3 Ways Your Company Probably Failed to Build Digital Operations
In spite of the myriad benefits of digital operations, the fact remains: digitizing business operations is demonstrably hard.
Over 70 percent of digital transformations fail, according to research. Even worse, of those companies that don’t fail, only 16 percent see actual performance improvement.
Last year, businesses spent $1.3 trillion dollars on digital transformation, and that number is expected to reach $2.3 trillion by 2023.
This is a horrific waste of money on digital initiatives, the great majority of which either fail outright, or fail to produce their desired business outcomes. Companies cannot afford that kind of waste.
On the other hand, companies cannot afford doing business-as-usual without digitizing some measure of their business either.
Why do companies fail to digitize operations?
There are many, many reasons why operations digitization initiatives fail, and much of that continues to be misunderstood, even by top management at leading global enterprises.
Failure generally rolls up into one of three, broader patterns, as much cultural failures as they are technological:
Digitization plans are not fully aligned and committed to across the business
Companies often launch headlong into digital transformation, assign primary oversight to a singular executive or committee, then slam on the brakes abruptly when an unforeseen hurdle or implication arises, only to fall back on their old ways of doing business.
Example: A CEO of a consumer retail business initially supported the CIO for phase I of an ERP system overhaul, but noticed only at the onset of phase II how the transition would change existing customer-facing elements of the business. The CEO was unwilling to part with those elements, and the project was halted after phase I.
Digitization implementation is based on waterfall instead of agile principles
Most companies are suspect to the belief that digitization requires a minimum, 18-month detailed plan to begin implementation.
Rather than focusing on what can be improved today, or within singular, iterative sprints, companies generally commit themselves to all-encompassing, long-term plans, which either
- fail to achieve the early momentum required to keep up project commitment, or
- give way to market forces, competition, pivoting strategy, or higher priority objectives.
Example: A medical device company initiated a two-year digitization plan that incorporated both internal and market-facing assets of the business.
Six months into the timeline, the business sales model shifted from direct to consumer, to channel sales driven, a now-core business process which was not at all considered in the two-year digitization plan.
The plan was revised several times, before a short-term revenue crunch took precedence, and the initiative was abandoned.
Digitization focus is on legacy system update or replacement projects
At most companies, the digitization process begins with and remains centered around a large, expensive, legacy-replacement project, requiring large sums of capital, human resources, and time, but not necessarily bringing companies closer to achieving their digital objectives.
In a 2016 survey, only 35 percent of participants saw more than 50 percent of the expected benefits from their new ERP implementation.
Example: an IoT connectivity company decided for a major ERP implementation to help the business scale, unify systems, and add a few new strategic functionalities.
At one year along on the project timeline, only a few processes and teams had been transitioned successfully onto the new system. The remaining teams either found that the new system wouldn’t support their existing processes, or they were unwilling to modify their existing processes to fit the new ERP system.
Of the teams who transitioned, less than 50% noticed a performance improvement. The final result was an organizational bust: only 30% transitioned to digital, after more than a year of consulting and IT project management.
Go forward, faster
A better approach to building digital operations is to start with an understanding of how the business can deliver improved customer and employee experiences today: not two years from now, nor in an ideal world, nor with an expensive, new legacy system.
Implementing an ERP or hitting milestones on a rollout timeline is not the same as digitizing your business operations. Although you may have invested (a lot) in digital goods and services, that doesn't mean that introducing new, digital systems is itself a means to an end.
Ask: what changes can my teams implement starting today which will deliver value quickly for our customers and our employees?
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