Despite the best of intentions, CIOs and their organizations often struggle to deliver business outcomes from digital transformation strategies. According to research firm Gartner, 89% of corporate boards say digital is embedded in all business growth strategies, but only 35% of organizations are on track to achieve digital transformation goals. And while KPMG reports that 72% of CEOs have aggressive digital investment strategies, McKinsey details a harsh reality that 70% of transformations fail.
Stats such as these raise the question: How can CIOs and digital transformation leaders better recognize failure signs and proactively address issues?
My experience leading many digital transformations is that failures stem from a series of derailments, many of which are inadvertent. Even if digital transformation leaders avoid outright failure, these derailments delay initiatives, create avoidable organizational stress, and often yield underwhelming business outcomes.
Five years ago, I shared that the No. 1 reason digital transformations fail is that executives fail to recognize that digital initiatives are bottom-up transformations that require change across the organization. Employees must understand the why behind digital strategies and have incentives to participate in transformation initiatives. CIOs like to say, “Digital transformation is a journey,” but I believe leaders must strive to lead transformation as a core organizational competency.
CIOs can’t be involved in every strategic discussion or dive into every initiative’s details, but there are several high-level signs that indicate a digital transformation may be destined to underperform, especially as CIOs add initiatives. In my experience assessing digital transformations, the following five are the most common.
1. Prioritize too many initiatives without a shared vision
“One of the most common ways to derail digital transformation efforts is ignoring the importance of a clear strategy and defined goals,” says Arturo Garcia, CEO of DNAMIC.
CIOs must communicate strategy and goals when making investment cases and garnering support from the CEO, executives, and the board. As challenging as it is to get to a yes, it’s what comes next that often derails digital transformations at the very start.
CIOs must facilitate a discussion on priorities. Having too many number-one priorities sets unrealistic expectations with business stakeholders and stresses team leaders. Worse is when prioritized initiatives don’t have a documented shared vision, including a definition of the customer, targeted value propositions, and achievable success criteria.
When I survey transformation leaders and their teams, I privately ask each person three questions: What’s your top priority, why is it important, and how many other initiatives are also taking up your time? The risk of derailments increases as I hear inconsistent answers or too many conflicting priorities.
2. Neglect to set collaboration and communication principles
Digital transformations can start with one initiative, defined goals, and a dedicated team. But CIOs are under pressure to accelerate and find digital transformation force multipliers. That means growing the number of leaders and teams that can plan innovations and deliver transformative impacts.
“Innovation does not happen in isolation: It occurs when organizations encourage and nurture it, often with processes to enable nontraditional ways of thinking, working, and the space to try out ideas in a safe environment,” says Hasmukh Ranjan, CIO of AMD.
Here’s how I spot derailments: Ask initiative leaders to share access to their roadmaps, agile backlogs, collaboration tools, stakeholder communications, and internal documentation. I seek information completeness, communication consistency, and ease-of-use factors. When CIOs struggle to grow beyond one transformation initiative, the root cause is often gaps in collaboration and communication principles.
3. Customize solutions to meet everyone’s requirements
Many organizations use agile methodologies when planning and executing digital transformation and assign multidisciplinary teams to manage releases, sprints, and backlogs. But are product managers developing market- and customer-driven roadmaps and prioritized backlogs? Unfortunately, many digital transformation initiatives succumb to stakeholders dominating priorities with neverending wishlists and poorly defined requirements.
One recent study shows that only 50% follow a product-centric operating model focusing on customer centricity and delivering delightful customer experiences. “Companies that leverage high-quality data, center their enterprise around responsible risk-taking, and organize around products are the most likely to experience profitable growth from their digital transformation journey,” says Anant Adya, EVP of Infosys Cobalt.
Subject matter experts and internal stakeholders should be contributors to priorities and requirements, not decision-makers or backlog dictators. Digital transformations derail when CIOs miss the opportunity to establish and communicate product management responsibilities for creating and evolving market- and customer-driven roadmaps.
4. Underinvest in developing digital trailblazers
In its 2023 State of Digital Transformation report, TEKSystems found that 48% of tech and business decision-makers report needing to revise the nature of their organization’s talent base, and another 34% acknowledge needing new types of talent. “Organizations can derail their digital transformation journey by failing to map out goals, objectives, and tactics prior to launch and not valuing the right mix of IT and business stakeholders in the planning stages,” says Ricardo Madan, senior vice president at TEKSystems.
CIOs invest in skills development, and HR usually offers leadership development programs, but these approaches often don’t address the knowledge and skills needed to lead digital transformation initiatives.
Digital trailblazers, including product managers, program managers, architects, agile delivery managers, and data scientists, need specialized learning programs and coaching to build their confidence in handling transformation responsibilities. Derailments can happen when transformation leaders seize up when negotiating priorities, fail to facilitate decisions on requirements, or struggle when handling conflicts or blow-up moments. Digital trailblazers face many people challenges when guiding employees through a transformation, and CIOs should identify coaches and development programs to prepare their leaders.
5. Drive KPIs and data-driven decisions without a data strategy
Building digital products, improving customer experiences, developing the future of work, and encouraging a data-driven culture are all common digital transformation themes. Leaders should define new KPIs and OKRs that help people understand the objectives and recognize how their work contributes to the organization’s transformation goals.
But there are common pitfalls, such as selecting the wrong KPIs, monitoring too many metrics, or not addressing poor data quality. “Having bad data, or an inability to realize the value and take action from data, is a surefire way for a digital transformation project to go south quickly, says Dwaine Plauche, senior manager of product marketing at AspenTech. “Without useful, contextual data that can be scaled and used throughout the organization, digital transformation efforts may simply become one-off projects that get stalled at the pilot phase, leading C-suite leaders to believe the technology was a failure or the investment was a waste.”
This derailment stems from having no defined data strategy or having one not aligned with digital transformation objectives.
Consider how it looks to nontechnical executives when every digital transformation initiative has customized dashboards, different KPIs, and metrics with underlying data quality issues. Instead of initiatives telling a cohesive story, it leaves results open to interpretation and challenges. The data strategy should include guidelines on the types of KPIs, standards for dashboarding metrics, and responsibilities for improving data quality.
The five derailments I focus on here fall within the CIO’s responsibilities to address. They are important for CIOs leading multiple transformation initiatives to deliver against several business strategies. The practices that worked when digital transformations started small with one initiative must evolve into a digital culture and a transformation operating model. It’s in this transition where increasing derailments can lead to digital transformation failures.