Three experts reveal how you can avoid the digital transformation mistakes your competitors are all making
When it comes to digital transformation, we tend to focus on the success stories, such as how IKEA tripled ecommerce in just three years, or how Schneider Electric has built a customer platform for energy management and sustainability.
But in reality, 87 per cent of digital transformations fail to meet expectations, and that’s usually down to a series of common mistakes.
We spoke to Imperial College Business School's Chris Tucci, Professor of Digital Strategy & Innovation, and IMD Business School's Michael Wade, Professor of Innovation & Strategy and Didier Bonnet, Professor of Strategy & Digital Transformation, who told us what those mistakes are, so that you can avoid making them too.
1. Focusing on digital for the sake of digital
One of the first hurdles when it comes to a successful digital transformation is coming up with a clear reason for doing it.
A common mistake is thinking that embracing digital means making big investments in technology without having any idea how it should be used or how it will help the company. If you don’t have a set of well-articulated objectives, you’ll end up with expensive technology and no way of monetising or benefiting from it.
2. Focusing on strategy and planning rather than vision and agility
Many companies put their faith in plans that quickly become obsolete. How many organisations could have predicted and incorporated the pandemic or war in Ukraine into their plans? While the effectiveness of strategic planning has fallen, vision and agility remain crucial.
The best way to avoid being locked into outdated plans is to align on a clear vision, then carry out a series of small experiments in that direction, and only move forward with the changes that work for you.
3. Focusing on disruptors rather than disruption
Business leaders often find themselves becoming obsessed with companies that have disrupted a sector rather than focusing on the disruption itself. This is a distraction that stops organisations coming up with their own new ideas.
As Amazon founder Jeff Bezos said: “If all our competition is looking at us, and we are looking at the consumer, then we win.”
4. Setting up the digital team to fail
Digital skills are essential for any modern company, but leaders don’t always think about how the digital team will fit within the wider organisation.
The digital transformation team should be appropriately resourced, and always report to senior leaders. If nobody cares about them and they have no power, then they’re going to be ineffective and a waste of money. Moreover, if you bring in a group of data scientists but don’t give them a challenging problem, then they will simply move elsewhere.
5. Managing digital in an “ivory tower”
If you keep your digital team separate from the rest of the organisation, then they won’t have access to the knowledge and expertise already in the business.
This will make it very difficult for the digital team to come up with interesting ideas because they don’t understand the products, services or the business model as well as the rest of the organisation does – and if you keep them apart, they will have no way to scale their successes.
6. Not focusing on cultural transformation
Too many companies think digital transformation is all about technology, but it’s just as much about people.
New technology and digital capabilities are going to be adopted by people within the organisation, so leaders must build a culture of experimentation. It’s also important to address employee fears, such as being made redundant, head on.
The way to do this is to think of it like any other change management process: you build a business case for it, demonstrate the urgency, and convince all stakeholders – including employees – to adopt it. If your employees aren’t on board, your digital transformation is guaranteed to fail.
7. Underinvesting in digital capability
Digital products and services are not enough on their own, organisations need to be able to deliver them at scale.
Think early about the digital skills you need to acquire as well as how you will upskill your existing employees. Work with your HR and learning and development teams to ensure the digital capability building is in sync with the speed of your digital transformation.
8. Taking radical steps before the company is ready
Thinking big about digital transformation is a good thing, but don’t put the cart before the horse. Digitalising and modernising your existing processes and operations is a good start and will provide shorter term return.
Value chain transformations are hard, but you will learn a lot about how to execute digital and organisational change. Experimenting with new business models is key to building the future sources of business value.
9. Not focusing enough on corporate digital responsibility
For a long time, digital transformation was focused on improving performance, which makes sense. However, ethical and sustainable implications were often downplayed or overlooked. More recently, significant questions have been raised about the impact of digital technologies on social, economic and environmental welfare, such as digital diversity and inclusion, data privacy and security, equitable sharing of financial benefits, and planetary impacts. These questions need to be acknowledged and addressed within any digital transformation.
To summarise, to avoid being part of the 87 per cent of failed digital transformation execution, business leaders must create a learning culture orientated toward experimentation, find out what works before scaling up, and manage the people issues and digital skills gaps while creating your digital portfolio.