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Why Digital Strategies Fail - And What You Should Learn From Them

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Published:
October 12, 2021
Reading Time:
11 minutes
Lynn
Lynn's diverse perspectives on business stem from her extensive experience as a management consultant - her role as a beloved wife, mother and grandmother adds further depth to her insights.

The pressure to implement digital strategies for business is immense. Digitization is the buzzword of the times.

Knowing whether this is appropriate for your business depends on your overarching business strategy. If it is, you will want to know why the strategy fails and how to implement a successful strategy.

There are widely quoted statistics of a higher than 80% failure rate, or only one-in-eight success rate for digital transformation projects. At least 20% of businesses believe that their digital transformation projects are a waste of time.

Why is this, if digitalization is a driver of business success?

There are multiple opinions and research studies about digital transformation failures. They seem to have the following common themes:

  1. Failure to understand the complexity of digital initiatives
  2. Lack of ability to execute and maintain the momentum of digitization

We’ll look at these themes in more detail and give some examples of epic business failures. Then we’ll summarize the success factors you might want to aim for.

Understanding The Complexity of Digital Strategies For Business

There are many factors to take into account before undertaking digital initiatives. The most important seems to be an understanding that digitization impacts the whole of your business. You might need to rethink your operating models completely. Here are some questions to consider.

Are You Clear About The Objectives Of Your Digital Project?

Digitization is not about importing some shiny new technology into your business.

There must be a “business first” approach. Has the business objective of the proposed change been clearly articulated? Does the technology support the company strategy? Do senior managers have a single view of the outcomes?

Too often, the objectives are fuzzy. When everyone has a different interpretation of what is to be achieved, it’s challenging to decide on success or failure.

Your digital strategy might be aiming at one or more of the following objectives:

  • Making your products or services more digital
  • Changing the way you engage with customers, whether your products are digital or not
  • Changing internal infrastructure to alter the way you work

You should agree on whether the proposed change is an optimization of current systems, processes, or products or a complete transformation, which means integrating digital technology into all aspects of the business.

  • Optimization aims for improved efficiencies or better engagement with customers
  • Transformation should result in new revenue, new digital products or services, and new business models

Is Your Focus On The Customer?

It’s essential to keep asking whether your digital initiative improves how you create value for your customer.

Today’s customers rely on technology and want to engage with businesses on their cell phones or tablets. In addition, they are more informed and wield more power in the market than before. Digital strategies for business should therefore include customer perspectives – and how rapidly their needs and views change.

So, your digital strategy must include ways to harness customer data in real-time and adapt quickly.

Is Everyone In The Business On Board?

Digitization is not about the IT department. Nor is it just about digital technologies. It is also about having the correct organizational practices in place.

The strategy should consider all the departments that will be affected and whether their business processes must change. Support systems from HR or Finance are essential – this might include special training, new performance management metrics, or flexible employment models.

Culture and behavior are a critical part of transformation success. Employees should expect and embrace change.

“Business leaders are not always clear what technologies or skills are required. This inability to clearly articulate their needs is undoubtedly slowing down digital transformation.”

How to Execute and Maintain the Momentum of Digitization

Businesses need digital capability and resources to implement new digital strategies for business and keep up the momentum.

Do You Have the Capacity To Implement Digitization?

Digital transformation uses skill sets that most businesses don’t currently have, and these skills may be in short supply.

You may have legacy systems slowing you down. Or your current staff are not proficient enough in new technologies. They may resist change or be too busy to dedicate time to the project.

Businesses may consider bringing in digital consultants or having a hybrid or liquid employment model. This is a blend of in-house and outsourced staff, not just for one-off projects but as part of an ongoing approach to innovation and adapting to changing needs.

Have You Used the Correct Implementation Strategy?

The old-fashioned approach to project planning is the waterfall model. This is a sound methodology for static and predictable projects, consisting of sequential, clearly defined steps.

It is not as helpful for technology projects.

For example, let’s assume that your project is to digitize your supply chain. In the waterfall method, you will define the end result, identify the technologies and service providers that will deliver steps along the way, set up a project plan of incremental steps to take you to the endpoint, and agree on the resources you need (time, budget, staffing, etc.)

The process of delivery can be months or years. During that time,

  • New technologies and competitors may emerge
  • Business priorities may change
  • Budgets can be re-prioritized
  • Interest may wane, and
  • Change exhaustion can set in

The problem with this methodology is that nothing of any substance is delivered until the end.

Using the sprint methodology can be a successful strategy to avoid these problems. Each sprint delivers a clearly defined and useful product. Over time, they will all work together, but even if you stop halfway, your business has helpful and implementable solutions.

Can you move from pilot to company-wide implementation?

Many organizations allocate a budget and other resources to a pilot project.

However, they don’t properly consider the cost of adopting new methodologies across the organization. Neither do they plan for the time and cost to make every business unit digitally literate.

Recently Amazon announced that it had budgeted close to a billion dollars to re-train its workforce to be ready for the digital needs of 2025. Most companies won’t need that amount, but they certainly should factor something into their budgets.

Business Failures In Digital Transformation

Several major digital initiatives are held up as examples of why strategy fails.

General Electric

In 2011, GE set up a separate GE Digital division to centralize all its IT operations. It aimed to become a top ten software company and spent billions of dollars on digital initiatives.

There were initial improvements in some sales areas and much acclaim in the media and business schools.

However, both the vision and the new digital division were disconnected from the company’s core competencies. The attempted move from heavy machinery to cloud-based technology did not make economic sense. The CEO and several other senior executives had to resign, and the new team cut costs drastically.

digital strategies for business, Why Digital Strategies Fail – And What You Should Learn From Them

Nike

Nike had a track record in the digital world with its Nike+ app. Sensors in its shoes provided running performance information and even running course mapping and music. Nike partnered with Apple for digital resources and expertise to support the app.

However, in 2016, Nike decided to go it alone with the launch of the wearable Fuelband. This was a move into the fitness sector and away from delivering superior athletics goods. They made a significant investment into talent, hardware, software, and big data capabilities.

After just three years, they shut it down.

The failure was attributed to several factors:

  • The move into a complex sector that was far removed from their core capability
  • Missing the target market, who were confused about how the “fuel points” worked
  • Inability to retain highly skilled staff. As a result, Nike couldn’t keep up with the innovations of competitors, especially Apple’s Fitbit
  • A decision to maintain its relationship with Apple, rather than being a competitor

These are both examples of digital transformation which aimed to deliver new products and services. Similar failures have occurred at Procter and Gamble, Lego, and Burberry.

Their business leaders were experienced, and their pockets were deep. But they misjudged their markets and capabilities.

How To Have Successful Digital Strategies for Business

So what must business leaders do to have a successful strategy?

KPMG’s global research points to three critical factors:

  • Focus on the customer. This needs having the ability to capture and analyze an immense amount of data.
  • Use technology as an enabler for innovation within the core business.
  • Learn to thrive on change. The company culture, ways of collaborating, making decisions, organizing work, and the asset base must all be flexible and agile.

Some lessons learned from significant failures are:

  • To split a big transformation into many small projects and experiments or sprints. This gives everyone time to re-evaluate and pivot without risking vast amounts of money.
  • To reorganize so that technology is part of every function in the company, not just the IT department.
  • To ensure digital literacy and skill at every level in the organization. If your employees are not yet ready, the answer may be to find consultants and digital experts from online consulting platforms like Consultport. Moving to a hybrid workforce that includes independent freelancers keeps you up to date with the latest technologies without investing in them.

Key Takeaways

The world is going digital, and digital strategies for business are essential to avoid becoming irrelevant. However, having a successful strategy includes knowing why strategy fails.

There are multiple examples of failure. There are also many lessons to be learned from them.

Business leaders should understand the complexity of digital initiatives and have the ability to execute and then maintain the momentum of digitization.