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9 Reasons Digital Transformation Projects Fail

Jun 30, 2020 9:45:00 AM

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By some estimates, more than half of all IT projects fail.

It’s not for lack of trying. And there are plenty of mistakes from which we can learn. 

Somehow, in the 50-plus years since the development of project management principles, we still face greater than 50% odds that an IT project won’t be completed on time, will run out of funding, or won’t meet customer expectations. Or all three.

The sad fact is IT projects are hard. Seemingly straightforward ventures can become enormously complex. Hardware, software, infrastructure, operating procedures, and training all must fall in place the right way at the right time. When dealing with new or recent technology, the stakeholders might not understand the technology’s actual capabilities and limitations. Even absent technical challenges, IT projects can be undermined by politics, shifting priorities, and old-fashioned sabotage.

Digital transformation has even higher stakes. The survival of some organizations depends on successful digital transformation, but digital transformation projects can be even more complex than traditional IT projects. Some estimates suggest an even higher failure rate for digital transformation: 70% or more. Because projects described as “digital transformation” are more recent, the sample size is smaller than for IT projects in general.

The reasons why digital transformation projects fail can be divided into three main categories: technology, project management, and organizational culture. How can you reduce the risk of failure?

Technological Challenges

Artificial intelligence. Robotics. Big data. The internet of things. The cloud. Media are breathlessly reporting exciting new technologies that are changing the world for the better. Lost in all the hype is how difficult it is to actually implement these technologies. They often have unknown limitations.

This leads to problems:

  • Too many moving parts – Organizations sometimes bite off more than they can chew in digital transformation. They mistakenly believe all legacy systems must be upgraded and/or replaced at the same time. It’s hard enough to replace an order-taking system without trying to move it to the cloud. Implementing an e-commerce site has complexities all its own: Trying to integrate a new e-commerce site with an updated manufacturing planning and execution system is asking for trouble.
  • Insufficient expertise – It’s often difficult to find the right talent for new technology implementation, especially for organizations trying to cut back on expenses. And few businesses have in-house resources with sufficient knowledge.

Project Management

There are so many ways that poor project management can torpedo a project it’s hard to list all of them. Here are the important ones for digital transformation projects:

  • Vague problem definition – Some projects are launched without a clear idea of what problem is being solved. No solid problem definition with clear boundaries to indicate what is and what isn’t in-scope is a formula for failure: No one knows what “finished” looks like, so scope creep becomes the rule and not the exception. This inevitably leads to cost overruns, missed deadlines, and unmet expectations.
  • Poorly written requirements – Projects with incomplete requirements; vague, and/or not testable are doomed to failure. Too often (and usually due to lack of problem definition clarity), the stakeholders don’t really know what they want or need, so they have problems defining the requirements in a way developers can understand and quality assurance people can test.
  • Failure to use an Agile, MVP approach – No large, complex project is going to provide value if the goal is to deliver a fully finished product in one step. Organizations must understand the only reliable way to succeed is to adopt an incremental strategy that begins with the minimum viable product (MVP).
    This incremental approach keeps the project on track. It ensures the project can respond to changes in business priority and receive near-constant feedback from the stakeholders. The time-boxing element of an Agile approach means the schedule can’t slip; as long as the team knows how much it can accomplish in a given sprint, expectations can be managed and work can be properly prioritized.

Organizational Culture

This category may be the greatest factor that leads to digital transformation projects going off the rails. The most organized, experienced, and competent development team can’t overcome a company culture that just can’t or won’t provide the proper environment for digital transformation.

  • Misunderstanding the concept of “digital transformation” – Some organizations believe “digital transformation” means taking an existing process and digitizing it; reducing paper trails. This misses the point: Digital transformation takes an existing process and makes it more efficient, faster, and performance-enhancing even before applying any digital technology to it. Putting paper documents online doesn’t buy you anything, especially if you’re automating a process that you don’t need anyway.
  • Low organizational maturity level – Some companies don’t have the organizational maturity to take on a digital transformation project. More developed organizations have established standards and experienced leadership for managing change—and change is a major factor in digital transformation.
  • Poor support from upper management – For digital transformation to succeed, upper management must support the project. It’s not enough for the CEO to attend the kickoff, say a few words about what a great thing this will be, and then disappear. The entire leadership team needs to demonstrate a unified commitment to its success. They should remain involved for the duration of the project. They must be willing to support the organizational and process changes involved and assist in managing unexpected challenges.
  • Resistance to change – Spencer Johnson’s Who Moved My Cheese? described how organizations often actively resist change. Some people fear change, some deny that change can happen, and some have a vested interest in maintaining the status quo. They don’t want to change.
    Digital transformation, by its very definition, must involve changes in the way business is done. All stakeholders must be open to new ways of thinking about business problems and how to solve them. Company leadership must encourage this shift in attitudes by setting positive examples.

Staging Your Project for Success

It would be misleading to suggest any project team can guarantee the success of a project. Even if you do everything “right,” unexpected events (natural disasters, economic downturns, and the departure of key stakeholders) can throw a monkey wrench into your plans.

However, there are steps you can take to set up your project for success:

  • Provide top-down support and commitment – Leaders have to lead. They must steer the organizational culture in the right direction, provide sufficient resources to the project, and commit to the goal of digital transformation.
  • Don’t try to “boil the ocean” – The team needs project familiarity and understanding of the team itself. Start with a simple, straightforward phase and graduate to more complex project phases as the team gains experience.
  • Use an Agile approach – Agile tackles a big project in bite-sized pieces. Each piece builds on the previous one until a complete, fully functional solution is delivered, on time, within budget, and meeting stakeholder expectations.

Digital transformation isn’t easy, but it’s manageable. Be aware of the things that can derail a digital transformation project and keep your eyes on the prize.

Angela Spencer

Written by Angela Spencer

Angela leads our Digital Transformation consulting practice helping clients close the gap between strategy and execution. Her extensive background and leadership in leading transformations spans strategy, operating models, governance, data and analytics, product management, agile methodologies, and managing change across organizations.

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