Michael Wade, the professor of innovation and strategy at IMD Business School Branding in Asia is reported as saying that 95% of digital transformation projects fail. He’s not alone in his scepticism. Couchbase said virtually the same thing back in 2017, estimating that 90% fail. Michael Gale estimated failure at 84% back in 2016.
All this tells you is that every year, our perception of digital transformation failure rises. If this pattern continues, next year we’ll be reading that the failure rate has risen to 99%.
The obvious question is are failure rates really so high?
My response is I really don’t care if they are.
As always, how you view failure depends on how you define it. If you mean that the project didn’t meet all expectations, then a high level of failure is probably not only true but almost de rigueur.
However, rather than being used to beat up companies, a high level of failure should almost be a badge of honour. After all, in the Valley, no-one trusts you unless you’ve failed. The reasoning is that you learn from failure. The adage is fail-fast. As counter intuitive as it might sound to companies that come from a 5-Nines environment, it is virtually impossible not to fail at digital transformation, and even if we could avoid this so-called failure the business’s needs would have long changed by the time IT delivered what the business needed five years ago.
Anyone who’s undertaken a large, complex IT project knows that you cannot make everyone happy and you cannot deliver perfect. If you try to do either you inevitably end up failing because it will take forever, cost a fortune, and end up with an unwieldy and over-spec’d system.
We cannot blindly trust users or customers to know what they want. Their insight can be invaluable or useless, depending on how you utilise it. Neither is customer or user insight a substitute for expertise and visionary thinking.
This is because most customers and users only think in an evolutionary manner. They might be good at articulating what’s wrong, but far less good at reimagining the product or process to make it exponentially better. Too often companies fix today’s tangible faults and meet today’s needs, but do not address tomorrow’s opportunities and challenges. This is the faster-horse paradigm that is generally attributed to Henry Ford (“If I had asked people what they wanted, they would have said faster horses.”)
Just as Survival of the Fittest is not about the strongest succeeding, but the most adaptable surviving, so too successful digital transformation is about continually adapting to changing business and customer requirements. It’s about delivering infrastructure that is built to support change and adaptation. This means that no company will ever be ‘digitally transformed’, because innovation will never stop.
In fact the problem with how we view digital transformation is that yet again the focus is on the technology and not on the real issue, which is to continually improve customer experience and put the customer at the heart of everything the company does. True digital transformation is customer centric, not IT centric. It should make it easier for a customer to buy, transact, interact, use products and services, provide feedback and so on.
Digital transformation is therefore as much a mindset shift as anything else. It’s about moving from an organisation-centric business model to a customer-centric model. It’s about providing capabilities for continuous innovation and adaptation to evolving customer expectations and market realities. It means that we must accept that failure is an integral part of improvement. Employees must be empowered to fail fast, learn from mistakes and move forward. Failure must be controlled, not feared.
So the real issue is not whether digital transformation is failing, but how it’s failing. Because just as there’s a right and a wrong way to fall, there’s a right and a wrong way to fail.