The top 7 reasons digital transformation projects fail

Published Mar 28, 2024
How change managers can avoid the most common pitfalls.

Imagine the headline that shouts: “Retail Giant Files for Bankruptcy After Botched Digital Transformation.” While fictional, this scenario reflects a harsh reality — and not just for retailers. In fact, these days, it can happen in practically any industry. In fact, according to recent McKinsey research, a staggering 70% of digital transformation projects fail to meet their stated goals. 

Why such a high rate of failure? Let’s look at the top reasons digital transformation initiatives go bust.

1. Lack of clear goals and strategy 

Like any explorer needs a map, a digital transformation initiative needs a clear roadmap with defined objectives. Imagine a furniture company embarking on an initiative to “improve their online presence.” This vague goal offers no clear direction to the teams charged with executing the project. Without a defined strategy outlining specific actions, like revamping the product catalog or implementing a more user-friendly e-commerce platform, the project will unlikely achieve meaningful or satisfying results.

To avoid this situation, invest time in upfront planning. Use a data-driven digital adoption platform like Pendo to conduct a comprehensive analysis of your current state and identify areas for improvement. Define success metrics (KPIs) aligned with your goals to track progress throughout the project. Develop a concrete strategy that outlines the “how” of achieving your goals. By clearly defining success and outlining a roadmap to get there, you ensure your digital transformation project is more likely to deliver a positive return on investment.

2. Biting off more than you can chew

Biting off more than you can chew can lead to costly mistakes, a lack of focus, and a loss of customer trust. This one is easily avoided with care. Despite the temptation to “change everything at once and be done with it,” remember that digital transformation is not an event but an ongoing journey. Start small, then scale strategically. Focus on achievable, targeted goals that deliver quick wins and build momentum. Prioritize projects that address your most pressing pain points and demonstrate a clear return on investment (ROI). By taking an incremental approach, you can build on successes and gain valuable insights before tackling more complex initiatives.

3. Setting unrealistic expectations 

Just like trying to do too much at once, promising a digital utopia while presenting an unrealistic budget or timeline is a recipe for failure. When expectations of the time, resources, and effort required for any transformation — large or small — employees become frustrated, and morale and accuracy plummet. The result is project delays, missed deadlines, and a transformation that fails to deliver on its promises.

To avoid this, conduct a thorough and honest assessment of your current state and capabilities. Set realistic timelines and budgets based on data and industry benchmarks, not “what someone wants to hear.” Communicate these expectations transparently to all stakeholders from the outset so everyone involved is on the same page and prepared for the long haul.

4. Neglecting user needs

Say you have hired consultants to implement a complex new enterprise resource planning (ERP) system, but they didn’t consider the uniqueness of your internal workflows. Forcing employees into a new app with a clunky, unintuitive user interface, especially without adequate onboarding and support, inevitably leads to low digital adoption, decreased productivity, and employee resistance. Similarly, a poorly designed e-commerce platform with a confusing checkout process can drive customers to your competitors. In short, focusing solely on the technology implementation without prioritizing user needs can spell doom for the project.

Eliminate this pitfall by conducting user research to understand their needs, pain points, and preferred digital experiences. Gathering this feedback in a digital adoption platform helps build consensus for transformation from the bottom up, empowering employees to be part of the process. Design intuitive, efficient, user-centered solutions that address their specific challenges. Gather continuous user feedback and iterate on your solutions throughout the process. By prioritizing user needs, you ensure your digital transformation project delivers a positive experience that fosters user adoption and drives business value.

5. Poor communication and collaboration

Silos and miscommunication can derail even the best-planned projects. Poor communication can lead to confusion, duplication of effort, and missed deadlines. Without clear communication and collaboration across departments, a digital transformation project can become bogged down in internal conflict and inefficiencies.

Your communication plans and change management are the key to avoiding this pitfall. Break down departmental silos and encourage teamwork. Utilize digital tools like in-app guidance to facilitate communication and knowledge sharing. By establishing clear communication channels and fostering collaboration, you ensure everyone involved is aligned with the goals of the transformation and can work together effectively to achieve them.

6. Inadequate skills and resources

Imagine planning for that new high-end ERP platform but not taking into account the actual level of expertise (and cost) required to configure and customize it for your business needs — not to mention to use and maintain it on a daily basis. A digital transformation project requires the right tech skills to execute the implementation, adequate end-user training, and sufficient resources for both. Without these, your project is unlikely to deliver the promised results, if it does not stall altogether.

To ensure this doesn’t happen to you, first conduct a skills gap assessment to identify any training needs within your workforce. Invest in upskilling and reskilling programs to equip your employees with the capabilities they need to thrive in the new digital landscape. Consider leveraging digital adoption solutions to provide users with fast onboarding, in-app guides, and ongoing support and guidance throughout the transformation process. By ensuring you have the right skills and resources in place, you empower your team to navigate the complexities of digital transformation successfully.

7. Lack of leadership buy-in

A leaderless digital transformation is like a ship without a captain. Without clear and consistent executive buy-in and change management, a digital transformation project can quickly lose momentum. Executives who are not fully committed may hesitate to allocate resources or make the necessary decisions to push the project forward. This lack of support can lead to a culture of resistance and, ultimately, project failure.

To secure buy-in from key executives, clearly articulate the benefits of the digital transformation initiative and show how it aligns with your organization’s strategic goals. Develop a communication plan and change management strategy to keep leadership (and everyone else) informed of progress and to address any concerns quickly. By securing solid executive support, you ensure your digital transformation has the leadership and resources it needs to succeed.

Avoid the common pitfalls of digital transformation and come out on top

While digital transformation can be complex, it doesn’t have to be a scary or frustrating dead end for your business. By understanding the common pitfalls and implementing digital transformation strategies to avoid them, you can navigate the journey successfully and emerge with a modern, efficient, and customer-centric organization.

Want to learn more about how Pendo helps digital transformation initiatives succeed? Get a custom demo here.