Why do digital transformations often fail?
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
The transition to digital is a $1.7 trillion industry, yet 70 percent of attempts end up failing, according to McKinsey & Co.
Tony Saldanha, president of Transformant, a consulting firm helping organizations through digital shifts, believes a lack of clear goals and a disciplined process to achieve them, contributes to the high failure rate. Confusing terminology is also an issue.
“The term ‘digital’ is fuzzy,” Mr. Saldanha, the former VP for IT and Global Business Services at P&G, told Knowledge@Wharton.
His new book, “Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead,” outlines five levels of digital transformation.
“Real digital transformation, to be precise, is the rewiring of an existing enterprise so that your physical product becomes smarter, your go-to-market models become more digital, and your internal operations become at least two times as efficient,” said Mr. Saldanha. “But it’s a journey of five stages, all the way from automating your typical accounting kind of stuff, which is stage one, through stage five, where not only have you changed your processes, people and other rewiring, but your organization culture becomes completely digital. Being extremely clear about what you’re aiming at and being very precise on which stage you are on that journey is the No. 1 issue that most companies face.”
In the latter stages, an organization transforms itself for the first time (stage four) and makes sure they’re able to sustain it (stage five). Said Mr. Saldanha, “This is when, like many of the successful companies in history, the organization looks to reinvent itself. And there needs to be the internal processes that reward that behavior and allow that risk-taking to happen.”
One of the biggest challenges is changing behaviors and motivations so that the organization acts with the agility and the urgency of a startup. Said Mr. Saldanha, “That’s a harder transition. And that’s really where a lot of the fears are among the boards and CEOs among the Fortune 100s that I consult with. How do I almost re-do my organization’s agility and digital skills to compete with the startups?”
DISCUSSION QUESTIONS: What do you see as the obvious and less obvious hurdles retailers or brands face when undergoing a digital transformation? Do you agree that one of the core challenges is rethinking organizational culture to act like a startup?