitfalls of digital transformation.
1. Scope creep
Large transformation projects tend to fail because of a lack of strategic vision. This means defining at the outset what success looks like. “Be clear about the key deliverables and desired output of the transformation,” advises Gordon McIntosh of P2 Consulting. “I’ve seen firms try to do too much at once and then go through a process of restructuring the initiative half way through, wasting time and money.” Ben McGrail, managing director at Harlex Consulting, which handles major data migration projects for large organisations, warns against “ramping up big teams too quickly”, advising companies to “start small, think big”, using small, dedicated teams and quick wins to prove the business case.
2. Latest tech
Investing in the wrong technology is a major and expensive mistake. Mr Thackeray at Inspiring Healthy Lifestyles warns against being distracted by the latest technology, vendors or consultants. Vibeke Fennell, director of operational excellence at financial services consultancy Muller Beukes Edvardsen, advises companies to look at how operational processes deliver value to the customer before selecting new systems, to ensure they are fit for purpose. “Use technology where it matters to drive efficiencies and accelerate change,”
says Harlex Consulting’s Mr McGrail. Transformational technology empowers businesses to look beyond current operations to a digital future. “A big pitfall is the missed opportunity of simply trying to digitise traditional business models and processes,” says Josh Sutton, head of artificial intelligence at Publicis.Sapient. “One of the key opportunities of digital transformation is the shift from product-driven business models to service-driven business models. Amazon, Uber, Airbnb and other market disruptors used technology to reinvent the customer experience.”
“Most successful wholesale digital transformations are multi-vendor,” observes P2 Consulting’s Mr McIntosh. Ms Fennell of Muller Beukes Edvardsen agrees, emphasising that effective integration includes processes and people. “Digital transformation affects the whole value stream, so it’s important to consider the upstream and downstream impact of changing one particular process. If you leave a gap in systems integration, people will find a manual workaround and this will compromise the outcome,” she says, adding that an important part of transformation is removing previous processes. Mr McGrail of Harlex Consulting adds: “Properly managed, controlled and quality data creates the foundation for a digital future. Many businesses place too much emphasis on systems implementation and too little on data quality and integration.” Martin Joseph Brej, vice president of global services at Thomson Reuters Elite, who handles major integration projects for professional services firms, agrees. “In many cases the success of digital transformation initiatives has depended on setting the right expectations upfront, particularly around data transfer and conversion,” he says.
It is important to establish who is in charge. Digital transformation requires board-level support and effective communication. According to Forrester Research: “Two-thirds of leaders believe they understand digital strategy, yet only one-third of their senior managers agree.” Harlex Consulting’s Mr McGrail emphasises the importance of top-down messaging driving engagement, but warns that “dislocation between the board and the rest of the organisation can undermine change because the people who are actually delivering the project don’t understand the business case”. Muller Beukes Edvardsen’s Ms Fennell adds: “People will either enable or disable change. On-site training support helps them adapt to new systems, but it is equally important to allow them time to see the benefits.” Mr Thackeray at Inspiring Healthy Lifestyles says: “Ensuring that the leadership message gets through means identifying and engaging key influencers, and they aren’t necessarily the leaders.” Mr Sutton of Publicis.Sapient recommends getting feedback from customers and employees throughout the transformation journey to keep the initiative on message.
IDC predicts: “By 2017, 60 per cent of digital transformation initiatives will not be able to scale because of a lack of strategic architecture” or failure to back up customer experience with internal processes. This requires consistency across all channels. “It’s important to consider the entire chain of actions within the business that will impact the customer experience,” says Publicis.Sapient’s Mr Sutton. “You can have the best digital channel in the world, but if the execution does not enhance the customer experience, you will have failed to capitalise on the opportunity.” For example, John Lewis’s digital transformation from traditional stores to omnichannel retail included the successful integration of physical and digital processes whereby customers and staff can access the online ordering system in-store. Mr Brej at Thomson Reuters Elite underlines the importance of “visibility across processes and platforms” to foster a digital-first culture.