Why Do Digital Transformations Fail So Often and Go So Badly?
It’s remarkable that today, at the height of the tech industry’s dominance, organisations across the globe continually fail to achieve their digital ambitions. But why? Despite massive investments in time and money, the same themes repeat. What our research show's is that digital transformation doesn’t fail because technology is lacking, it fails because organisations overlook the people who are expected to use that technology.
In this article, we’ll explore what we’ve learned, share our key insights, and explain how understanding what your team already does is essential to making a success of digital transformation.
McKinsey, Capgemini, and Deloitte studies show failure rates of 67-75%, at an average of 2.5 years in. One Deloitte study found that only 13% of transformation projects where a success!
Overestimating digital tools and underutilisation
Many organisations overestimate the power of their digital tools, assuming that purchasing the latest software will automatically solve their problems and realise their digital ambitions. However, these tools are often vastly underutilised, poorly configured and are do not reflect existing practice.
Research from Oxford University and IT University of Copenhagen shows that on average IT projects got 73% over budget, and the 38% that make it in to the "fat tail" go 206% over budget.
Large investments are made in technology, only for it to remain unused or used inefficiently because employees lack the skills or understanding to fully integrate it into their day to day workflows. But also because the software was not bought in response to what's actually done day to day. This disconnect between technology investment and usage arises because organisations of all sizes, fail to consider how tools will fit into the practical realities of their teams.
The role of digital maturity
The concept of digital maturity helps us understand this disconnect. Being digitally mature is not just about owning the latest tools, but about understanding how to use them effectively to drive business goals. It’s a journey where organisations progress from low levels of digital integration (where tools are adopted in silos) to a state where data and technology flow seamlessly across the organisation, enabling real innovation.
You can find out more about digital maturity in our Guide to Digital Maturity Levels and more here about our Digital Maturity Audit.
To illustrate this, imagine you’re setting up for a car race. You might think using an F1 car is the obvious choice because it represents the pinnacle of automobile engineering. However, digital maturity teaches us to start by considering the driver—you. Who are you, and what are you capable of? You need to find a track that suits you, build a team that will support you, and then pick the car that matches your current level of ability.
Most drivers start with go-karts, then move to GT racing, and eventually work their way up to F1—but it’s a planned journey that matches development with ambition. Simply buying the F1 car doesn’t make you an F1 driver, nor can you retrofit an F1 engine in to a go-kart (or at least you probably shouldn't).
The challenge: Drivers and other sportspeople race and compete to find out what they’re able to achieve. Businesses, however, rarely do this with software and teams. Often, they leap ahead in ambition, skipping important steps like testing, training, and gradual progression.
"We have a well defined tech stack"
Organisations often believe they’re operating with a streamlined set of key applications, or heading toward that end state. Our experience tells us that reality, is very different. There are typically hundreds of different tools in use across teams, used a variety of ways to both supplement, and replace key applications. This phenomenon, often referred to as digital sprawl, results from employees finding "better ways" to complete tasks outside of official workflows.
What’s critical to acknowledge here is that where digital sprawl and shadow IT are present, they are foundational to your organisation. Your organisation, and current success, is built on these tools, whether you like it or not. Ignoring or trying to suppress them without understanding why they were adopted in the first place only stifles innovation and masks the true needs of your employees.
In this respect shadow IT represents both a challenge and an opportunity. On the one hand, it creates security and management issues as IT departments lose sight of which tools are being used and where data is stored. On the other hand, these unsanctioned or unseen tools can provide rich insights into the day-to-day experiences and priorities of employees. These tools represent user-led innovation, showing how teams solved real-world problems with technology they preferred.
By embracing this reality and shining a light on these tools, we can understand the workflows behind them, and uncover the intrinsic knowledge employees have gained. Changing these intrinsic habits is key to aligning technology with digital ambitions. Moreover, user-led software procurement could become a powerful strategy; imagine employees, the end-users, having a say in what software gets adopted, and adopting software that's already working well within your shadow IT. After all, your team are the ones doing the work.
"Why don't we just integrate everything?"
Integrations are often promoted as the solution to the problem of data silos and disconnected processes. They are offered as a cure all for the challenges with shadow IT, with "just integrate it" a familiar response. The promise is simple: seamless data transfer between systems to break down knowledge and departmental barriers. However, the reality is far more complex.
Most software is built on its own proprietary database, designed with specific goals, logic, and workflows to support its function. When you attempt to integrate different systems, you are confronted with the challenge of reconciling not just disparate databases, but the differing intents and rules behind each system. Some of these simply cannot be reconciled.
Understanding the gaps in integrations is often more important to the success of a digital transformation than where data seamlessly maps from A to B."
For example, consider integrating a finance system with a CRM. On paper, the goal is to have seamless communication between sales and finance. In practice, something as simple as record deletion can become a major issue. Sales teams may want to merge or delete records in the CRM, but the integrated finance system may block this for data integrity reasons, causing friction and inefficiency. Instead of solving the problem, integrations often introduce new hurdles, making everyday tasks even more cumbersome.
"OK, let's just shut it down". Trust vs. Zero Trust
Another approach getting universal compliance and removing digital sprawl is to restrict access. A great example of this is cyber security's promoted Zero Trust model, where users are granted the least privileged access, everything is continuously verified and the organisation assumes they are in breach permanently. While limiting access and adding extensive layers of security and validation may sound like a logical solution, in practice, it often faces challenges in a complex environment. Do you really want your organisation to operate on a foundation of distrust? It's rare to find a business leader who desires to distrust their team and tech by default—so there must be a better way.
Zero trust is a sound principal for managing cyber security risk, but it does not provide an answer to risk appetite, and that's where innovation lives.
Most leaders we engage with tell us that more data, analytics, restrictions, and more top-down decision-making doesn't feel like the answer to creating a digitally mature business. While Zero Trust is often critical in regulated industries, and a great place to start, it's ultimately a means to respond to risk.
What we see in digitally mature organisations is this risk reassessed, with control reframed not as a privilege, but as a right. These organisations strike a balance between security and freedom, empowering employees to innovate while maintaining the right level of control, and visibility of the digital estate. Those that create an open culture are most successful, able to rapidly replicate success at scale elsewhere in the organisation, often repurposing tools and methods to meet differing needs.
"But everyone wants more and better digital tools"
One of the biggest challenges to digital transformation is cultural resistance. We frequently see three key issues: knowledge and tech hoarding, overestimation of digital skills, and an entrenched investment in the status quo.
Digital transformation doesn’t fail because technology is lacking, it fails because organisations overlook the people who are expected to use that technology.
People with digital skills often guard their knowledge, creating dependencies on a few individuals while preventing others from gaining essential skills. Similarly those with powerful digital tools restrict access to a small group of peers, preventing the wider organisation from benefiting. Additionally, many employees overestimate their digital capabilities, assuming they are far more adept than they truly are. This overconfidence often leads to resistance when new tools or processes are introduced.
Furthermore, there is a significant investment in maintaining the status quo. Familiarity often wins out over change, even when existing systems are inefficient. And, when questioned about what role they play in the unsatisfactory results they are seeing, many leaders struggle to acknowledge their part in perpetuating these limitations.
Digitally mature businesses share tools, knowledge and "tricks" at scale, ensuring that everyone benefits. Their leaders acknowledge their own role in creating asymmetric knowledge siloes (where information from "higher up" is guarded unnecessarily) and work hard to share what they know and want to achieve.
The most successful digital businesses have an alignment of mission, values, policy, process, practice and software. Creating a virtuous cycle that engenders confidence, clarity and an ability to react.
"Everyone know everything they need to know"
This leads us to collective intelligence. A common flaw in how businesses approach digital transformation is the assumption that knowledge is evenly distributed throughout the organisation, or at least distributed where it is needed. This assumption is what we call collective intelligence, when the group is always more knowledgeable than the individual. However, in practice, this rarely proves to be the case.
Teams fail to note their learning and best practice and are worse still at sharing when they do. Knowledge often resides within a few key individuals or teams, creating bottlenecks that prevent the free flow of information. In low maturity organisations these information siloes also create a shadow organisation hierarchy, what we call a shadow topology, where key people retain influence and power because of the information and access they horde, rather than because of management of structural authority.
The most digitally mature organisations are those that break down these silos, encouraging the sharing and utilisation of information across the entire company. By creating open communication channels, businesses can fully leverage collective intelligence to drive true innovation.
"Everyone knows what I'm saying"
Starting on the journey toward collective intelligence doesn't just push on cultural and structural boundaries. Our ability to communicate, something very familiar to most leaders, is an obstacle in and of itself.
Even the most basic forms of communication are riddled with misunderstandings, which can significantly undermine digital transformation efforts. We know what we think we have communicated, but rarely test what has been received. Take emojis, for example. While often thought of as universal, emojis are regularly misinterpreted across different cultures.
For instance, the folded hands emoji 🙏 is often seen as a symbol of prayer or gratitude, but in some cultures, it is simply a greeting or a high five. Even the halo emoji 😇, which is typically used to denote innocence or goodness, is interpreted as a threat in certain regions. The goal here is to demonstrate how easily communication can go wrong, even when the intent is clear.
In digital transformation, when teams from different departments and backgrounds are required to collaborate, these kinds of miscommunications are amplified. Ensuring that everyone has a shared understanding is crucial. Without it, even well-intentioned initiatives can fail. This is where sources of truth matter most.
"I know our processes"
Often, it’s not the people at the top of the organisational chart who hold the most valuable knowledge. Instead, it’s those on the ground with years of experience who truly understand how things work. These individuals are often the champions of the status quo, but also invaluable for driving digital transformation from within. In our work we rarely find a direct correlation between C-Suite's intent, and the day to day reality of those on the ground. It's essential to execute successfully on strategy that this changes.
Organisation leadership needs to engender an environment where strategy and mission are manifest in policy, delivered via process, best practice and software. Gaps between all of these parts should be clear, helping us understand the role that people play in both the expected execution, and spanning the gap between ambition and reality.
Digital mapping is an essential tool for overcoming these challenges. It involves examining both digital and manual processes within an organisation to identify workflows and sources of truth, determining where the true sources of knowledge reside and what "day to day" looks like. By mapping out processes and pinpointing where the knowledge lies, businesses can create a more accurate and effective transformation strategy, one that reflects the reality of today, values the status quo and acknowledges the challenges in changing that.
"I'm great with computers, or I know someone who is"
The issue of overestimating skills is present across industries, from finance to software development. People tend to assume that their level of competence is higher than it is, while simultaneously using their own abilities as a benchmark for others. This creates a problematic environment where critical improvements are overlooked, and progress stalls. When people believe they are more skilled than they are, they are less likely to engage in training or support efforts, and they may resist changes that could actually improve their workflows and the business as a whole. Overcoming this mindset is key to ensuring the success of any digital transformation effort.
Even with the right tools and champions, the skills gap remains a significant barrier to successful digital transformation. Many employees lack the basic digital skills needed to effectively use new technologies, and suggesting that someone needs to improve their skills is often met with resistance, as it can be perceived as patronising.
Consider a simple example. Someone typing at 40 words per minute (wpm) and spending four hours a day typing could dramatically increase their productivity by doubling their typing speed to 80 wpm. This improvement would double their output in the same amount of time, freeing them up for more complex tasks. Yet many people fail to see the value in improving fundamental skills like this at the same time as increasing the amount of "screen time" expected.
Our analysis shows fundamental skills like typing and mouse use create obvious, but unexpected cultural challenges. If tasked with producing 2000 words you might delegate this to someone with in your team, what you don't know if that the person you have delegated to types at half the speed you do. This creates a situation where delegator has an unreasonable expectation for delivery as at best you will no receive the work in twice the time you would consider normal. This becomes a negative feedback loop where either less work is delegated, or tensions rise as expectations have to be reset.
"It's all about the customer"
But who is the customer? A common theme in digital transformation projects is a focus on the wrong customer. Typically, Customers (big C) are treated as the main customer, with a perception of their perception of value driving decisions. While this isn’t necessarily wrong, it’s important to consider who the best “customer” of a digital transformation is. Who will benefit, who will struggle, and how does their experience impact the overall success of the project?
Before you invest in software, call your own switchboard, email your own support team - then login as your team do, take the same calls and respond to the same emails in the same way that they do day to day.
If instead of the Customer (big C) we think of our team as the customer, our priorities in technology change profoundly. By focusing on those who actually interact with the technology daily, we close the gap between ambition and reality.
Often, it is about working with what we have, not what we wish we had, and ensuring that our teams are empowered to use technology effectively. There is no shortcut to avoiding the hard work of aligning the team’s needs with the overall goals of the transformation.
"I love change"
Often, digital success competes with internal barriers, such as outdated policies, ingrained habits, or competing priorities. It is important to ask who might be repressing innovation and why. By addressing these internal challenges head-on, businesses can ensure that the full potential of new technology is realised, rather than being limited by the very systems they are trying to improve.
Ask yourself: If software is designed to allow something radically new, are we ready for that? Have we considered who in the organisation may resist this change, and what policies or practices might prevent this new capability from coming to light? Who loses their role if transformation is a success and what does than mean for them and us?
"Don't worry, AI's going to solve everything"
AI is often seen as the magic bullet for digital transformation, but like any other tool, AI is only as effective as the way it is used—and, more importantly, where it is used. AI isn’t a replacement for people; it’s a tool to enhance what they are already doing.
The bigger challenge is figuring out where AI will have the most significant impact. For example, using AI to automate simple, repetitive tasks can free up time for more complex, creative work. However, AI will not be effective if employees lack the foundational skills or understanding to work alongside it. In digital transformation, the human element is just as important as the technological one.
Thanks for reading
There's a lot to consider when thinking about digital transformation, and sometimes you will get everything you need instantly from a new tool or app. But on the whole digital transformations require exploration and careful planning.
Remember, 67-75% of digital transformation don't fail because technology is lacking, they fail because organisations overlook the people who are expected to use that technology.
Technology is a tool, not a solution in itself, and the key to success lies in understanding and aligning the needs, skills, and workflows of the people who will use it.
Successful digital transformation requires not only adopting the latest tools but ensuring those tools fit seamlessly into the day-to-day operations of the team. Digital maturity, collective intelligence, and a focus on both internal and external customers are critical for bridging the gap between ambition and reality.
By acknowledging the importance of communication, skills, and a thoughtful, user-driven approach to technology adoption, businesses can overcome the common pitfalls that lead to failure and create an environment where both innovation and people thrive.
Get in touch with the team@yopla.co.uk if you'd like to know more about our digital roadmap, or just to talk tech!
