3 Reasons Why Digital Transformations Fail

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    Gang Pei Head of North Asia

Covid-19 has shone a light on how good businesses are at adapting, especially to moving online. But here's a few things to watch out for when making your digital transformation.

With the Covid-19 pandemic we’ve seen the importance of digital technology and online services, and the relative ease with which many of us can live and work just through a laptop. Remote work has become commonplace—even for very traditional Japanese companies. I’ve read articles that have said Covid-19 is the biggest driver yet of digital transformation (DX), forcing companies to move into the modern age. And yes, while we have seen massive changes to business and operating models, some of which are undoubtedly due to the pandemic, many are part of a longer-term shift. DX, as has been covered in ReMark’s Global Consumer Study 2020-21, has been particularly in the spotlight this year as consumers compare agile, young, tech-savvy businesses against older, out-dated companies and customer journeys.

But what is the ultimate aim of digital transformation, anyway? Does it apply to all industries, all services?

Some executives tend to confuse means—like system introduction—with purpose when it comes to DX. This can be dangerous—and a big reason why DX so often fails. I’ve seen numerous cases where things go wrong while engaging in DX promotion work in different industries, including insurance and healthcare. ‘Digital’ is a means, not an end. Why then are there so many organisations that aim for means?

I think there are three things that determine why digital transformations so often fail.

The long term

The first is the lack of an overall long-term strategy. It is vitally important to show exactly what role digital plays in the direction of the company moving forward. If there is a lack of strategy there is a tendency to fail due to fragmentary systems and projects, or trying to integrate popular technology for the sake of it that may not be appropriate in every instance, like artificial intelligence (AI). Digital implementations that lack substance—with unclear objectives and responsibilities—can still get great press coverage with fancy words and a well-designed launch, but they won’t drive any real change to increase profits or improve business efficiency.

An undercommitted leadership

The second is a lack of commitment from the top. Senior leaders often know the importance of digital transformation and may even take action by creating new roles like ‘Chief Digital Officer’ or handing the project to the corporate strategy department. But DX is more than just a project to be managed—it is a culture change, a different way of working and a new mindset.

"Digital implementations that lack substance can still get great press coverage with fancy words and a well-designed launch, but they won't drive any real change."

Gang Pei, Responsable para Japón Head of North Asia

To be successful, it should involve the whole company with personal engagement from top decision makers, becoming a transformative experience that should be reflected in the DNA of the company. You don’t learn to ski just by buying the right equipment—it needs personal effort and coaching, too.

Lacking a customer-centric perspective

The third and most important thing is the lack of a customer-centric perspective. There is always a gap created when the starting point is what the company can offer (internal resources, budget, competencies), and not what the customer wants. It's easy to put customer-centricity into a company philosophy or purpose, but so often it's extremely hard for the idea to affect behaviour and thought change among management. The essence of customer-centricity is to identify who the customer is, what their needs are, and determine how to meet their needs.

Until now, the customer base has been categorised by attributes like age and gender, but in the digital age, it may be categorised by the platform customers use and the route by which they can be reached. Moreover customer needs may evolve with the times and the products and services provided may be digitised. Satisfying customer needs is where digital essence comes into play.

Now that DX is being promoted in every industry, we must rethink its original purpose, ensure everyone is onboard and that it is committed to in strategic plans, and return to a customer-centred perspective.