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Why Are Digital Transformation Initiatives Failing?

As enterprise leaders significantly escalate their artificial intelligence (AI) investments this year, heralding a new era of digital transformation, IDC projects that spending will approach $3.9 trillion by 2027. These investments aim to enhance internal processes, reduce time spent on manual tasks, and leverage data and technology to improve the customer experience, ultimately lowering expenses and overhead. However, research indicates that 70% of digital transformation projects fail.

In 2011, GE repositioned itself as a “digital industrial” company through its Predix software platform for the industrial internet. In 2015, GE furthered this strategy by creating GE Digital, aiming to centralize all IT operations and aspiring to become one of the top 10 software companies.

“Investing ahead of the curve makes sense when we know what the curve is. But with digital transformation, there’s a lot of exploration and understanding to accomplish before the curve starts to take shape.”

While initial improvements in service margins resulted in positive media coverage, they were insufficient for GE to drive substantial change. Marrying digital investments with financial performance involves several critical factors. This article from the Harvard Business Review (HBR) explains why GE Digital failed and highlights the questions that should have been considered to validate their digital investments beforehand.

Economic Factors: Success depends on multiple factors, not just digital capabilities. It is crucial to evaluate the demand for the platform and the specific needs it addresses internally or for the customer.

Complexity of Digital: Digital transformation is an ongoing, complex process requiring investment in skills, infrastructure and business processes. Organizational readiness is key—e.g., how prepared is the company to handle the initiative? Is there top-down alignment strategically, operationally and financially?

Industry Readiness: Align digital investments with industry readiness and strategic fit. Assess how the solution fits into industry and customer needs. Does it create shareholder value and generate revenue?

Balance Excitement and Uncertainty: Avoid overinvesting in new digital initiatives at the expense of existing business operations. Don’t be blindsided by new technology and neglect other parts of the business.

Putting the Brand Before the Digital Transformation

What role is your brand playing in your business? The author of this post prompts readers to consider how a brand or organization serves its customers and why a succinct strategy is enacted through every brand interaction, service provided and across every aspect of the customer journey.

“Brand-led business transformation is customer first, meaning that it always asks ‘how can we help?’ before it asks ‘how can we sell?”

“If outstanding customer experiences are the goal of many businesses today, brand is the instruction manual for the nature of those experiences.” He went on to express why the brand should be prioritized over digital experience: “Digital business transformation (DBT) has dramatically improved the way that businesses serve their customers. Exceptional customer experiences have transformed entire categories, built new businesses and given legacy businesses new momentum.

But digitally-led business transformation has its limitations. While on the supply side it has saved vast sums of money, DBT has been poor at delivering a sustained competitive advantage. Once best practice has been established, popularized and adopted, every customer experience first-mover is recommodified. The advantage is lost.”

In addition, he states “We need to recognise that DBT has run its course—not as a powerful means of delivering new digital experiences and services, but as the driving force in business transformation.” Brand-led business transformation is customer first, meaning that it always asks ‘how can we help?’ before it asks ‘how can we sell?’

When leadership is about to embark on a digital transformation or AI initiative, they should consider pausing to ask:

Why are we doing this?

What specific issues will it address for us and our customers?

How will this impact our culture?

What value or cost savings will it create?

Understanding these fundamental questions is crucial. Leaders must explore and understand the anticipated benefits and challenges before embarking on a digital transformation initiative. This strategic reflection ensures that every digital initiative aligns with the organization’s goals, customer needs and the overall value proposition, ultimately leading to a more thoughtful and effective transformation process—all while avoiding fumbling the company’s future.

Questions? Please email me here. As always, thank you for reading.