Industry Insights

Your Digital Transformation Wasn't Enough. Now What?

By Dan Saks / September 9, 2019

Digital transformation wasnt enough blog

Study after study shows that digital transformation projects have a sky-high rate of failure — as much as 70% in many cases. If digital transformation success is such a hard-fought win, that must mean that the other 30% or so of companies are in the clear, right?

Far from it.

In a survey report just released by [AppDirect], we found that even when digital transformation projects are considered successful — meaning they meet all or most of their objectives — a significant number of organizations, 72%, run into a host of new obstacles that may impact future growth.

Trouble appears on the horizon early, during the planning phase of digital transformation.

The trouble appears on the horizon early, during the planning phase, when a third of companies already believe they will need a "phase two" digital project to see meaningful results. The problem? The budget becomes even harder to come by during the execution phase. We find that's when companies have difficulty justifying additional spend on digital transformation.

It's never an easy job to admit that your first attempt at digital transformation wasn't enough. When you have that hard conversation with your boss — whether the CIO, CEO or maybe even your board — here are three areas to consider that will help you answer why next time will be different.

1. Focus like a laser on ROI.

In our survey, return on investment (ROI) was a big question mark for organizations. In the planning stage of digital transformation, 28% of companies are concerned about their ability to demonstrate ROI. As they execute their projects, the reality is even worse: 38% of companies have difficulty showing the ROI of their digital transformation.

Part of the problem may be that the key performance indicators (KPIs) that used to work no longer apply. While these "old" KPIs like net profit are important, there are numerous other ways to measure the impact of your digital projects. Focus on KPIs that measure the traction of your digital initiatives, such as the number of active users, conversion rates, Net Promoter Score (NPS), month-over-month growth, bounce rates — whatever is best suited to your digital goals.

It’s also important to keep in mind that the best metrics for your digital transformation may be qualitative. As PricewaterhouseCooper explains: “In most cases … metrics should be tangible and quantifiable. But in the more innovative, disruptive initiatives, they may be more qualitative, as when measuring customer perception.”

The bottom line: Both hard and soft data and can be useful to measure ROI, but they need to support the overall strategic goals of your digital transformation.

2. Make automation your mission.

At its core, digital transformation can often be boiled down to one word: automation. Using technology to automate as many business processes as possible is the fuel that powers the time and cost savings that transformation projects often promise.

A majority of businesses understand that automation should be a top priority. According to a recent McKinsey Global Survey report, 57% of companies say their organizations are at least piloting an automation initiative in one or more of their business units.

57% of companies say their organizations are at least piloting an automation initiative.

But, a pilot does not always evolve into a successful project. Our survey finds almost half of organizations, 49%, have too many commerce processes — such as billing, reconciliation, and software provisioning — that must be done manually. This is true even for many born-in-the-cloud SaaS companies, who still manage sales transactions, provisioning and content exchange entirely with email and spreadsheets.

As you plan the next phase of your transformation, find the places in your business where manual processes create friction. These should be at the top of your digital priority list to fix.

3. Put flexibility front and center.

The reasons why companies pursue digital transformation are unique, but several common themes always emerge. In our survey, gaining business agility and streamlining business processes were among the top reasons, with many claiming it is still difficult and expensive to integrate new solutions into their technology stacks after the completion of their digital transformation projects.

Why do many companies still struggle? Today, technology simply changes too fast for most companies — and their planning processes — to keep up. This may be part of the reason why only 29% of the applications companies use are integrated into their core systems. When your business model will be unrecognizable in five years, how can you possibly plan for technology to support it?

For the most part, you can't. This is why you must architect your technology systems for maximum flexibility. In practice, this means consistently using API-driven, modular solutions that are extensible and technology agnostic.

As a first step, find the point-to-point integrations in your technology stack and focus on finding alternatives. As a recent MuleSoft report recently put it, "point-to-point integration has created some of the biggest headaches [companies] have ever seen." Developing APIs, either internally or working with a third-party, is essential to streamlining your technology and business processes.

The reality is that digital transformation is never an end.

The reality is that digital transformation is never an end. Today's organizations will need to undergo periodic transformations if they want to remain competitive. However, it's essential to make each digital initiative count. Focusing on these three areas will help make every one of your company's digital phases a success.

Dan Saks is co-founder and co-CEO of AppDirect.

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