Fix your digital transformation for real results

There is a growing realization that many digital transformation efforts are falling short of their objectives. While some organizations successfully integrate digital technologies throughout their operations, others find their digital projects either stalled or not meeting their goals effectively. If this resonates with you, there's encouraging news: you are not alone in this challenge. Moreover, it's becoming easier to pinpoint obstacles and establish best practices. Importantly, research has shown that mature connectivity within businesses is a strong indicator of the value driven by digital transformation (DTx), and adopting a platform-based strategy enhances this success.

Assessing Digital Transformation
The effectiveness of your digital transformation largely depends on the goals you set. For objectives like financial performance, DTx has often missed the mark. According to a 2023 Harvard Business Review article by five McKinsey analysts, although 89% of large global companies have initiated digital and artificial intelligence (AI) transformations, they have only achieved 31% of the anticipated revenue increase and 25% of the expected cost reductions.

The consultancy KPMG highlighted varying outcomes in a survey last year involving 400 U.S. tech leaders from companies generating over $100 million in revenue. The findings showed that while many companies saw significant returns on their DTx investments in terms of efficiency, cost reduction, employee productivity, and customer engagement, more than half reported no improvement in performance or profitability. Another study, recently commissioned by EdgeVerve and conducted by Forrester, involved 630 respondents from large enterprises. It revealed that nearly 40 percent of these companies had invested over $500 million in DTx efforts in the past year, yet only 20 percent felt these initiatives had met their business objectives.

Identifying the Challenges
A common issue is the proliferation of small-scale projects. Rodney Zemmel, co-author of the McKinsey book "Rewired," describes this as "death by 1000 pilots," where numerous exciting projects fail to align with true organizational value or scale effectively.

The Forrester study noted several impediments even when DTx investments had specific goals like process efficiency and customer experience enhancement. Three out of five respondents reported that their organizations faced issues due to "organizational silos, conflicting priorities, and difficulties in implementing new process capabilities." Simply put, DTx is not a cure-all; it cannot fix pre-existing structural or organizational flaws. If a company lacks a culture of insight-driven decision-making or has operational inefficiencies, DTx and AI investments alone will not resolve these issues.

Data challenges also persist. According to Forrester, one-third and one-half of respondents cited data security, data quality and integration, and the coexistence of existing and new technologies as significant hurdles. A general lack of data preparedness can severely limit the scope and impact of any DTx initiative.

The Role of Connectivity and Platforms
Not all companies have struggled with these issues. What sets successful enterprises apart? High maturity in connectivity practices often indicates whether a company can achieve advanced digital capabilities. Companies that excel in connecting systems and processes generally fare better. The Forrester research found that about a quarter of surveyed firms were at the advanced end of the connectivity spectrum, making them 1.7 times more likely to translate their DTx investments into tangible business value than those at the beginning stages.

Most decision-makers agree that a platform-based strategy could enhance their digital efforts. 70% believe such a strategy will bridge the gap between business and technology, facilitating a connected ecosystem. Additionally, enterprises strongly desire to improve integration capabilities, leverage intelligent automation across technologies, and achieve interoperability—goals that are well-supported by a connected platform approach.

Looking Beyond Digital Transformation
Integrating digital technologies across departments, operations, and products has been a long-term endeavor for IT and business leaders, yet success has yet to be consistent. Challenges include an excess of projects, a lack of strategy focused on real value, persistent organizational silos, inflexible processes, and inadequate data readiness.

Conversely, a firm's ability to connect systems and processes correlates positively with successful, digitally driven-business outcomes. Platform-based strategies that unify and orchestrate business and technology components are increasingly considered effective methods to advance transformation efforts. When implemented successfully, such platforms can integrate DTx more deeply within an organization, transforming it from a project or initiative into a fundamental, ongoing business practice.