The Reason Most Digital Transformations Fail

Productivity increases depend not just on new technology, but on a thorough re-imagination of how systems, processes and the people affected by (and responsible for) them should be managed for optimal impact. JL

FastCo Works reports:

Two-thirds of digital transformation projects fail. Too often, what’s missing is design thinking, and the human factor—How will employees, customers, and partners interact with the new technology? “Companies want to adopt agile ways of working, but what they find quickly is that it leads to a significant level of dysfunction. Without a real strategy for collaboration and a clear end goal, it’s absolute chaos.” Once they see how the transformation will integrate with the go-to-market plan, the supply chain, and the bottom line, people are likely to unite behind it.

For too many companies, digital transformation provokes a mix of urgency and paralysis. Leaders know they need to move quickly to transform their business around the cloud, big data analytics, mobile, artificial intelligence (AI), and the Internet of Things (IoT), but dread the upheaval it requires.

And they’re right to approach with extreme caution. According to a study by the consulting platform Consultancy.uk, as many as two-thirds of digital transformation projects fail—an alarming figure for a practice that affects almost every type of business operating today.
So what does it take to be in the minority that succeeds? Ironically, it’s not a singular focus on the new tech you’re implementing, but rather shifting your focus to the people using it.
“There’s so much buzz around the technologies—people think they’re a silver bullet,” says Tom Puthiyamadam, global digital services leader at PwC. “But in practice, the idea that technology in and of itself can transform how your people work, behave, and get things done is a fallacy.”
Here, Puthiyamadam shares three critical lessons that can help companies navigate a meaningful digital journey.
1. Technology is only part of the answer.
While it’s true that digital advances like IoT and AI will profoundly change how most companies operate by creating new efficiencies and opportunities, tech can’t do this on its own.

Too often, what’s missing is design thinking, and the human factor—How will employees, customers, and partners interact with the new technology?
“Digital is really an approach to business,” says Michael Versace, a research director at global market intelligence firm IDC, which studies digital transformations. “It’s how products are created, how operations are put into market, how products and services are developed and designed.”
Successful digital transformations are about creating a new experience for customers and employees, not just implementing new systems. This requires drawing in different voices and perspectives within the company besides IT—and getting everyone on the same page.
It’s this moment–getting everyone aligned—that’s critical. “We had a client,” says Puthiyamadam, “that grew their business from a couple of luxury beauty salons into well over 700 in little more than a decade. While they knew they were running in front of their technology, we worked with them to create wholesale change in how their business ran.
By bringing the different perspectives of our retail and consumer industry specialists together with our designers and technologists, we got everyone to speak the same language. We built an experience that lets their customers easily book appointments based on their preferences through a new app, while at the same time aligning back-room processes–HR, accounting, the front desk and call centers–though one integrated system. As the CEO of the company told us, ‘It’s not about the CRM and client data. It’s about the thing we’ve always been after: the guest experience.'”
The take-away, says Puthiyamadam, is that “we have to get people understanding what others are saying. Let’s get the language right.”
2. Strategic collaboration is where digital transformation lives or dies.

For a transformation to succeed, you need to break down silos. But there’s a creative way to do this, and a destructive way.
“Companies want to adopt agile ways of working across departments, but what they find pretty quickly is that it leads to a significant level of dysfunction,” says Puthiyamadam. “Without a real strategy for collaboration and a clear end goal, it’s absolute chaos. People cannot communicate with each other—they’re not able to actually meet project deadlines.”
In the midst of a digital reinvention, people need a well-defined vision for how the new technology will support the business strategy. Once they see how the transformation will integrate with the go-to-market plan, affect the supply chain, and ultimately, impact the bottom line, people with different skills and roles are more likely to unite behind it.
This alignment of business strategy, collaborative design thinking, and technology is what Puthiyamadam and PwC call the BXT (business, experience, and technology) method.

3. Innovation can come from anyone.
When PwC works with clients to drive change through BXT collaboration, Puthiyamadam says the most delicate balance is between ideation and execution.

During the ideation phase, it’s critical to bring as many different voices into the “innovation sandbox” as possible. Then, teams are given specific direction on their part in the long-term execution of the project. With that clear direction, “we continue to flex and move the teams around, so you’re never in the same group,” says Puthiyamadam. After all, the key to unlocking a team’s talent might not be in obvious places.
Unfortunately, many companies remain bound to hierarchy when it comes to problem solving and brainstorming. “The idea is, the more senior you are, the more innovative you would be—so the more we should listen to you,” says Puthiyamadam.
But as we learn again and again in a digital age, actionable and novel ideas can come from people at any level. A groupthink mentality in which everyone agrees with the ideas of the CEO limits perspectives and undermines the openness required for true organizational transformation.
“The softest spoken voice in the room sometimes has the grandest innovation,” says Puthiyamadam. “They might not have the megaphone, so we get them in the sandbox and say, ‘Let’s hear your ideas. You have the power and the voice equal to the CEO.'”