70% of digital transformation projects still fail. Many executives leading digital transformation are sharing their frustrations and the challenges they are facing. The road to digital transformation is not easy for these people, who are given the task but not the means. Digital transformation is not new. A lot of people are tackling the subject for many years now and they all relate the same challenges.
Barb is working for an insurance company. She is relating that her colleagues are seeing her as a thread. They see her as the evil, who is going to put them out of work, so the resistance is intense from the departments. She has one champion, who is protecting her but she is the number one enemy for most people. All she achieves is made so complicated, while it could be way simpler if she did not face so much resistance. She spends most of her time lobbying rather than doing.
George is working for a professional services company. He is tasked with digital transformation but the budget is not there. He does not have the tools, he does not have the metrics, he does not have the people and the budget is insufficient to do what is right. He does what he can with what he has and already achieves great success but it is way less than what could be achieved. The company has a lot of potential but does not see it. He is seeing each day this missed opportunity and it is depressing him.
Ellen is working for a fashion company. The company is talking about implementing functionalities that should have already been implemented years ago. There seems that the basics are discussed, while the market is moving forward. The progress is slow. People do not understand and spend more time debating than doing. They are taken over by brands, which are far more innovative.
Ken is working for a retailer, who wants to bring his eCommerce in house. In the CEO's eyes, this is just a storefront to build. When Ken explains that bringing eCommerce in-house involves having also an inventory manager, a call center and connecting to other systems, then the project does not take the same dimension and the amount of investment is not as imagined. Also, the CEO did not anticipate that, now, he will need to have the skillsets in-house to manage all this. Ken will be spending a year just to educate and to stir the project in the right direction.
Adam is working for a catalog retailer. The team is old school. He is trying to push digital but the catalog is still the center of attention and spend. Designing for print and designing for digital is different. He is having a hard time getting them out of the old ways. The ‘’legacy’’ considers him as an outsider and does not value his inputs to the level it should. He keeps having to fight for his business unit and to make sure he is getting the resources he needs.
A lot of stories showing that most companies want the transformation but the reality is different. They want the transformation but they do not assign the right resources to it or the budget. What is magic? They want the transformation but it should not disturb. How can we change without changing? They want the transformation but still want to measure using the same metrics. Isn’t is measuring apples to oranges? They want the transformation but use the same people as the ones they currently have. Don’t you need people who know what they are doing? They want the transformation but only in this area. Is it still a transformation then? They want the transformation but do not want to touch their existing technology. Do you know that digital requires technology? They want the transformation but no impact on the EPS. How can you make an investment without impact? The list of contradictions is long.
I will summarize the major hurdles to transformation:
The authority: transformation leaders are the owners of the transformation but because it touches a lot of departments, they work in a matrix organization and have to get everybody along. They keep a limited authority on the tasks and therefore can get stopped by any department, which does not want to collaborate. The politics eat on the larger goal.
The budget: the organization does not always understand that in order to transform it needs some budget. They heard that digital is cheap so because it is cheap, let’s just not give them money. Yes, digital is cheaper but the organization does have to invest to put the things right before it can see the benefits. The benefits usually come very quickly and the ROI is high but it might mean spending a couple of million dollars for some years until the transformation is done.
The duration: People believe it is going to take 5-10 years to get there so no need to rush. It does not have to be lengthy. What makes it long is usually the lack of understanding, the resistance or the politics that interfere with the process. What can also elongate the process is the budget not being attributed correctly so everything needs to be piecemeal in order to be able to achieve the goal. I am not saying tho that a big bang is a way to go. It has to go by steps but sometimes the steps are much longer than needed.
The scope: transformation has to touch everything. When we are talking about transformation, we are talking about product, customer experience, technology, systems, processes, skillsets, and especially mindset. We cannot become digital without the right systems or still working with a waterfall process. Digital is going quickly. It is changing often. We need to be able to adapt and therefore the organization needs to be set up in such a way that it can move quickly.
The skillsets: finding true digital people and especially people who have led a digital transformation is not easy. The skillsets are very specific. In addition, digital people do cost more but companies are not always understanding or willing to pay more. They, therefore, end up using existing resources who are not savvy or getting people with very little experience. In some areas, it is harder to find talents and a lot of organizations are not open yet to get remote people or commuting people to be able to acquire the right expertise. The lack of talent is, therefore, limiting the performance of the teams.
The technology: legacy systems, old infrastructures or missing capabilities are also hurting a lot the transformation. When the systems are not adequate, we have to equip the firm with the right infrastructure and these are non-anticipated costs.
The lack of savviness: the transformation leader is very often his own species in the pond. They are here because the board knows they need such expertise but without always knowing what they need them for or not understanding the scope of what they can achieve. A lot of leaders still have to fight old ways and are therefore not always given the support they need. They have to go through a lot of education to move things along.
The short term vision: Digital transformation is an investment. Some CFOs only look at the impact it can have on the quarter or to the year. Their goal is to cut costs and save money in order to increase the bottom line. In fact, a transformation needs some investment and it will get an ROI sometimes over multiple years. Because a lot of firms need to respond to their shareholders, investing is not always the priority as it might hurt their earnings per share. We can reduce significantly the impact but the board needs to be ready to give away 1 cent or 2 to achieve a goal that will get a much bigger payback in the future. Short term vision and earnings are very often conflicting with long term savings.
The fear of disruption: people are comfortable with what they know and what they have been doing for years. Nobody usually wants the change, however, change is inevitable. As soon as the transformation starts, some people are not happy and start complaining. The company needs to make it clear that this is the direction to go and not provide an audience to the naysayers. People fear for their jobs, leaders fear to lose some people, people have to adapt and learn new skills. Leaders know that a culture change needs to happen but does not want the rumblings that go with it. The change can be smooth but it cannot be perfect as there will always be some people, who are just fine with the status quo as it is way more reinsuring.
So now, why this need to happen and all the hurdles need to be removed? There are 100 million new businesses launched globally each year. They go faster, they have new ideas and these small fishes are pushing the big ones out. So it is a matter of life or death to be able to transform constantly. Humans, products, and companies, all follow a lifecycle. The company always needs to prepare for the next big thing in order to replace the one getting old if it wants to survive in the long run. Companies have a 24-year lifetime. Companies like Amazon are investing constantly and are not afraid to take an EPS hit as they know they will come back stronger in 2 years and eat them all. For example, Amazon is talking about VR while some other retailers are still debating to deploy ship from stores. The pace of technology is increasing. Now we have a new revolution every 5 years, while before it was every 10 years. We are now even going to see huge changes every 2 years. Who can stay and just watch what is happening there and believe he can survive?
The reality is there. Companies have to face it. Remember when in 2007 some people were saying that the iPhone will not take off. Where are we today? Are we still looking at the iPhone on the other side of the road? No! It invaded our lives! CEOs and boards need to embrace the change and understand where the market is going. Digital leaders should not face such resistance and they should not share this unanimous frustration about what is happing in corporations. They know what they are doing, they are here for the company survival so trust them and let them operate. Would you put everything in the way of a neurosurgeon, who you selected to remove this tumor in your brain, and who can offer you many more years of life?