Why Business Transformations Fail

In Digital Transformation by Eric Vidal1 Comment

why-business-transformations-failWe often talk about how digital transformation can be a game changer for your business, but what about other kinds of organizational shifts? They’re all too common. In fact, businesses today must transform to keep up with evolving consumer behavior, emerging technologies, changing laws and regulations, and the spread of globalization. Corporate transformations can be challenging, and data consistently shows that up to 75 percent of these efforts fail. Let’s explore exactly why—and what you can do to make sure that doesn’t happen to you.  

Business Transformation: The Prevalence, The Struggle, The Failure Predictors

According to KPMG’s Global Transformation Study 2016, 96 percent of organizations today are in some phase of transformation, and almost half have completed a transformation initiative within the past two years. With those numbers, you’d think doubts about the success of transformation plans would be the exception, not the rule. Unfortunately, that’s not the case. Fifty-three percent of the 1,600 polled senior executives said they’re not sure their efforts will deliver their intended value in the long term. Short-term result expectations weren’t much better—only 51 percent believed they could achieve necessary results on the front end of their projects.

Ouch.

The need for businesses to transform isn’t going anywhere, so it’s vital to understand why some businesses succeed while others fail. Let’s start by identifying points that could help predict a failure before the transformation even begins.

  • Underestimating the changes to the operating model. Organizations know transformations will change the way they do business—that’s the whole point, right? A problem forms when the view of that change is too narrow and businesses don’t realize the extent to which these changes will affect operations. According to KPMG’s survey, this underestimation—or, what you could also call a type of corporate nearsightedness—was the barrier to success indicated most often by executives (37 percent).
  • Lacking a clearly defined business outcome. As Advisor Esteban Herrera wrote in a recent column on CIO’s IDG Contributor Network, “Setting out on a change program without clear business outcomes is like setting out on a journey of 1,000 miles without a map.” I completely agree. After all, if you don’t have a hardline goal for your initiative, how do you know when you’ve succeeded? How do you measure progress along the way? Clear business outcomes should be purposeful, measurable, and time-specific, not wishy-washy. Think of it this way: If your business outcome has more adjectives than dates and numbers, you’re probably doing it wrong.
  • Neglecting the ‘people aspect’ of change. When buried in all the data surrounding a transformation initiative—statistics behind the reasons why, data on the best methods, and so on—brands can lose sight of the ‘people aspect’ of change. At the end of the day, most transformations are necessitated by a human shift (like millennials’ penchant for mobile and what that means for your business). Just like changes are designed around people, they’re also implemented by people—your employees. To ensure everyone is informed and on board, change management and communication are critical.
  • Failing to include innovation in the corporate culture. The corporate culture must evolve along with (or ahead of) the transformation at hand. If not, there’s likely to be more internal pushback, potentially sabotaging that highly coveted ROI and slowing progress. According to PRNewswire, “Business leaders must embed continuous innovation into the culture and structure of their organizations in order to build enduring competitive advantages. To do so, they must have insights into what customers today and in the future truly value, and must follow a “business value first” approach to technology. Such an effort calls for enabling the organization to work smarter and faster so it can create return on investment even as it continues to innovate.”

What’s Next? 

If you’re one of the 96 percent of companies in a transformational phase today, how confident are you that your initiative will succeed? If any of the failure-predicting points above sound familiar, it might be time to take some proactive steps to correct the issue(s). If your organization has successfully completed a transformation, what suggestions do you have for those knee-deep in a corporate shift? I’d love to hear your thoughts.

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