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However, digital transformation requires time and effort. Whether supporting traditional operations by introducing new technology or updating entire technology systems with unique technology, digital transformation requires time and patience. Have you ever noticed the outcome of this process? Is that a success? Be careful, and here are five reasons that may make your digital transformation fail.
- Insufficient risk estimation and mitigation
For a specific business, pre-empting risk means having a clear vision over all aspects of the project, including the budget, time, and measurement. Digital transformation should be an initiative that brings your company better tools to compete, but not a hasty plan for reacting to competitors. Never underestimate or ignore the risk of transformation. For example, Revlon's bankruptcy in 2019 can give us a warning. This global cosmetics giant rolled out a new ERP for its North American business in 2018. However, during the ERP changeover, unexpected issues disrupted its ability to manufacture specific quantities of finished goods and fulfill shipments to several large customers in the US. This fatal disruption caused a chain reaction, and the company's stock fell 6.9% in 24 hours. This "accident" reminds us to think about how organizational change can affect digital transformation success before we take action.
- Insufficient time and margin for transformation
Every type of transformation needs time and space. You should be patient and careful before you succeed. Don't take shortcuts and shorten the testing phase. The failure of Hershey's can teach us a lesson. In the company's crucial digital transformation in 1996, they were trying to complete the project before the predicted Y2K bug. To finish work before the deadline, the implementation team had to shorten the testing and ship as quickly as possible. What's worse? Completion was set for one of the company's busiest times of the year. When problems arose with the new system, over $100 million in orders were unfulfilled, and the company's stock dropped 8%. This case indicates that you should know how much work and time is required before your project roll-out.
- Lack change management
Change management means managing organizational changes from start to end. Digital transformation projects are often dramatic and dynamic. This management will make your operations run smoothly until the migration is completed successfully. The digital transformation failure of Hewlett-Packard taught us the significance of having a flexible, capacity-on-demand solution for every possible issue in the process. In 2003, HP's new ERP wasn't configured to sync with its old systems. As orders piled up, the company didn't have manual workarounds to ship orders outside its ERP systems. In other words, a plan B is necessary for handling changes. You should keep asking your team, what can we use in the interim? How can we communicate with customers that may arise before and after lapses happen?
- Failure to ensure the company objectives and goals
For many companies, digital initiatives are solutions for solving problems. However, companies are forced to transform simply because of competition, so no clear goals are set to guide the company. As a result, companies ship new technology for its sake but don't have metrics for measuring. For example, Procter & Gamble had big ambitions to modernize their company in 2012, but the project dragged on and eventually shuttered when it came under scrutiny. Their objectives were too broad, and they failed to consider the ROI for such a massive digital transformation. Thus, you should ensure that your project objectives and goals are achievable and clear.
- Failure to understand customer expectations and needs
Your ultimate goal of taking the risk of transformation and embracing new technology should be better helping your customers. A digital transformation cannot win when it doesn't serve your customers well. So before considering your new plan, think from your customers' angle. Asking customers what future change they want is essential. Then, you can decide what to do and not to do according to customers' demands. This is necessary for any business to stay alive.
Companies need to transform digitally to serve their customers and enhance competitiveness in the market. However, they also need to face failure and learn lessons from it. These five analyses and four real-life cases will enable you to think thoroughly before entering digitization. Adopting a" fail-fast" attitude can help your company's digital transformation journey. You should accept failure first and require any of your actions to be thought through.
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