How to improve the failure rate of digital transformation projects

Research has shown that digital transformation projects in the APAC region are largely unsuccessful, with mixed success at best.

For example, a Gartner study recently published in Australia found that the success rate of CIOs leading digital projects was approximately 48%, which, as Vice President Analyst Analyst Daniel Sanchez-Reina said, was “like a coin toss.” He called this problem “the curse of random success.”

Vishal Dhawan, regional managing director for Asia Pacific at software company Planview, said his company serves 4,500 customers worldwide, including more than 200 in Australia and more than 50 in New Zealand. The organization recently analyzed 2,500 value streams managed through its software and found that companies only manage to deliver tangible results on 8% of planned initiatives.

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“I think today boards, CXOs are all saying, ‘Hey, I spent millions on digital transformation. Can someone show me what value I see compared to these digital initiatives? If you look at the numbers and the success rates, I think the waste on digitalization is quite disturbing,” Dhawan said.

However, as TechRepublic explains, organizations can improve their success rate by focusing on culture, increasing decision-making capabilities, and enabling the ability to change course.

Why do organizations struggle with digital transformation projects?

Planview has identified several key challenges that organizations face as they pursue digital transformation.

Lack of visibility and transparency

The organization’s work creates a “very heterogeneous landscape,” Dhawan explained. While many technology systems are implemented “for the right reasons,” he noted that executives often struggle to get a clear picture of the state of digital initiatives across the organization.

“That near real-time visibility and transparency is missing,” Dhawan said.

Additionally, CEOs may be aware of their most important strategic projects but often still need to request reports to stay updated on their progress.

“And then half the organization starts collecting data for this project, and when the data reaches the CEO, things change,” he explained. “So there is clearly an inefficiency in terms of productivity and just putting together a basic sense of visibility,” Dhawan said.

Difficulty adapting to changing conditions

Dhawan said companies often struggle to change their digital projects or strategies mid-stage as requirements change.

He emphasized the need for organizations to dynamically adapt or make their strategy more flexible, change initiatives and reallocate resources in response to changing market dynamics.

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“The question is, where do you get those core capabilities… to be able to change and refine your strategies and tactics and initiatives, you know, based on these changing dynamics?” he asked.

The emergence of purely digital business models

More and more operating models are emerging that are purely digital in nature, without a starting or ending point like traditional transformations or projects. Dhawan said banks and telecom companies aspire to this digital operating model.

“It creates a completely different mindset change,” he explained. “They don’t do projects anymore. If someone runs an e-commerce platform or a mobile platform, it’s not a typical project where there is a beginning and an end; you start a product initiative and there is no stopping.”

This digital operating model creates a number of new challenges for customers adapting to this model of continuous innovation in complex organizations, such as prioritizing and reprioritizing according to strategy, connecting cross-functional teams in agile projects, allocating costs and measuring KPIs.

Three ways to improve your digital transformation success rate

A strong culture that enables better decision-making and the ability to flexibly change priorities are factors in improving digital transformation or digital operating models, Dhawan said.

1. Support a strong company culture

Dhawan said that digital transformation success is the culmination of people, processes and technology in an enterprise, where technology is used as a catalyst and not just an end in itself.

Planview sees that some organizations are successful when people and culture are the starting point.

“I think it starts with changing your thinking, culture and approach to implementing your strategy. This is the starting point. So, the culture and design of the organization becomes a good foundation,” Dhawan said.

2. Have the ability to make decisions objectively

A recent study by The Economist for Planview of 600 managers in seven countries found that just 14% were confident in their organization’s decision-making capabilities.

“It comes down to having the right set of capabilities where you can apply a very objective decision-making model, particularly when it comes to capital allocation, resource allocation during a typical budget cycle.” Dhawan said.

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Dhawan said the objective approach helped build consensus so that people are aligned in the face of demand from all sides. “They should be thinking, ‘Yes, this is the right allocation of our company’s capital and where our resources should be invested to achieve what we’re trying to achieve.’

3. Enable always-on heading correction for transformation

Change readiness is an essential part of today’s digital transformation or digital operations projects.

“You need to be able to come together as a board or project team to quickly look at a data-driven, objective model for reassessing and reallocating finite capital and resources,” Dhawan said.

“It’s about constantly checking how the work aligns as much as possible with your strategy and making sure any discrepancies are quickly highlighted so you can course-correct very quickly.”