Two thirds of digital transformation projects fail

Large companies are throwing away roughly $400 billion (£258 billion) a year on digital and analytic business transformations that fail to deliver what they promise. According to a new study from Genpact, more than two thirds of digital transformation projects entered into fail to meet expectations. Problems aligning communication between IT and business teams is cited as the central issue for implementation failure, with legacy integration and talent earmarked as other major bottlenecks.

The application of technology in the business world is booming. The growth follows the massive potential digital can bring – a recent report from Accenture for example finds that the use digital technologies in the world’s top 10 economies could add a combined $1.36 trillion to their GDP in 2020. The awareness seems to have landed safely in the boardrooms of corporations, with a recent survey from Dicitas Consulting revealing that 80% of managers agree that digital technology is at the very least likely to be here to stay. The trend is visible across all sectors and industries, from media & telecom to energy, retail and public sector.

Despite all the potential, awareness and focus on digital, clients are struggling with phenomenon. While some large corporate players are experimenting with and implementing digital technologies, many are finding it difficult to keep up, according to recent research by KPMG. On the strategy side, businesses are struggling with drafting digital strategy, and embedding strategic objectives throughout the organisation, and as a result only third of businesses are able to apply digital in a strategic manner, and one in five organisations can label themselves as ‘digital proof’.

Yet even once a digital strategy has been developed and an implementation plan has been mapped out over time, businesses also come to struggle with execution, highlights a new study from Genpact. The report, conducted among managers working at 100 large global enterprises, finds that only 30% of respondents agree that a return on investment (ROI) was achieved in sync with business case expectations. Only 26% of managers agreed that their analytics programme had met or exceeded their expected business outcomes, while digital initiatives fared only slightly better at 31%.

As it stands, the report suggests that at best only “some benefits” are gained from the current implementation of digital and analytic transformations. The project failures come with a hefty price tag, estimated to total a waste of £258 billion a year. “The billions of pounds poured into the technology is often failing to provide the benefits expected from the technology,” write the authors.

According to Genpact, 64% place high or extremely high value on analytics improving their business performance, and 71% of respondents place a high or extremely high emphasis on digital technologies improving their business processes, showing that there is a considerably mismatch between what companies desire and where they are currently situated in terms of preparedness for such transformations.

Holding back implementation
The report presents a number of reasons for poor ROI from digital and analytics projects within the firms. Slightly less than a third cites poor communication between IT and business teams as an issue for the implementation of business transformations processes. A lack of business intelligence tools, legacy processes and systems unable to collect relevant data and a lack of access to talent was cited by another third of respondents.

For consulting firms, the digital boom, and the need for expert advice and support, remains big business. In the UK technology consulting is the fastest growing segment of the consulting market, estimated to be worth £6.4 billion, while across the Atlantic in the US, technology consultancy is the number two fastest growing segment, expected to grow by 12% this year.