8 reasons why digital transformations still fail

You would think IT leaders would have the whole digital transformation mandate down to a science by now, given that organizations have been deploying initiatives for several years. But you’d be wrong.

Many of the issues organizations have faced as they implement new processes continue to plague them.

“The easy things have been done and the things that are left are hard,” such as having to deal with “the human pieces,” says Stephanie Woerner, principal research scientist and director of the Center for Information Systems Research (CISR) at MIT’s Sloan School of Management.

Companies need to focus on two areas to become future-ready: operational efficiency and customer experience, according to 2023 CISR research. “However, future-ready is always a moving target; companies must continuously evolve their capabilities and generate new value from digital,” including use of new technologies such as generative AI, regtech (aka regulatory technology), and climate tech, the research states.

Here are eight reasons why digital transformations continue to fail.

Shortchanging the people problem

Digital fatigue in ongoing transformations is real. People are tired and want to revert to their old workflows, Woerner says. While this malaise could also be due to an architecture mistake on IT’s part, “all these transformations come down to change management,” she says.

“People got really excited about, ‘We’re going to transform,’” Woerner says, but she believes part of the problem lies with leaders who “didn’t have the discipline to make the hard choices early on” to get employee buy-in.

Ranjit Varughse, CIO of automotive paint and equipment firm Wesco Group, agrees.

“The first challenge is getting digital transformation buy-in from teams at the outset. People are creatures of habit, making many hesitant to change their existing systems and processes,” he says. “Without a clear change management strategy to get a team aligned, ERP implementations in particular can be slow, stall, or even fail entirely.”

Mark Wei, cofounder of Australian-based property data platform company PropertySensor, says he previously led digital initiatives at both Philip Morris and Mercedes, and a common problem is people’s unwillingness to change workflows.

“At Mercedes, we spent millions on a dealer inventory system that nobody used. The technology was solid, but we missed something crucial: Dealers had developed their own workarounds over decades,” Wei says. “They weren’t resisting change — they were protecting workflows that actually worked.”

[ Related: 8 change management questions every IT leader must answer ]

Digital transformation isn’t a technology problem, it’s about understanding how people actually work, not how we think they should work, Wei says. “At PropertySensor, we scrapped our first version after realizing real estate agents needed mobile-first solutions, not desktop dashboards,” he says.

“Money rarely solves these problems,” Wei adds. “I’ve seen $50 million projects fail while $500,000 initiatives transform entire departments. The difference? Understanding the human element before touching the technology.”

To make digital transformations work from a cultural perspective requires an organization’s leaders to embrace or foster change, says Michael Corrigan, CIO of World Insurance. Yet, “having that mindset [of] encouraging collaboration and ensuring everyone understands and supports the transformation is something that is much easier said than done,” he admits.

Corrigan has seen businesspeople so focused on their “day jobs” that they often don’t understand that the success of a project “requires their voice and support and contribution of time. That’s often foreign to folks in business.” Many don’t understand why the business has to be involved at all and why IT can’t just get it done, he notes.

“You have to change the culture, and cultural change is very difficult for several organizations,” he says.

“People, process, and technology” is a common phrase technology leaders use when discussing the critical elements of a transformation. “But the real focus should be people, people, people,” echoes Megan Williams, vice president of global technology strategy and transformation at TransUnion. “While architecture and tech solutions are at the heart of the transformation, lack of change management and acknowledging the culture change required to transform is almost always cited as the top reason for failure,” she notes. 

[ Related: 10 hard truths of change management ]

Williams cites recent research from change management firm Prosci, which finds that organizations with a clear change management strategy are six times more likely to achieve their transformation goals than those with poor change management practices. “Essentially,” she says, “effective change management significantly increases the chances of a successful transformation initiative.”

Not dealing with data

A critical element of digital success boils down to having solid data. A lack of quality data and accessibility are surefire ways initiatives can stall or fail, says Evan Huston, chief digital officer and CTO of mattress maker Saatva.

Digging deeper, Huston cites incomplete or inaccurate datasets, which can hinder analysis and decision-making; inconsistent data formats and standards, which can impede integration and analysis; and restricted access to critical data, which can delay projects and limit insights.

Saatva prides itself on good customer service, he says, and one of the company’s digital initiatives is to provide customers with accurate information on their order delivery status. This requires real-time location detection of merchandise, which depends on accurate data.

“However, this digital initiative is challenged because we use third-party delivery providers that vary in their use of technology,” Huston says. “Some providers have GPS-enabled trucks, and some don’t. Therefore, a portion of the fleet is dark to us,” meaning there is incomplete data. Data integrity is also an issue because the data Saatva receives comes in a variety of formats and must be standardized in a warehouse, he says.

[ Related: Breaking down data silos for digital success ]

“In some cases, the data exists but is not available from the root source because it is not cloud-enabled,” which goes to the access issue, he points out.

When this is the issue challenging your digital initiative, Huston says, one solution is “to pivot the initiative focus toward the underlying data rather than the feature.” He adds, “This will of course increase the cost of getting to customer value and may change the math behind the overall prioritization.”

Wei has seen transformation projects “crash spectacularly,” often because of data issues, and says, “The failures taught me more than the successes.”

The biggest disaster Wei says he witnessed was at Philip Morris. “We tried implementing a global sales analytics platform. [It] looked perfect on paper, but we didn’t account for regional teams using different sales metrics,” Wei recalls. “Some markets tracked daily sales, others monthly. The data was incompatible, and the project collapsed after burning through millions of dollars.”

Underestimating the importance of documentation

Amid a digital transformation, effective documentation is a crucial yet often underestimated element of success, says Kumud Kokal, CIO of Farmer’s Business Network. “The ongoing upkeep, maintenance, and updating of documents throughout the implementation process can be a significant and demanding task,” he says. “However, neglecting this aspect can lead to failure.”

The greatest risk in digital transformation is poor documentation, which often leads to poor system configuration, agrees Krishna Yadamakanti, vice president of enterprise system and operations at medical equipment manufacturer Shockwave Medical.

“Missing artifacts, such as technical architecture diagrams or a lack of proper technical oversight to ensure business requirements are accurately implemented, can derail projects,” he says. “Thorough testing is crucial in validating configurations and ensuring smooth deployment across interconnected systems — a critical step for mitigating risk.”

Overlooking the importance of goals and metrics

Related, Kokal adds that “unwritten goals are fantasies.”

To ensure alignment among all stakeholders, Kokal recommends having clearly documented benchmarks and success metrics — such as the percentage of requirements met, time saved, and the number of bugs or incidents post-implementation.

“A non-negotiable best practice is to ensure clarity on business objectives and the use cases the business is solving for,” he says. “For example, when implementing a financial system ERP, my organization’s primary objective was to improve our financial processes across multiple areas. This was communicated effectively, ensuring that the entire team was aligned throughout the transformation.”

[ Related: Digital KPIs: The secret to measuring transformational success ]

Organizations must also consider the longevity of technological changes after implementation, Kokal says. “To prevent stagnation and maintain competitiveness within the industry, the technology should ideally have a minimum lifespan of three to five years, at which point, it is necessary to reevaluate the business objectives and if the technology is meeting them.”

Lack of executive sponsorship

Without proper support or a project champion, digital initiatives have little chance of succeeding. “Without strong executive support, projects may lack resources, prioritization, and necessary approvals,” says Saatva’s Huston.

Further, projects without executive backing may struggle to secure funding. A lack of leadership can also lead to resistance from key stakeholders, he says.

“I was once at an organization where a group of managers thought it would be a great idea to build an app,” Huston recalls. “It started as a hackathon project, and some folks ran with it from there because of the passion behind it. But it never gained interest from any particular executive and ultimately, the app was decommissioned.”

This requires adding an executive sponsor to every initiative during the annual planning cycle, Huston says. This means having a “single wringable neck who is taking accountability for the project,” he says. “If no one is willing to be the sponsor, kill the project,” because it indicates that the rest of the executive team only passively supports the effort.

[ Related: 15 digital transformation questions every CIO must answer ]

There has to be effective leadership — and a commitment from business leaders as well as IT leaders, says World Insurance’s Corrigan. “The business has to understand the scope and agree to timelines, deliverables, and cost. If you’re misaligned on any of those three, it’s going to be pretty difficult to have a successful project.”

That’s because IT will have the wrong deliverables, underfunding — or overfunding — and too much time if there are no deadlines established. “We see so many [projects] fail because we try to do them as cost effectively as possible,” Corrigan says, “but just as many fail when there’s no set timeline and you’re not continually communicating where you’re at with the deliverables and the stakeholders of the business.”

Ineffective communication

It may seem basic by now, but many organizations still do not promote the value of clear communication during digital initiatives.

In some instances, a lack of good communication means the term “Go Live” on a project can often be a poorly defined or subjective condition, says Varughse of Wesco Group. To be successful, clearly defined “Go Live” conditions are pivotal to complete a full transformation cycle, he stresses.

“Create a timeline for post-implementation to define clear conditions at day 1, 30, 60, 90,” Varughse advises. “For example, ‘On Day 1, I can ship product.’ If product cannot be shipped, there is no Go Live. A dashboard of these critical processes, accessible to all teams, removes subjectivity and avoids any risk to the bottom line.”

TransUnion’s Williams points out that often, failures “are a function of trying to do too much, too fast. Stakeholders, leaders, and customers expect quick results proving efforts are worth the investment,” she says. “But initiatives of this size and scope don’t happen overnight.”

This is where communication comes in — it is critically important that senior technology leaders balance stakeholder satisfaction with progress — while ramping up to be organized around delivery, and keeping those stakeholders in the loop, Williams says.

“Teams must understand the benefits of the transformation and receive consistent communication regarding progress and key decisions,” says Kokal. Echoing others, he says that ignoring change management, especially the “What’s in it for me?” factor can also jeopardize the success of the initiative.

No governance framework

Corrigan enumerates all the pitfalls of not having a governance framework: no clearly defined project scope, no requirements, no one designated as responsible for metrics on both sides, no expected timeline, and no transparency into cost.

Having a governance framework when a project is just starting will help IT manage risk and ensure the initiative will solve whatever problem the business is looking to solve, as long as “clear vision, clear responsibility, and clear goals are put out there,” Corrigan says.

Digital projects may also suffer if security is not prioritized and integrated at the outset. Often, there tends to be a focus on the exciting potential of new technologies rather than ensuring a solid security framework. Neglecting this may heighten the likelihood of vulnerabilities surfacing over time.

Not knowing your market

Digital transformations have a short shelf life, Varughse points out.“If an organization is bogged down with over-governance and multiple project approvals, it can hinder their progress in the long run.”

Like Williams, he says it’s important to constantly show improvements to consumers. “If they don’t see regular advancements, they may move on to the next shiny object.”

Today, it’s also crucial that businesses “engage with our younger demographics in a meaningful way, understand their needs, and stay ahead of the curve in terms of trends and preferences,” Varughse says. “We know they are constantly challenging us to come up with the next innovative product, and we simply cannot afford to disappoint them.”

Before starting a digital initiative, watch how your people work, advises PropertySensor’s Wei. “Not how they should work, not how your consultants think they work, but their real daily routines,” he stresses. “The best technology enhances existing behaviors rather than forcing new ones.”

The real estate industry’s resistance to digital transformation isn’t stubbornness, but a survival instinct, he maintains. “In a field where one missed detail can cost millions, people stick with what works. Our successful transformations happened when we respected this reality instead of fighting it,” Wei says. “I believe this perfectly translates into many other industries, not just real estate. Know what you’re digitally transforming before actually attempting it.”