Why is Digital Transformation so hard?

By now, most of your 2023 budgets have been approved and you have begun your process to acquire new technology to achieve some sort of digital transformation objective. Unfortunately, many weeks/months from now, many of these projects will not produce the expected outcome. Why is digital transformation so hard? Digital transformation should enable your enterprise to achieve greater business value, performance, and innovation.

At its core, digital transformation is about organizational change. Examples include:

1. Automation of manual processes
2. Implementing new software (a CRM, billing or ERP system)
3. Reinvent business models (think Blockbuster/Netflix, Amazon, Airbnb, Uber, online learning)
4. Moving technology to the cloud out of traditional data centers
5. Starting an API first development (API becomes a product and how teams interact with systems)
6. Switching to serverless solutions vs Kubernetes
7. Using SaaS tools vs a myriad of spreadsheets
8. Implement new technology such as IOT or robotics

The fundamental reason digital transformation efforts fail is human behavior. Human behavior is the hardest thing to change. Successful digital transformation will be the result of successful technology choices/implementation and change of human behavior. The best laid plans for new technology will fail simply due to our inability to change our own behaviors. If you haven’t heard of Conway’s Law, follow this link to read more about it. Conway's Law is alive and well in corporations around the world. Simply stated, Conway’s Law proposes that organizations organize systems that mirror their own communication structure. These communication structures have baked in biases that can be hard to change. Personal/professional biases get in the way of change. Communication structures aren’t limited to just humans. This can also involve technology such as how files are shared between departments.

Let me give you a few examples to foster your internal examination.

1. A telecommunication company used a system of red folders for order pre-processing. When the idea came up to use technology rather than paper, the red folder communication structure was simply codified in software rather than re-thinking the behavior embedded in the red folder processing.
2. A higher education institution needed to implement a new student information system to replace an outdated mainframe system. A process was in place to support student/course exceptions. That process dictated the entire custom development efforts versus using off the shelf solutions.
3. A manufacturing company managed payroll using traditional time punch cards. The accounting office then transferred all punch card data into spreadsheets. When a new payroll system was implemented, the accounting office wanted to continue transferring data into spreadsheets even though the shop floor manufacturing system already had the worker’s clock in/out times which could be automatically fed into the new payroll system.
4. A digital marketing company had an online CRM system but all reporting was kept offline by the accounting office with a copy of the CRM data in spreadsheets.
5. Try to get any department to solely use online office tools (Google Workspace, Microsoft Office 365) rather than desktop documents and emailing/sharing.

I’m sure each of you have your own horror story behind challenging digital transformation efforts. Focus on the human behavior part first to identify the possibility of success. Otherwise, months of frustration are ahead without any true business benefits. Many internal processes have been baked into the organization over the course of years. This is where startups gain the upper edge because they are not bound by hardened communication structures and processes. Your ability to break down these historical communication structures and processes will correlate directly to the success of your digital transformation efforts.