Digital transformation is the process of adopting and implementing digital technology to create new or modify operations, services and products by translating business processes into a digital format. At a time of significant technological advancement and evolving business requirements, digital transformation is high on the agenda for practically all modern organizations.
Worldwide spending on digital transformation is forecast to reach almost US $4 trillion by 2027, according to the International Data Corporation (IDC) Worldwide Digital Transformation Spending Guide. As organizations continue to prioritize digitalization, digital transformation investments are projected to grow substantially, potentially reaching or even surpassing two-thirds of all information and communication technology (ICT) spending, it found.
“Digital transformation is no longer a discretionary investment: companies that want to be competitive and win in the digital economy are leading the way,” says Angela Vacca, senior research manager with IDC’s data and analytics group. “Digital business investments are ramping up even faster with the advent of generative AI which is having an impact across industries; still, opportunities are varied across different market spaces.”
With a relentless pursuit of innovation and efficiency set to drive a period of phenomenal growth in digital transformation, here are 12 surprising things business leaders should know about it.
1. Most projects fail
Digital transformation often has a lot to live up to. Despite the promise it offers modern business for creating new revenue streams, improving productivity and reducing costs, most projects fail to deliver expected goals. A McKinsey & Co study assessed more than 600 firms that had recently undergone digital transformations. It found that just 20 percent of the companies achieved more than three-quarters of the revenue gains they had anticipated before embarking on their projects, while only 17 percent achieved more than three-quarters of the cost savings they’d hoped for.
2. It requires “continuous reinvention”
One-third of business leaders consider digital transformation to now mean “continuous reinvention” rather than episodic improvement. That’s according to the Transforming the enterprise of the future report from KPMG International. It found that a majority (88 percent) of enterprises are now running two or more transformation programs, with over half (54 percent) running three or more concurrently.
“Digital transformation is more of an ongoing process than a straightforward, one-time project,” says Stanley John Kebite, project manager at Japan-101. “A bit of a continuous improvement as well as staying updated with technological advancements are what it takes to maintain a competitive edge.”
3. Technology is secondary
“I think the most surprising thing that businesses learn when undergoing digital transformation is that technology plays a secondary role in it,” says Vaclav Vincalek, virtual CTO and founder of 555vCTO.com. “Often, businesses think digital transformation means lots of technology, and once the technology is incorporated, they are done.”
While technology is a crucial component, the actual transformation happens when you implement technology but revise your entire business model to complement it, says Matt Aird, CTO at Custom Neon. “For us, it wasn’t simply a case of revamping our website or integrating AI; it was about studying our site usage, what was working and what wasn't and from there changing how we approached customer interactions, product development and internal processes.”
READ: 10 digital transformation pitfalls and how to avoid them
4. Culture change is the true challenge
In digital transformation, technology is the easy part – changing organizational culture is the true challenge, according to Amir Kahani, managing partner and consultant at Keyideas and business mentor at the University of Central Florida Business Incubatore. “Workers must accept the change, see its advantages and feel comfortable in their positions. It all comes down to developing a digital mindset where adaptability and constant development come naturally. Consider it like teaching an elderly dog a new way of thinking rather than simply some new skills.”
Digital transformation hinges on employee buy-in, agrees Vincalek. “Management can’t just decide to throw in new technology and expect their employees to know how to use it. A great example is when UPS introduced a new way of loading their trucks for daily delivery. The technology and the data were ready in a short period of time (relatively speaking), but the implementation and training of all the managers and drivers took? That took about two years.”
5. It demands proactive change management
Successful digital transformation demands proactive change management, yet many business leaders underestimate the extent to which their employees fear change, says Jay Jayasuriya, principal at Sendero Consulting. “This fear, often rooted in uncertainty and perceived threats to job security, can significantly hinder transformation efforts. Proactive change management involves not only implementing new technologies but also addressing these fears through transparent communication, comprehensive training and inclusive decision-making.”
By recognizing and mitigating the human aspect of resistance, leaders can foster a supportive environment that embraces change, ensuring smoother transitions and more effective adoption of digital initiatives, Jayasuriya adds. “This approach not only enhances the success of digital transformation but also strengthens organizational resilience and adaptability.”
6. A holistic approach is key
Business leaders may be surprised how important it is to take a holistic approach to digital transformation. “Many focus on individual aspects of digital transformation but ensuring all business functions are interconnected is key to compliance,” says Martin Hartley, group CCO of emagine. “Every department plays its own crucial role in the digital journey.”
As the old saying goes: “go together if you want to go far,” adds Kahani. “The same applies to digital transformation, which is rarely effective when done alone. It frequently calls for working with startups, other businesses and rival businesses. For many leaders, the realization that creating an ecosystem is more advantageous than adhering to an ego-driven strategy comes as a surprise.” Sharing resources and information can spur growth and innovation – it’s like creating harmony while performing in an orchestra, he says.
7. Customer-centricity is important
The importance of customer-centricity in digital transformation is another eye-opener, says Kahani. “Consumer expectations are higher than ever in the digital age. Companies must use data analytics not just to understand but to anticipate client wants and customize interactions.” Selling a product is no longer the goal; instead, the focus is on developing a memorable experience, Kahani adds. “Imagine being able to foresee your customers’ demands before they ever become aware of them, all thanks to the power of data analytics.”
8. Employee experience should be considered
While many businesses believe the customer experience is the most important thing about digital transformation, and it is the main reason the project begins in the first place, it’s also crucial to consider the employee experience, says Hartley. “Having an internal focus helps with getting buy in from all members of the organization, which can be a vital differentiator when it comes to return on investment.”
READ: AstraZeneca's prescription for digital adoption success
9. Cyber security is a major challenge
Cyber security is a major challenge for organizations when it comes to digital transformation, says Kahani. “Many view cyber security as a headache, but it is essential to address. Advanced technology brings greater accountability with it. Many leaders underestimate the importance of cyber security until it's too late.” A single breach can cause significant financial losses and harm a company’s reputation, so integrating cyber security at every stage of the digital transformation process is crucial, he adds. “Think of it as building a stronghold to protect your digital domain.”
10. It can be messy and unpredictable
Another surprising aspect of digital transformation is its non-linear nature, says Kevin Shahnazar, founder and CEO of FinlyWealth. “Many business leaders expect a smooth, predictable transition, but the reality is often messy and filled with unexpected pivots. At FinlyWealth, our transformation journey took us down paths we never anticipated. For instance, our initial plan to develop a mobile app evolved into creating a voice-activated assistant for smart home devices, opening up an entirely new market segment we had yet to consider.”
Timelines are often inaccurate, and delays are common, adds Stuart McCalla, an organizational and leadership architect. “Leaders should constantly manage prioritization so that those implementing the transformation know the most important tasks. It is less stressful for everyone when deadlines and priorities are clear, allowing them to act accordingly.”
11. Things can move very quickly
The pace of change in digital transformation can be shockingly fast, says Shahnazar. “Technologies that seem cutting-edge today can become obsolete within months. This rapid evolution requires businesses to cultivate agility and adaptability as core competencies. We learned this lesson the hard way when our meticulously planned 18-month digital roadmap became outdated six months into implementation due to emerging technologies.”
Technology developments can indeed be surprisingly rapid, agrees McCalla. “In any digital transformation lasting more than a year, leaders can expect the emergence of new technology that might compel a change in course or strategy. Leaders need to be prepared for this and avoid getting locked into a single technology, as this can impede change or growth.”
12. You shouldn’t fear the truth
Fear of reporting insufficient progress can hinder success, so it’s essential to remove the anxiety of truth-telling, says McCalla. “Many transformations use red, green and yellow status reports to track progress. However, project reporters may sometimes fudge numbers to avoid delivering bad news.” Senior leaders’ frustration usually starts with the messenger and escalates as it moves through the organization. Before starting any digital transformation, leaders should work to reduce fear within the organization. “This allows information to flow in a timely manner and issues to be resolved rather than hidden and discovered later,” McCalla adds.
[inlinead-1]