Why Many Digital Transformation Efforts Fail

If you have been around information technology investments long enough, you know that outcomes often are negative: the hoped-for benefits do not emerge at all, or prove to be less than expected. Possibly 30 percent of major IT investments actually produce the expected results. 

The same continues to be true of digital transformation efforts and investments. A new survey of IT professionals suggests DX has the same outcomes. 

source: Walkme 

The study also had respondents estimating that, of all IT projects, fully 41 percent failed to meet objectives, in the form of key performance indicators. And the larger the organization, the more likely it is that DX or any other IT initiative will fail. Larger enterprise respondents reported failure rates at six times the rate of small entities. 

source: Walkme 

To be sure, the more-important KPIs deal with financial performance: productivity, equity value growth, higher income or lower costs. 

Such “failures” are not hard to understand. Most large enterprises rely significantly on third-party integrators to attempt complex initiatives. That means lots of organizational complexity. And the number of persons who must not only agree to support, but actively ande usefully support such initiatives is therefore quite high. 

source: Walkme 

And that runs squarely up against an immutable law: the more permissions one requires to get anything done, the lower the chances of success. Consider any project with a number of key influencers. Assume that at each stage, the chances of getting a “yes” are 50 percent.

If only one “yes” is required, odds of success are 50 percent. If two “yes” hurdles are required, success rates drop to 25 percent. If three “yes” hurdles exist, odds drop to 13 percent. Each successive hurdle reduces success rates further. 

As you can see, even a small number of hurdles, each with a 50-50 chance of success, quickly reduces odds of success to an impossible level. After seven hurdles, odds of success are one in 100. 

Obviously, any complex IT project has many more gates than seven. With sufficiently vigorous top-level support, the odds of success at each gate are likely higher than 50 percent. But there are so many more hurdles or gates that odds of success are low; odds of failure high. 

The conventional wisdom is that about 30 percent of big IT projects actually succeed as expected.

Sustainable Competitive Advantage from Advanced Technology?

Perhaps every firm dreams of gaining sustainable advantage over its key competitors. Perhaps no firm ever achieves it. Gartner now seemingly argues that digital transformation will wind up the same way: becoming a way firms compete, but only one way among many, and without permanent leadership outcomes. 

Competitive advantage from “digital transformation” will be as transitory as all earlier applications of computing and information technology, one might conclude from the Gartner assessment. 

As digital networks, “always on” connectivity, and smart devices become ubiquitous and commonplace, computing will simply fade into the background, becoming as unobtrusive as the dumb thermostat or light switch, says Ed Gung, Gartner Research Board managing VP.

As digital technology becomes embedded into the way all parts of the business operate, “digital” will cease to be a useful modifier, he also notes. In the end, digital technology will become just one more dimension on which companies compete. 

Distribution networks, capital assets, exploration rights, customer relationships and content are other levers companies can pull. But sustainable advantage will be difficult to maintain in those realms as well.

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