Why digital transformation fails and what companies can do

Digital transformation demands significant investments of time, money, and resources, making it essential for organisations to succeed. However, studies indicate that a staggering 70% of these projects fail, raising concerns for enterprises globally. Boston Consulting Group forecasts that in 2024, organisations will spend over $3.4 trillion on transformation efforts, with $2.38 trillion potentially wasted on unmet goals.

Anurag Dua, partner at consulting firm EY, points out that for most companies, digital transformation is now an ongoing process driven by the rapid evolution of technology. “While deploying new technology might be straightforward, aligning it with a company's overall culture presents significant challenges.”

That said, digital transformation projects fail without a change management strategy – which is a structured process that helps people understand and embrace business changes. Following a change management strategy makes you six times more likely to meet your digital transformation goals.

Divya Madaan, director- technology management and transformation,  Sun Life Global Solutions, emphasises the need for continuous and dedicated investment, in terms of both time and budget, to successfully achieve transformation goals.

Paul Pallath, vice president, of applied artificial intelligence (AI) practice at Pune-based technology consulting firm Searce, believes that digital transformation initiatives often focus on short-term issues and neglect broader aspects such as modernisation, automation, and governance. “Initiators must recognise it's not just about technology, but also cultural change. Revamping a single department is just a piece of the puzzle; alignment across all areas is crucial for success, or else it leads to costly and fragmented investments.

Pallath emphasises the need for a holistic approach to digitalisation, urging leaders to consider the four Ps: people, portfolio, process, and platform. Key questions include who should be involved, how the project fits into existing solutions, its impact on user experiences, and the necessary technologies. Understanding “what” problem(s) to solve and if transformation is really needed.

Dua further stresses that digital transformation is a journey requiring time and patience, even as stakeholders demand quick results. Madaan said that leveraging agile methodology, which promotes continuous feedback and prioritises tasks, can often lead to a more focused approach to the transformation process.

For example, by focusing on specific business cases, such as automating HR's time-off requests, organisations can demonstrate quick wins and engage stakeholders in the development process.

Industry experts also believe that to plan effectively for digital transformation, organisations must assess their digital maturity, which refers to an organisation's ability to quickly respond to the developments and shifting trends of technology.

Seshail Kamanna, partner of digital transformation at BDO India, a professional services firm based in Mumbai, believes that evaluating digital maturity should extend beyond individual roles to include teams, functions, business processes, and management. This should be an ongoing activity, not a one-time event.

Experts also underscore the importance of defining milestone-based KPIs, which should be integrated into the key responsibilities of relevant personnel to align efforts toward common goals. Learning from best practices and successful models elsewhere can also provide valuable insights.

Ultimately, digital-led transformation is not solely an IT initiative that can be completed overnight. Experts believe it is a continuous evolution that hinges on the right people, platforms, and, crucially, a solid change management strategy.