Why do 70% of all digital transformation projects fail?

Why do 70% of all digital transformation projects fail?

Do business leaders not fully appreciate the urgency and importance of the need to digitize? I contend that they do. The issue is not about their willingness to act; it is rooted in how they go about executing their digital transformations.

Take the famous story of Kodak’s disruption by digital cameras. It has become a favorite talking point among consultants to drive home the urgency of digitization. It’s a good story, very clear and highly impactful. It makes sense that a chemical film company would under-estimate digitization.

Except that it isn’t entirely correct.

It is true that Steve Sasson, an engineer working at Kodak, developed digital camera technology in 1975. And it is correct that the initial version was initially under-appreciated at Kodak. After all, it was almost a foot long, and took terrible pictures. But to assume that Kodak tried to kill the idea, or that it didn’t invest sufficiently in it, is flat out wrong. Kodak invested billions to develop digital photography. It made some strong acquisitions, such as the photo-sharing business, Ofoto, as early as 2001. That was 11 years before Facebook purchased Instagram. When Kodak eventually sold Ofoto in 2012, it wasn’t because they did not appreciate the value of photo sharing. It was sold as part of Kodak’s bankruptcy restructure. By 2012 it was too late; Kodak had run out of runway to digitally transform their business. Kodak’s mistake wasn’t in the awareness of the digital threat. It wasn’t even in their resourcing of this opportunity. It was in executing the digital transformation with timely and reliable precision. So, while Kodak has been unfortunately labeled as an organization that stuck its head in the sand to ignore digital disruption, the reality is that Kodak’s story is more mundane. Its transformation efforts ended up in the 70% failure camp.

The issue du jour for executives isn’t the lack of awareness of their need to digitize, but how to effectively execute it. Executives understand the need to go digital; they badly want to transform their organizations. They even invest in transformation projects and yet most of these transformation projects fail! Meanwhile the ankle biting, digitally native, small competitors keep gnawing at their businesses. And the clock of digital disruption inexorably ticks on. How does a leader resolve this dilemma?

How do you go from digital awareness to digital transformation, quickly and reliably?

I have a surprising answer to that question. The answer is that you don’t. You don’t go directly from awareness to transformation, any more than an aircraft goes directly from standstill to flight. There’s an intermediate step involved – Takeoff.

The airplane takeoff metaphor goes deeper. It explains why 70% of all digital transformations fail. What businesses lack is a disciplined and structured approach to improve the success rates of digital transformation takeoffs – á la an airplane takeoff procedure.

Most issues that result in failed digital transformation have their roots in decisions that should be made in the planning or “takeoff” stage. For example, ensuring enough skin-in-the-game across stakeholders, designing the best executional plan, identifying optimal change management approaches, effectively de-risking the execution of disruptive ideas, managing the inherent conflicts of delivering steady operational results while still disrupting the business, and finally, building a systemic culture of change for ongoing disruption.

So, if you’re driving a digital transformation effort and want to beat the 70% odds of failure, don’t work harder, work smarter. Plan for all the problems that prevent sustainable digitization.

If you do, then as with an airplane, a successfully executed digital takeoff will dramatically improve the probability of getting to your destination.

Tony Saldanha is VP, Global Business Services, and leads the Next Generation Services team at Procter & Gamble. His book, Digital Takeoff, will be published this year. It will deal with the biggest challenge facing CXO’s today – how to make digital transformations more predictably successful. You can contact him at tonysaldanha36@gmail.com