Despite billions, if not trillions of dollars being invested in digital transformation over the past few decades, many companies are still struggling to keep up with the rapidly evolving landscape.
According to McKinsey, 70% of transformations fail. But what is going wrong?
In this blog post, we’ll explore three key factors that could be contributing to the failure of digital transformations.
The wrong starting point: Value creation versus extraction
Many successful companies are tech businesses that were able to adapt and change in a way that traditional companies find problematic.
These tech businesses identified pain points and needs and offered products and services that addressed them, keeping pace with the rapidly changing and evolving world. Meanwhile, traditional businesses remain locked into old ways of doing things.
The transformation has been a way of extracting value rather than re-invention.
The days of extracting value are almost over for the financial services industry. There are not many places left to reduce costs. So, they must become value creators, which means taking a leaf out of the digital giants’ book and finding ways of identifying and solving problems.
For example, Banking-as-a-Service (BaaS) and embedded banking offer banks the opportunity to leverage their operations on behalf of third-party brands to create value.
But, according to experts, success will not be determined by technology but by the proposition, approach, and processes that the banks wrap around it. Pain points and value must be identified upfront, forming the basis of what gets delivered.
Corporate amnesia: Forgetting why it all started
Time can be a massive barrier for businesses undergoing transformation. Many companies embark on transformation and, years later, forget why they started in the first place.
Corporate “transformation” amnesia often results from lacking that all-important plan and vision. It is suggested that companies should “lay out a strategic framework for long-term value creation for shareholders each year”.
China nicely illustrates the power of long-term planning. Since 1953, the Communist Party has published a plan for the subsequent five years providing guidelines and a vision for the economic and socio-development of the country.
If a company has forgotten why or lost sight of why it started a transformation programme in the first place, it may be time to call a halt and re-plan and reset the vision and mission.
Forgetting it’s all about people
According to experts, many issues with digital transformation are human-centric. Companies need to focus on the person, helping people understand themselves, their roles, and the most effective way to work as part of a team.
This requires a people-first approach and a focus on creating meaningful work for employees. The key is to recalibrate and understand that it is never too late to take a human-centered approach to digital transformation.
Digital transformation needs transforming. With a focus on value creation rather than value extraction, companies will become more innovative because that endpoint requires it. It will take time, so finding ways to battle corporate amnesia is critical.
Be more China, have a well-articulated and understood plan, and ensure everyone involved in the programme knows what they are doing.
Companies must take a people-first approach to digital transformation, focusing on creating meaningful work for employees.
By addressing these key factors, companies may be able to increase their chances of success in the digital age.