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5 Reasons why Digital Transformations Fail

15 May, 2023
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In 2011, Marc Andreessen claimed in the Wall Street Journal that “Software is eating the world”, predicting that the rise of software would digitally transform every industry and every sector of the world as we know it. Ten years later, there is nothing more to say but: he was right. Software has completely transformed our lives, and with that, every company, and every organization on the planet. It has fundamentally changed the entertainment industry with Netflix and Spotify. It has transformed travel and hospitality with AirBnB and Booking. It has transformed our cities with scooters, public transportation, and parking, that you can book with your phone in seconds. Every company is becoming a software company because the business models transform from selling products to creating experiences.

This means, that companies must change. Not only their business model – but also the way they work, the way they are organized, and the way they leverage IT resources. This transformation has many names. If we talk about the change of the business model, we talk about digital transformation. If we talk about the way of working, we talk about DevOps transformations. And, if we talk about transformation of IT, we talk about Cloud transformation. But they are all part of the same story. You can only succeed, when you master all three of them. The hard part is not digital, DevOps, or Cloud – the hard part is the transformation.

Common pitfalls – Why transformations fail

Many transformations fail – and it takes many companies more than one attempt to get it right. But in most failed attempts we can see the same patterns. If you want to succeed in your digital transformation, make sure to avoid these five common pitfalls:

Assuming your company or industry is special

Many customers that I meet believe that they are special, but they are not. And I’m sorry to say, it’s probable that neither is your company or industry. At least, not when it comes to digital transformation. Could your product kill people if it has a defect? So could cars, airplanes, trucks, medical devices, and so on. And the same is true for all of the parts that are produced for these products. They are nothing special. Do you have to you comply with certain standards? Do you create military products? Are you publicly traded? Do you work for governments? Whatever you think makes your company special, chances are there are many companies that face the same challenges that you do. The same rules apply to them as to you when it comes to your digital transformation.

If you look at the studies for DevOps transformations, you’ll find they apply to all companies: from small start-ups to big enterprises and from cutting-edge internet companies to highly regulated industries, such as finance, healthcare, and government.1

And this is actually a good thing. This means a lot of the problems you’re probably facing during your own transformation have already been solved by others. You can learn from their failures and don’t have to experience them yourself.

Having no sense of urgency

The biggest blocker to change is complacency. If people in your business are complacent, they will tend to resist change and keep on doing business as usual.

You must establish a true sense of urgency for people to address critical things now. Urgency in this case does not mean pressure from management that creates anxiety. True urgency should drive people to change with a deep determination to win – not with anxiety about losing.2

Without a sense of true urgency, people will resist change and are more likely to keep their old behaviors. Note that a sense of urgency might arise for completely different reasons at distinct levels of your organization. Management might feel pressure from the market and the lack of agility to react with frequent releases. Engineers might feel the pressure of technical debt and the problem of attracting and retaining talent because of old processes and tools. It is important to align these stories to a common root cause using a clear vision. If you manage to align the different senses of urgency into a single force that drives in the same direction, you can ensure that the different forces will not neutralize themselves.

Having no clear vision

It is easy to replace tools, processes, and roles, but it is hard to change behavior, culture, and stories. Without a clear vision, the transformation will not yield the desired results.

If I hear customers say we are not Microsoft or Google or we are not a cutting-edge internet company, it tells me they are missing a clear vision. If your vision clearly states you want to become the digital leader in your industry or change from a product company to a service company, people will not dare to say things that contradict it.

A good vision to drive change is a clear and compelling statement of where all your transformation leads.3

I believe it is worth noting that transformations are not always driven by upper management. I know many companies where the transformation is driven by individual departments or even teams. Nevertheless, the same rules apply – you need a clear vision for the members in your team or department and to establish a sense of urgency to ensure the transformation is successful.

Let obstacles block your progress

When you start a transformation, many obstacles will block your transformation. Good examples that I often experience are certain regulations in certain industries. Many regulations, such as ISO26262 or GxP, propose the V-Model for software engineering. The V-Model is based upon the waterfall model, so it contradicts basically everything we have learned in many years of research. If you insist on keeping the waterfall model, your transformation will most likely fail, due to your internal interpretations of the regulations. If you have a closer look at them, you’ll realize they just insist on best practices. If your practices are superior to the recommended ones, you can justify that and still pass an audit.

Most obstacles you’ll encounter are caused by your organization, for example, your organizational structure, tight job categories, processes, or trench warfare between the working council and management. Don’t permit these obstacles to block your transformation.

Not getting help

Consultants have a bad reputation in many companies, mostly because of bad experiences.

Often their appearance is associated with layoffs and other tough decisions. But if you want to learn a new sport, you don’t just buy the equipment and watch some videos on YouTube. You join a club that provides a professional trainer or find yourself a coach that will guide you. Sports are not just about knowledge and tools – they are about building skills. And without an experienced coach, it is hard or impossible to succeed in certain sports.

The same is true for building new skills and capabilities in your business. There is no shame in getting help from someone more experienced who can guide you through the change. The odds are high that help will be cheap based on what you save in time and effort, never mind the costs of failure.

How to succeed with your digital transformation

Start with WHY

For a transformation to succeed, you need a clear vision and a sense of urgency. The vision should be precise, compelling, short, and should inspire people to follow it. To communicate the vision, you can follow the Golden Circle4 and communicate from the inside to the outside (see Figure 1).

A picture containing text, iPodDescription automatically generated. Figure 1: Communicating a vision should start with WHY?

 

Let us see the layers of the circle in more detail:

  • WHY?: The reason why your company will undertake the transformation. This gives it a purpose and establishes a sense of urgency. Why should anyone care?
  • HOW?: How are you going to succeed in the transformation process?
  • WHAT?: The actual thing that you want to transform. What are you doing or making?

A purpose-driven mission

Don’t underestimate the power of vision! If you are a manufacturer of combustion engine cars, transformation to electrical cars will not come easy. There will be resistance. People will be afraid to lose the power of their jobs.

To succeed, you need a clear vision and to communicate the WHY? – like the Volkswagen Group in its goTOzero mission statement in 2019, which concentrated on four main fields of action: climate change, resources, air quality, and environmental compliance. By 2050, the entire Volkswagen Group wants to become balance sheet CO2-neutral. By 2025, the company plans to reduce the carbon footprint of its fleet by 30 percent over its entire life cycle compared to 20155. This perfectly explains the WHY?, establishes urgency, and fits into their overall updated vision to make this world a mobile, sustainable place with access to all the citizens. Equally, Mercedes-Benz stated in their Ambition 2039 statement from 2019 that they aim to have a carbon-neutral car fleet and production over the next 20 years.6

And it is the same when you transform a product company into a software or services company. Even if you only transform from a waterfall organization to a DevOps organization, people will be afraid of the change and there will be resistance if you cannot paint a picture of a desirable future and explain why you have to undertake the transformation.

Establish an engineering culture

Having a purpose-driven vision will help you to establish an engineering culture during your transformation: an inclusive and secure organizational culture that fosters talent and is driven by sharing and equality. My colleagues wrote about this in XPRT Magazine #12.7

This is a culture where people feel safe to speak up when they feel something is wrong, a culture where people feel safe to experiment and be creative without fear, and a culture where everyone feels welcome and safe – independent of heritage, gender, or religion.

The culture of an organization is a set of shared assumptions that guides behaviors within the organization8. That’s why it is hard to change it. Creating PowerPoint slides with values and mission statements might affect the culture but maybe not in the way management intends to.

As an engineer, you might ask yourself why the organization’s culture matters to you. Isn’t that a task for management? However, the culture is the result of the assumptions and the behaviors of every single person in the system – and that means every single person can change it. As an engineer, you should be aware of your culture and you should speak up if you see that something is wrong. Start doing the right things and telling the right stories.

Culture is best ingrained into corporate behavior using little quotes and principles that have a deeper meaning. They are easy to remember and encourage people to do the right things. Here are some examples you will often hear in companies with great engineering cultures:

  • Ask forgiveness, not permission: Encourage people to do the right thing, even if it is against current rules or processes.
  • You build it, you run it: Establish end-to-end responsibility and ownership for the things built.
  • Fail early, fail fast, fail often (or fail fast, roll forward): Try to fail early and fast instead of making everything 100% bullet-proof.
  • Embrace failure: Encourage people to experiment and take risks and ensure blameless learnings from failure. Take responsibility and don’t blame others.
  • Collaborate, don’t compete or work together not against: Foster collaboration – across organizational boundaries and also with customers and partners.
  • Go fix: Encourage people to take ownership and fix things instead of just complaining, but you have to ensure that innovation is not suppressed. Make sure people are also empowered to really fix the things they complain about.
  • Treat servers like cattle, not like pets: Encourage people to automate everything.
  • If it hurts, do it more often: Motivate people to practice things that are hard to build up the skills to accomplish. This phrase is often used in relation to releasing or testing applications.

These are just a few examples. More stories and sayings will arise when you transform your culture and become a digital company.

A great engineering culture is not just the responsibility of management. They have to let it happen and provide the vision but the best culture is then created by the people themselves during the transformation.

Data-driven transformation

If you want your transformation to succeed, it is critical to measure the right metrics and to prove the transformation really yields better results than the old system. Every metric or Key Performance Indicator (KPI) you measure will have an impact on the behavior. That’s why it is important to measure metrics that matter9 that allow you to optimize the right things first and to achieve small wins that will help you keep everyone motivated to continue with the transformation. Measuring the right data should always be the start for a transformation.

Optimizing something that is not a constraint is a waste of resources and can even have a negative impact. Objectives and Key Results (OKR)10 is a flexible framework to define and track objectives and their outcomes. It is used by many digital companies, among them Google, Microsoft, Twitter, and Uber.OKR helps organizations to achieve a high alignment on strategic goals while keeping a maximum level of autonomy for teams and individuals. That’s why it is a good framework for supporting your digital transformation.

A data- and AI-driven transformation is not a big-bang project that can be planned for a fixed finish date. Change is a long process – so your digital transformation is rather a way than a goal. Led by the digital vision – the WHY – the transformation can be separated into 3 phases (see Figure 2):

Data-driven transformation Figure 2: Phases of a data-driven digital transformation

 

  • Digital Strategy: Start by defining a Cloud, AI, and DevOps strategy. Gather company and market benchmarks.
  • People, Process & Culture: Build your first cross-functional teams around customer needs. Enable them to deliver value end-2-end and adjust the accompanying processes.
  • Scale and optimize: Create more teams around customer journeys and make sure to measure if the transformation is successful and yields the expected results.

Adoption and change management are an important pillar that accompany the entire change process.

Summary

“Change is hard because people overestimate the value of what they have and underestimate the value of what they may gain by giving that up.”
— James Belasco and Ralph Stayer

Change is always hard and that is the reason why many enterprise transformation fail – not only the digital transormation. But there are some typical pitfalls that can be avoided. If you think that one of these pitfalls apply to your company – hit refresh and start with a clear vision and a good strategy. And, there is no shame in getting help from someone that can guide and coach you. Get yourself a partner you trust that has experience with helping other clients succeed in their transformation.


  1. Forsgren N., Humble, J., & Kim, G. (2018). Accelerate: The Science of Lean Software and DevOps: Building and Scaling High Performing Technology Organizations (1st ed.) [E-book]. IT Revolution Press. Page 22.↩︎
  2. John P. Kotter (2008), A Sense of Urgency, Harvard Business Review Press↩︎
  3. John P. Kotter (2012), Leading Change, Harvard Business Review Press↩︎
  4. Simon Sinek (2011), Start With Why – How Great Leaders Inspire Everyone to Take Action, Penguin, p.38↩︎
  5. Volkswagen (2019): Volkswagen with New Corporate Mission Statement Environment “goTOzero”: https://www.volkswagenag.com/en/news/2019/07/goTOzero.html↩︎
  6. Mercedes-Benz Group Media (2019): “Ambition2039”: Our path to sustainable mobility: https:// group-media.mercedes-benz.com/marsMediaSite/ko/en/43348842↩︎
  7. de Vries, M., & van Osnabrugge, R. (2022): Together we build an Engineering Culture. XPRT Magazine #12: https://xebia.com/together-we-build-an-engineering- culture/↩︎
  8. Ravasi, D., & Schultz, M. (2006). Responding to organizational identity threats: Exploring the role of organizational culture. Academy of Management Journal.↩︎
  9. Michael Kaufmann (2022). Accelerate DevOps with GitHub: Enhance software delivery performance with GitHub Issues, Projects, Actions, and Advanced Security. Packt Publishing. P. 14.↩︎
  10. Doerr, J. (2018). Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth. Portfolio Penguin↩︎
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