A new report by Cheshire brand communications specialist 438 Marketing has predicted that global waste from digital transformation programmes could reach around $2 trillion by 2026.
Despite being frequently hailed as the panacea for business growth and innovation, digital trasformation is often proving to be a decidedly, the report found.
Global investment in digital transformation is expected to almost double between 2022 and 2025, according to Statista, but combine that statistic with a 2020 report by the Harvard Business Review which placed the failure rate for digital transformations at 70 percent, the price of wastage through digital transformation programmes not meeting their objectives could be around $2tr figure by 2026.
438 has laid a large part of the blame for this waste on organisations often forgetting the “people part” in digital transformation:
- Of the 70 percent of enterprises that fail to create real value from their digital transformation efforts, 62 percent cited culture as the number one hurdle (McKinsey)
- 46% of organisations identified resistance to change as a major barrier to digital transformation success (Gartner)
- A further study also found that 47% of digital transformation failures were attributed to employee resistance and a lack of change management (by Prosci)
- 21% of organisations in a survey identified inadequate sponsorship and support from top leadership as another reason for digital transformation failure (McKinsey)
“Given these estimates that ignoring the ‘people’ element of a transformation could be accounting for 50 percent of digital transformation failure, inadequate employee engagement could have a $1.4 trillion price tag come 2026!”, says 438 Director Andy Whitmore.
“But the other thing the monetary loss figures don’t show is the hidden cost of failed implementation. While digital transformation is often sold as a means to improving the employee experience, all too often, the opposite happens.
“One of the most notable roadblocks in achieving digital transformation success is a disconnection between business leaders and employees when it comes to technology adoption. Many companies invest heavily in new tech solutions, but they fall short in fostering a culture of tech adoption among their workforce.
“Whether due to a lack of training or the sheer effort it takes to manage multiple applications, a 2021 poll found that 35 percent of employees are frustrated by their organisation’s technology, and 44 percent say it does nothing to enable them in their job or in fact, makes their work harder.”
Conversely, 438’s study shows that a people-first approach to introducing new technology can improve the odds of successful digital transformation by almost three times, from 28 percent to 73 percent.
Whitmore added: “Ironically, it’s the human side of digital transformation that ensures that change is successful, seamless, and sustainable and the anticipated value is truly realised. [Transformation] has always been about people. This has been the blind spot for so many digital transformation efforts—it’s what a lot of companies are missing.”
Whitmore cites his own compay’s work with PepsiCo’s internal AI platform, Ada, as an example of the positive effects of employing a “user-first, integrated communications” approach. PepsiCo has seen a 98 percent increase in total logins and a 78 percent increase in unique users since 438 came on board.
“Digital transformation isn’t about technology, it’s about people,” the report concludes. “When employees understand where their company is headed, how they contribute to that larger purpose, and how they’ll benefit, they’re much more likely to be engaged. All of which requires open communication, a dedication to a common goal, and a culture of acceptance and innovation.”
