Statistics show that most of digitalization projects end badly. Fortunately, it is possible to avoid the worst barriers to digital success by learning what are the key pitfalls of digitalization.
Here is a piece of good news for anyone who believes digital technologies do provide opportunities: 75 percent of Norwegian executives believe digitalization is crucial for increasing the competitiveness over the next few years. This was revealed in a survey conducted by the international giant Siemens.
The statistics of digitalization success
At the same time, there is no shortage of downsides when it comes to the results of companies that embark on digitalization projects. Take a look at this list, which would look pessimistic at first sight:
- 84 percent of companies fail in their digital transformation efforts (Forbes, 2018).
- Three out of four IoT projects fail, and six out of ten never get past the proof of concept phase (Cisco, 2018).
- Only 23 percent of companies achieved top-line growth due to investments in digitalization (Simon-Kucher & Partners, 2017).
- At Harvard, instead of giving numbers, they simply say that many fails, citing examples such as GE, Lego, Burberry and Ford (HBR, 2018).
You will find plenty of examples anywhere you go. Although failed projects often lead to learning and may provide great value in other areas, it is difficult to measure the value of it. If you take a closer look at things, it is not strange that projects keep failing. When the world is changing rapidly and uncertainty is high, you have to take some chances and accept risk. Several of the biggest digital successes had never existed if they depended on a waterproof business plan and the support of a risk-averse board beforehand. Some things work, others don’t. That is why many companies are investing in portfolios of projects in their innovation work.
What are the eight pitfalls of digitalization?
But it is not only calculated risk that causes us to fail. Here are eight pitfalls of digitalization to consider for anyone embarking on a new endeavour:
- We need to know where we want to be, what our goals are. Digitalization is about using digital technology to improve, innovate and create new – it is not an end in itself. If you can’t answer why you are digitalizing, you have a problem.
- We must give new projects enough love. As long as we are most concerned with doing things a little better than last year, risky changes will be difficult – and sometimes be seen as a threat by the organization. To succeed, new ways of work must have C-suite support. Executives need to learn how to celebrate failures. The Norwegian bank DNB’s work on Vipps – a mobile payment service – is a good example of that.
- We must realize that this is not only technology. Yes, technology is crucial to success. But if you want to reap benefits from technology, you also have to redesign processes, and perhaps even culture. For example, a newspaper editor who optimizes work to make a printed newspaper once a day will struggle to become good on digital platforms.
- We must endure. Changes do not become permanent without follow-up over time. Nagging and repetition are underrated methods – also in the field of digitalization.
- We must develop, recruit and retain employees with the right skillsets. The battle is fierce for experienced technologists and a good reason. But remember that you also need other competencies that the most tech-savvy developers to change a company. And there are simply not enough new graduates every year to provide us all with the competence we need. Therefore, employers and employees must work together to make sure people stay up to date.
- We have to adapt to our culture. Some companies have developed a culture that is exceptionally resistant to change, creativity and initiative. But it is possible to make quite large changes in corporate culture if only invest time, effort and take a systematic approach at it. Unwillingness does not have to be a permanent state.
- We need to see the big picture. No companies operate independently of what is happening around them, and changes in customer needs and competitors’ strategies have consequences. The speed of change and industry convergence has made it even more important (and complicated) to keep an eye on what is happening around you.
- We must start with ourselves. Leaders at all levels and seniority must lead the way. Both by constantly updating their competence and by exposing themselves to the changes that are happening around them. Managers must protect and support new initiatives and projects, and projects without the top manager’s attention have a much higher risk of failing.
If the risk is so high, why shouldn’t we just sit still and make sure we don’t rock the boat?
So why should we engage in digital transformation?
Sometimes it may indeed seem safest to stick to what one has always done. The only problem is that even if you don’t take advantage of new technology opportunities, there is always someone willing to accept the risks of doing so. When they succeed, you’re in trouble.
To learn as much as you can about what is needed to succeed and then make the leap of faith might turn out to be the safer choice after all.