Enterprise digital transformation: How to avoid 7 common project fails
What C-suite leaders need to get right to succeed with business transformation.
How much should my company be spending on digital initiatives?
When properly vetted and applied, the benefits of digital tools and platforms can drive a major competitive edge for businesses in any sector.
As the global push for digital transformation accelerates, budgets allocated to these digital initiatives are understandably increasing to accommodate the needs and requirements of these transformational efforts.
According to IBM, companies at the forefront of generative AI (GenAI) adoption and data-led innovation are already reaping outsized rewards, reporting 72% greater annual net profits and 17% more annual revenue growth than peers.
However, despite what may feel like enormous investments devoted to digital technology and modernization, businesses may be underestimating how high the competitive bar for digital investment has become.
Globally, 89% of large companies are undergoing a digital and AI transformation—and yet, they have only captured 31% of the expected revenue lift and 25% of expected cost savings from the effort, according to Harvard Business Review. Until business leaders align their budget allocations more closely with their overarching business goals and strategic objectives, they risk underutilizing the potential of digital and AI initiatives to drive meaningful outcomes.
The spend on digital transformation is expected to increase as technologies continue to redefine competitiveness across the market. By 2026, global digital transformation spending is forecast to reach US$3.4 trillion, up from US$1.59 trillion in 2021, according to Statista. This shows just how critical digital transformation is becoming. Individual organizations' success will come to depend more than ever on having the right strategic plans in place to recognize and capitalize on potential technological advantages, and ultimately to keep up with high-investment competitors.
What parts of the business are driving investment?
The top drivers for digital investments among mid-sized and enterprise-level businesses are:
Improving operational efficiencies
Improving customer and employee experience
Modernizing legacy IT infrastructure
Attracting and retaining top talent
Enhancing international competitiveness
Assessing your organization's digital investment governance maturity
Midmarket companies are spread across the spectrum of digital maturity and capability. Our findings indicate that:
As companies move along the digital maturity journey, they are better equipped to mitigate risk, create value, and stimulate innovation. Those that continue to rely on a legacy approach to digital strategy face, at best, an uncoordinated digital portfolio with unrealized synergies. At worst, your business could be hampered by competing investments with project teams working against each other to claim responsibility for any measurable improvements.
Where does your company fall on the digital investment scale?
How effective has the digital transformation been?
As many as 67% of the mid-sized firms we surveyed say they have been able to extract the expected return on investment (ROI) from the technology and automation investments they have made to date. However, a 2020 study from BCG found that only 30% of digital transformation initiatives actually meet their objectives.
This contradiction underscores one of the most profound challenges facing leaders in managing their digital investment responsibly and productively: The lack of measurable, transparent, and appropriate program KPIs, aligned with longer-term strategic objectives of the business. This is just one of many pitfalls of impulsive investment.
Why do digital modernization efforts fail or fall short?
Flawed transformation projects can all be traced back to a lack of a holistic, analytical strategy in determining where—and how much—to invest. Three primary deficiencies stand out:
- Lack of alignment: Digital modernization is about synergy, not silos. Organizations often treat digital as a standalone enterprise function and may not be linking it with their broader business objectives. This fragmented approach can result in misspending, missed opportunities to improve performance, and productivity loss across the organization.
- Lack of expertise: Companies often lack qualified talent to drive innovative approaches with digital technologies and platforms—but there are ways of finding the specialists you need.
- Lack of quantitative and qualitative metrics: Companies can lack clarity when articulating their unique strategy into the capabilities they need to build or acquire along the way. The business case is often not developed to a level of precision that would allow management to compare the expected ROI with other strategic options and trade-offs.
Like any compelling business strategy, digital investments must be linked to clear and ambitious targets, aligned to system-wide outcomes, and planned according to their contribution to business performance.
What defines thoughtful investment in digital strategy?
Under pressure to demonstrate progress or replicate another company's success? It's tempting to get caught up in the hype surrounding specific digital tools without critically assessing whether they are the best fit for your business and your unique strategic objectives. But throwing money at the digital gap or the current tech du jour seldom results in real progress.
Formalizing a digital strategy roadmap to prioritize and enable your business objectives is a critical differentiator in modernizing your business successfully. Your roadmap is the foundation for how you grow, innovate, adapt, and compete in a fast-changing marketplace.
The most effective investments in digital strategy are closely aligned with your business's broader objectives and long-term performance goals, which is a philosophical departure from ad-hoc approvals at the business-unit level (often based on narrowly defined use-cases).
Digital strategy as a driver of competitive advantage
Despite a company's determined efforts to entrench technology throughout its operations, our research shows that even a thoughtful digital portfolio isn't enough to guarantee success against the savviest competitors. Leaders need to also think critically about how they're measuring the success of those digital investments to ensure they're rewarding the right behaviours.
For example, if your intention is to invest in technology to support the growth of your business, it's worth spending the time up-front to ensure your project metrics are tied to real improvement in your company's leading growth indicators, which are likely not the revenue itself.
Failure to carefully map your digital investments to strategic leading indicators may result in auspicious initiatives that ultimately fail to move the needle or, maybe worse, discarding promising early-stage ideas before they've had a chance to translate into overt performance metrics.
To help your company meet its targets, consider the influence of the following four factors when evaluating digital investment options, or engage an experienced digital strategy consultant to help you:
The way forward starts with thoroughly understanding your business environment, challenges, objectives, and change management plan.
Consider how solutions work in favour of resources, departments, and objectives.
that minimizes frictional costs across disparate teams and projects.
The scale and velocity of the post-pandemic digital shift are massive. Use milestones and metrics, such as operational efficiency and customer experience feedback, to redefine how you measure success and evaluate new opportunities.
Your digital strategy starts here
To start your digital strategy discussion, contact our Digital Advisory team. Our methodology has helped numerous organizations identify and eliminate conflicting investments and costly technologies, clearing the path for digital strategy as a competitive advantage and driving sustainable performance.
Move your corporate objectives from intent to impact—contact us:
Sam Abdulrrazek
Partner and National Leader, Digital Strategy
[email protected]
Darryl Stock
Sr. Manager, Digital Strategy
[email protected]
Helping our clients achieve purposeful digital strategy
Our digital strategy and transformation consultants develop digital roadmaps for companies of all sizes, operating in all sectors, and facing unique challenges, helping them identify, align, prioritize their technology investments to improve ROI. With our tailored services, our clients can shape their digital mission and form sound digital investment budgets that yield long-term results.
Here are three examples of digital strategy solutions we've developed for Canadian midmarket companies: