Why digital transformation fails: 7 reasons and fixes

Many employees and managers resist change, especially when long-practised and proven ways of working have to be given up. A typical example is the introduction of new software solutions that meet with rejection because they change familiar processes. If acceptance of new technologies and processes is lacking, usage remains low and the project fails. The human factor should not be underestimated in any technology introduction.

The solution lies in open communication and involving employees. This includes fostering a culture of openness and transparency, conveying the benefits of the change understandably, and picking up concerns and taking them seriously. Without a culture that allows and encourages change, digitalisation efforts remain unsuccessful.

Another major problem is the shortage of skilled workers combined with inadequate training programmes. Many companies lack employees with the necessary digital skills and knowledge. Qualified specialists are particularly scarce in IT, data analysis and digital marketing, so digital initiatives are not implemented successfully. Without continuous further training, employees do not develop the required digital competencies.

The remedy is a culture of lifelong learning and continuous development. Proven approaches include modern learning formats such as blended learning that are used regularly, on-the-job support to deepen new skills, and concepts for education and learning in later life.

Without a clear corporate strategy for digitalisation, the corresponding projects receive neither the necessary attention from management nor sufficient resources. Unclear and non-measurable objectives mean that progress cannot be assessed and success cannot be measured.

Clear leadership and clear objectives are called for. The digitalisation strategy is developed and communicated in the company. Milestones and SMART objectives make progress and success measurable. Quick wins show an effect early, and successes are communicated and celebrated.

Integrating new technologies into existing systems is often complex and error-prone. It can considerably delay or prevent digitalisation projects. A thorough analysis of the existing IT landscape and step-by-step implementation help to manage this complexity. Flexible and scalable solutions that can be adapted to future requirements make sense.

Then there are security concerns: fear of cyber attacks and data loss inhibits willingness to digitalise. Investment in cybersecurity, robust data protection management, regular security reviews and employee training and awareness address these concerns.

Culturally, promoting agility and flexibility helps. This includes iterative approaches such as agile methods and DevOps practices as well as a positive culture of learning from mistakes that allows experiments and learns from errors.

High initial investment in hardware, software and implementation often deters companies. Anyone who does not clearly see the long-term benefit of digitalisation is rarely willing to make the necessary and sometimes very high investments. A realistic business plan with milestones and objectives forms the basis for investment decisions. Funding programmes, strategic partnerships and financing options can make the decision easier, and a step-by-step approach spreads the costs and reduces the risk.

The solution is strategic investment planning and long-term thinking. The expected return on investment and the long-term advantages are clearly communicated, and success stories and case studies help with this. In addition, there is skilful handling of the paradoxical allocation of resources between exploration and exploitation, that is, ambidexterity, and an understanding of “good” and “bad” costs.

Without the credible engagement of top management and its close alignment, digitalisation projects are doomed to fail. What is needed is the will and the deep conviction that digitalisation massively influences the company's future viability. If this conviction is missing, strategic direction and resources are missing too. The result is uncertainty and a lack of motivation among managers and employees, and initiatives stall or fail.

Credibility and commitment arise from clearly defined objectives and milestones, transparent communication and binding agreements with the managers and employees affected. Understanding must also be created among those not directly involved. Progress, and setbacks as well, are reported regularly and credibly.

Without open and honest communication and regularly gathered feedback, frustration and rejection arise among employees. Without a communication concept designed for at least the medium term, the objectives, progress and challenges of digitalisation remain unclear, which creates uncertainty and resistance.

Where there is no culture of gathering and evaluating feedback, organisational blind spots arise. Necessary interventions are planned too late or not at all. Managers and employees cannot contribute their experiences and ideas, and system intelligence does not take effect. Acceptance suffers, and ongoing processes cannot be continuously improved.

What is needed is a culture of “listening and understanding”: a communication concept, regular feedback loops that specifically gather opinions and feelings, and a secure interplay between the social level, the specialist level and the process level.

Case studies show that many companies underestimate the complexity of a digital transformation. The first consequence of sluggish or failed digitalisation is considerable cost disadvantages. Manual, error-prone processes such as data entry into accounting systems tie up time and cause correction costs. Outdated IT infrastructure is expensive to maintain and often incompatible with modern software. Employees are deployed on activities that add no value, and additional administrative staff have to be hired as turnover grows.

The second consequence is competitive disadvantages: slow responsiveness, loss of market share and insufficient capacity to innovate. Kodak developed digital photography early but hesitated to commercialise it and was overtaken by companies such as Canon and Nikon. High-street bookshops came under heavy pressure from the rise of Amazon. Kettler, known for its garden swing seats and Kettcar pedal go-karts, no longer picked up new trends in leisure mobility.

The third consequence comprises further considerable problems. Without effective data and information management, there is no insight into customer behaviour. Missing digital interfaces lead to negative customer experiences, for example when tracking and tracing or information about delays is missing. Qualified specialists also prefer modern working environments, which makes recruiting and retaining employees more difficult.

The seven reasons share a common core: technology, budget and planning only work if the company's values and culture support the change. The guiding principle at transformis is: “Cultural change is called for when the existing corporate culture limits organisational performance.”

For management boards, this means managing digitalisation projects from the outset as culture projects too. This includes a communicated strategy with measurable objectives, the visible commitment of shareholders and leadership, a learning culture that builds competencies, and feedback loops that make resistance visible early. Developing corporate culture systematically lays the foundation for a successful digital transformation.