Five reasons why digital transformation fails and how to avoid it


Often seen as just another buzzword a couple of years ago, today, digital transformation is a must-do initiative for businesses that want to be more efficient and have a competitive position on a market. The events of the latest half past year buoyed up the vulnerabilities of a non-digital business, making digitalization an even more pressing matter. Nearly 84% of SMBs agree that technology is reshaping their industry, and 85% of them are currently planning or implementing digitalization initiatives. But regardless of that, a shocking 70% of digitalization activities fail.

So, what can go wrong? The short answer is many things. From setting the wrong goals to choosing solutions that don’t fit the business – various factors can paralyze or even ruin the whole initiative. Below, I’m reviewing the five most typical digital transformation mistakes together with the possible ways of preventing them.

What’s digital transformation?

Before getting to the digital transformation mistakes, let’s take a closer look at what the concept of digital transformation comprises. 

Simply put, digital transformation is the practice of integrating digital solutions into various areas of a business to facilitate and improve operation and deliver more value to customers. Among the biggest advantages of digital transformation for small businesses is the increased accuracy of the data, which results in better insights into how the business performs and the opportunity to make better, data-driven decisions. Moreover, it’s a way to cut operational costs and free more time for business-critical tasks and processes.

Why digital transformation fails and how to avoid it

But all the virtues of digital transformation become visible only when the process goes smoothly and is approached accurately. So, let’s break down what can turn a digital transformation initiative into a waste of time and resources.

  1. Misunderstanding the concept

Very often, businesses look at digital transformation as a short-term initiative that boils down to implementing digital solutions into the work of departments. So they are waiting for visible results shortly in the post-implementation period. The truth is, treating digital transformation as a one-time project might have very little to no result, and thus taken as a failed initiative. It happens due to a misunderstanding of the concept of digitalization.

How to avoid

The word “transformation”, by its meaning, hints at a process. Business transformation, ideally, is a never-ending story of finding better ways to operate and more space to grow. It is also true for digitalization. Being a part of the overall business transformation, it should be treated as a continuous initiative that will involve and impact all the parts of a business. And many of the benefits may become palpable over the long run. A business that starts digital transformation needs to have a long-term plan and be ready to go through it step by step, bearing in mind a bigger picture instead of immediate results.

  1. Choosing the wrong approach

While large enterprises may have a luxury of a full-scale transformation, the situation is drastically different for small and medium businesses due to smaller budgets and available resources. So understanding what to transform first can be a big challenge for SMBs.

Striving to ensure better efficiency, companies often look at improving operation and cutting costs. And frankly, there’s nothing bad about it. Internal processes are an important area for digital transformation. But putting them at the heart of transformation may result in overlooking a bigger lever for efficiency.

Understanding customer needs and being able to cover them the best way possible is a solid competitive advantage and a driver for business growth. So starting digital transformation, it can be wiser to think about the customers first of all. There are two big areas to consider, including customer experience and insights about customers. Transforming them can allow you to have a clearer view of your customers’ needs, engage with them more efficiently, and deliver the experience they are expecting.

But often, it can be hard to tell at the start what can prove more beneficial in the longer run. So there’s a big risk of making the wrong choice.

How to avoid

In fact, digitalizing both processes and customer experience is something you can’t go without. But on the condition of tight budgets, defining which area is more critical at the moment, can help make the most of the transformation. To define such an area, it can help asking yourself some questions, including:

  • Do you have flaws in understanding and answering your customers’ needs?
  • Which of your goals can be reached faster supported by technology?
  • Are there any processes that take too much of yours or your employees’ time and could be streamlined with the help of technology?

Answering these questions and aligning the answers with your goals, you can ensure the efficiency of digitalization and drive your business growth. For example, an e-commerce company might need to transform sales or customer success management processes. A brick-and-mortar business might need to implement digital payments to enhance their customer experience. A business that deals a lot with online transactions might think about automating finance management for more accurate accounting and a better view of their financial health.

  1. The lack of readiness among employees

Employees’ adaptation to the new way of working can be a challenge for the digital transformation initiative. Reluctance to accept the change often comes out of a lack of understanding of the reasons behind the change and benefits that people might get from it, as well as the necessity to adjust to using new tech solutions. It can result in hampering the adoption of technology by workers or the longer time needed to make new processes work as planned.

How to avoid

Awareness is one of the keys to successful digital transformation. To ensure the support of new initiatives, you will need to put some effort into explaining the virtues of the change to people involved. There are different ways of raising awareness among your staff, that might include:

  • meetings regarding the plan and terms of the new process/technology implementation
  • series of training to help employees adopt new solutions
  • distribution of the necessary documentation across the involved departments, and more.

Thus, you can help people better understand your reasons for transformation, help them prepare for the upcoming change, and adjust to the introduced technologies by the time the process of transformation is over.

  1. The silo mentality

When digital transformation is looked at and approached as an isolated IT project that involves a certain department and has no connection to others, it is highly likely to fail. 86% of executives and employees blame team problems and failures on the lack of internal communication. Such isolation – which is also called silo mentality – can tremendously slow down or even block various initiatives within the company. And in case of implementation, the positive outcomes of the digital transformation may remain invisible to other employees and key decision-makers, questioning the overall efficiency of the step.

How to avoid

Breaking down the silo mentality can ensure that digital transformation, as well as other business-critical initiatives, will be smoothly accepted throughout a company, and various departments, including, of course, the higher management will have access to business-critical data gathered with the help of the implemented solutions. 

To dismantle silos, a business needs, first thing, to encourage clear communication across the company. A high level of transparency is also needed to ensure that both decision-makers and staff members are fully aware of the upcoming changes, understand the reason for their introduction, and can see and utilize the results of the implemented solutions in their work. 

  1. The lack of expertise

SMBs often can’t afford the burden of forming a dedicated department that will be responsible for the process of digital transformation or even a CIO to handle it. In fact, for many small business owners, it’s a common practice to manage various parts of their business themselves, which can include managing finances, bookkeeping, marketing, and more. When it comes to choosing and implementing digital solutions, SMB owners might lack the expertise needed to do it efficiently. So a business might end up having implemented solutions that are not compatible with other important tools used in a company or are too complicated to use, etc. It can result in a significant loss of money, a waste of time, and a failure of the whole initiative.

How to avoid

The lack of expertise can be addressed by leveraging vendors. The first step to take is to analyze the solutions that a company already utilizes to manage its core functions to find out what integrates with them, and whether such integration can be useful for your business. For example, accounting solutions like QuickBooks or Xero allow for many integrations that can help improve bookkeeping, from eliminating manual operation to providing more accuracy of the books and facilitating reconciliation, etc. Moreover, today, many providers of digital solutions are helping their clients to go all the way through implementation, integration, and learning to use, offering onboarding calls, free demo sessions, and a high level of support.

To sum up

Digital transformation has many virtues for businesses, no matter their size. However, the initiative can fail if approached the wrong way and is not based on the goals a business wants to reach. Small businesses need to be double careful, as they usually have smaller budgets and fewer resources than larger companies do to fulfill the transformation. So the need to start having analyzed and defined the areas for transformation and with a solid step-by-step plan that is not based on achieving fast results, but bringing more value to customers and improving the overall efficiency in the longer run.

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