Digital transformation is no longer just a buzzword – it’s an imperative, for thousands of mid-market and global corporations that drive our economy, as well as for many software vendors and partners on which they rely. We often see customers embark on digital transformations that lead to remarkable success. However, failed digital transformations continue to plague companies of all sizes, no matter how much money they might invest.
This begs the question: How do digital transformations fail?
From my experience, these failure modes can be classified into three groups:
- Regression
- Underperformance
- Failed initiatives
Regression refers to the “transformation-washing” conducted by businesses. While these organizations claim to be transforming and modernizing, they’re actually just building out features that should’ve been delivered a long time ago. In short, they are bringing too little, too late to the game, or trying to put lipstick on a pig.
Underperformance occurs when companies aim high with their digital transformation efforts – and miss. They’re held back by a lack of confidence, ability, imagination or executive support. But in all cases, they get the benefits of digital transformations on a much smaller scale than they had hoped.
Failed initiatives, as the name implies, are when businesses launch a digital service or product that simply doesn’t work out. Inevitably, they’re forced to discontinue it, or back burner it to try to save face with the board.
Why Digital Transformations Fail
A staggering 70% of digital initiatives fail to achieve their objectives. While that number sounds like fake news, it’s sadly the truth. But fear not, because you can circumnavigate this looming iceberg so long as you’re clear-eyed about the reasons behind those failures.
Company Culture
The inherent culture of an organization has a significant impact on the R&D team’s transformation initiatives. Digital transformations are inherently intertwined with culture change – for both software companies and their end customers. So, if a company’s existing culture is one that embraces collaboration and change, it is going to be more effective in executing transformation initiatives. That’s because, whether a company is changing internal operations, products, or how they interact with customers, transformation always entails getting different groups within various departments to work collaboratively. In a culture that promotes collaboration and is focused on tearing down walls between departments rather than throwing things over them, digital transformations will be poised for success.
Unfortunately, it’s all too common for there to be a significant disconnect between R&D and business teams, which is a major reason behind failed transformations. Whether deserved or not, these internal struggles pit people with technical roles against those with business-focused ones. This can lead to an “us-vs-them” mentality between customer-focused organizations like sales, marketing, manufacturing or operations, and the software product R&D teams servicing them. This holds true whether those R&D teams are internal or external. Compounding this issue is when software R&D teams are considered a “necessary evil” by the organization, rather than a “strategic advantage.” This is a very old song – but one that must be changed to de-risk and accelerate digital transformation efforts on all sides.
This is also where a strong CEO is crucial to bringing about an “embracing-change” mindset. CEOs need to set the right tone to ensure everyone is on-board and working together. They must model the right behaviors for digital transformation in order to effectively operationalize that behavior. CEOs must also secure an adequate budget for transformation initiatives and be willing to embrace a pragmatic modernization strategy big and bold enough to deliver true transformation, but at the same time pragmatic and grounded enough to not require a “big bang.”
Lack of appropriate talent
Another reason why transformation initiatives fail is not hiring the right talent for the job. Companies fail in finding the right people with adequate experience and understanding when it comes to executing such transformations.
We’ve written in great detail about what to do and what not to do in previous blogs. But, it’s important to remember that it’s nearly impossible to significantly transform your company without injecting fresh leadership and ideas into the organization.
So, how do you find the right talent? For starters, you need to find someone who shares your core values. This boils down to “culture fit.” Does this person jive with your team and will they be all-in from Day 1? Additionally, you need to make sure this person has the necessary skill level and technical expertise to help your business achieve its objectives. What about experience? Has this person been part of a digital transformation in the past? If so, what was their role? What do they bring to the table and how can they fill the gaps currently in your organization?
Remember to not put all your hopes into one new hire. Oftentimes the talent you need doesn’t come from a single brain – and it’s not as simple as hiring an “architect” or “visionary.”
Unclear goals
It is crucial for companies to clearly identify and understand what they and their customers want to get out of a transformation effort from a business perspective. This includes objectives like improving security, reducing costs, or increasing the ability to deliver innovative features or services.
Therefore, with any transformation initiative, you need to ensure your goals are defined properly and in such a way that everyone in your organization can answer the question “what does success look like?” From there, you can determine which initiatives will hit the mark and meet your definition of success. I’ve seen too many organizations fail to clearly define goals or success for large digital transformation efforts – inevitably this results in wasted effort and cash, frustration at multiple levels, finger pointing, and hand-wringing. In a word: failure.
A lack of a clear success target – and one that can also be clearly embraced by the end customer – will lead to poorly defined, underfunded or overfunded digital transformation initiatives. Businesses can easily end up heavily investing in initiatives that are effective only in the short term and are unable to deliver long-term benefits of a transformation.
Poor technology choices
Stop me if you’ve heard this one before: a business prepares to embark on a digital transformation and suddenly decides that in order to succeed, it must first remove any and all of its old technology.
Bad idea. Bad move. And a sure-fire way of adding your name to the failed digital transformation list.
Ripping out and replacing existing technology for brighter, shinier new toys always takes much longer and costs far more than you ever think going in. It’s so easy to burn through cash in software R&D – getting a solid return on that investment, though…
I strongly recommend an “embrace and extend” approach. Don’t go all-in on the “Next-Gen” project. Don’t do anything that feels like you’re trying to boil the ocean. You can deliver amazing innovation and successfully deliver on the promise of digital transformation, while still maximizing your return on already invested capital, if you do three things:
- Stop investing in old technologies – very simply, build new features in new and modern technologies, and write as little new legacy code as possible.
- Embrace a hybrid on-prem/cloud-based architecture – EXTEND your on-premise product THROUGH the cloud.
- Reframe your offerings from being product-centric to being platform-centric – sell your overall solution as a platform, with your existing products being just a piece of the overall picture.
What you’re really going for here is a pivot, not a revolution. And if you embrace this approach, you’ll be able to say “Yes” to your customers’ demands for digital transformation, and be able to keep the promises you make without breaking the bank.
How PlatformPlus Can Help
PlatformPlus allows your team to build new features or products with significantly less effort, enabling them to deliver on time and on budget while spending the bulk of their time on innovation rather than maintenance. This ensures they can focus their efforts on digital transformations, thereby reducing the risk of failure, and maximizing your return on your investment in software product R&D.
Conclusion
A lot of people tend to think that digital transformations are based only around product development and infrastructure. They could not be more wrong.
Digital transformations are about company culture, the mindset, the leadership from the CEO, an organization’s DNA, and its business model, just as much as they are about technology. If your company does not approach transformation initiatives from the right perspective with clear goals, a proper strategy, or the right tools they, are bound to fail.