28 Digital Transformation Failure Statistics To Learn From


Digital Transformation Failure Statistics

If you’re looking for statistics on digital transformation failure, you’ve come to the right place.

We know that finding relevant research can be a pain, especially when it comes to something as dynamic and ever-changing as digital transformation. So we’ve done the hard work for you: we’ve gathered up these statistics on digital transformation failure and compiled them into one handy list!

Now, we won’t lie: these stats aren’t all roses and sunshine; we have plenty of depressing ones (that’s why they’re called failures!). But this list is comprehensive enough that you’ll definitely find some good insights in there!

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Digital Transformation Failure Statistics (The Highlights)

  • 84% of digital transformation initiatives fail. 
  • 70% of digital transformations don’t deliver the expected results.
  • 75% of digital transformations settled for dilution of value and mediocre performance.
  • Businesses spend $1.3 trillion every year on digital transformation projects.
  • Digital transformation spending is expected to reach $1.8 trillion in 2022. 
  • Income growth for digital leaders is 1.8 times higher than that of those who oppose digitalization.
  • Although 87% of businesses believe that digital would disrupt their industry, an equal portion admit that they lack the necessary leaders.
  • 41% of organizations invest in digital transformation without conducting in-depth customer research to use as guidance.

 

General Digital Transformation Failure Statistics

1. 84% of digital transformation initiatives fail.

Transformations are difficult, but digital transformations are even more challenging.

Research shows that transformation efforts have a failure rate of more than 70%. And when it comes to digital transformations, the failure rate is about 84%.

Transformations are hard because they change your company—and change requires a lot of effort, time, and energy. Digital transformations are even harder because they involve technology and people—and not only do they have to work together, but they also need to work with the digital world at large. And that’s where things get tricky. Technology changes constantly, which means that adapting to new technologies can be incredibly difficult and time-consuming.

On the surface, it appears that digital transformation is being hampered by insufficient planning and a culture of resistance to change. Even some of the largest and most innovative firms, however, have suffered humiliating digital transition failures due to a variety of different issues.

(McKinsey)

 

2. Only 16% of organizations say their digital transformation has improved performance and equipped them to sustain changes in the long term.

For the majority of companies, digital transformations are not living up to their potential. In fact, 84% of respondents feel that their organization’s digital transformation has not been successful in improving performance or sustaining changes in the long term.

This could be for a number of reasons, such as ineffective planning, lack of buy-in from employees, or inadequate resources. Whatever the reason, it’s clear that there is still a lot of room for improvement when it comes to digital transformations.

It’s easy to see why so many companies fail at digital transformation.

When you think about it, it’s kind of like trying to go from driving a car to flying a spaceship. It’s not just about learning how to operate a new machine—it’s a whole new way of thinking about how you interact with the world.

And yet, when you look at the numbers for companies that have successfully undergone digital transformation, there are some commonalities that make it clear what kinds of organizations are able to pull off these changes effectively.

(McKinsey)

 

3. 7% of organizations reported that they saw improvement in performance after digital transformation, but those gains were not sustained.

Organizations that have undergone digital transformation often see improvements in performance, but those improvements are not always sustained.

This suggests that digital transformation is not a panacea for all organizational ills, and that careful planning and execution are necessary in order to realize lasting benefits.

While digital transformation can help organizations address some performance issues, it is not a cure-all solution. Organizations need to carefully consider their specific needs and objectives before embarking on a digital transformation journey.

(McKinsey)

 

4. Even in digitally savvy industries, only about a quarter of companies (26%) have been able to successfully undergo digital transformation.

The core of the problem is that companies are not transforming their business models fast enough to keep up with the pace of change in their industry. This is especially true for tech companies that are trying to navigate an increasingly complex world of data sharing and privacy regulations.

The silver lining? Companies that can successfully navigate these challenges will be able to create new opportunities for themselves to succeed in a changing digital landscape.

(McKinsey)

 

5. Traditional industries, such as pharmaceuticals, oil & gas, automotive, and infrastructure—experience digital transformation success rates of 4%-11%.

The main reason for the low success rates of digital transformations in these industries is that they are highly complex and involve many different stakeholders.

For example, in the oil and gas industry, there are often multiple stakeholders involved in a project, from exploration to production to refining. Each of these stakeholders has their own objectives and goals, which can make it difficult to align everyone behind a single digital transformation initiative.

In addition, these industries tend to be heavily regulated, which can add another layer of complexity to the process.

(McKinsey)

 

6. Companies with fewer than 100 employees are 2.7 times more likely than those with more than 50,000 employees to report success with digital transformation.

Success rates of digital transformations also depend on the size of the company undertaking them.

Smaller companies are generally more agile and better able to adapt to new technologies than larger organizations. This agility gives them a distinct advantage when it comes to successfully implementing a digital transformation.

Large companies have many moving parts and often have difficulty keeping up with their own growth as well as the changing needs of their customers. 

(McKinsey)

 

7. The odds of a digital transformation exceeding profit expectations are just one in ten.

If you’ve ever wanted to know what your odds are of delivering a profit-impacting digital transformation, we’ve got some bad news: It’s not very likely at all.

In fact, according to a recent study conducted by the consultancy firm McKinsey, the average digital transformation project has a 45% chance of failing to meet its profit goals. On average, only 10% of efforts will exceed expectations.

There are many reasons why digital transformations may not live up to their potential. One common reason is that companies fail to properly align their business goals with their technology investments. Without this alignment, it can be difficult to realize the full value of new technologies.

Other challenges include resistance from employees, inadequate leadership, and unrealistic expectations.

If your company is considering a digital transformation, these tips may help you increase your chances of success:

  • Make sure your business goals are aligned with your technology investments.
  • Communicate the vision for the transformation clearly to all employees.
  • Take an incremental approach, starting small and then scaling up as you gain more experience with new technologies.

(McKinsey)

 

8. Organizations overestimate the value of their digital transformations by more than two times.

This is according to a new study that found that organizations are reaping less than one-third of the benefits they anticipated from their investments in digital transformations.

The study surveyed C-level executives across a range of industries and found that many are struggling to keep up with the pace of change and realize the full potential of their digital transformation efforts.

While there are many reasons for this, one common challenge is simply integrating new technologies into existing systems and processes. Without a clear plan or strategy for doing so, many organizations end up siloing their data and losing out on key insights that could help them drive more value from their digital transformation investments.

(McKinsey)

 

9. Only 30% of digital transformations met or exceeded their target value and resulted in long-term change, classifying them as winning.

90 (2880×1884)

The above figure was obtained in a survey of 825 senior executives from 70 leading companies around the world. Based on it, 44% of transformations were worrisome, having added some benefits to the organizations but did not fulfill their final goals, resulting in only minor long-term change, while 26% produced limited value and no sustainable change.

In comparison, successful transformations created 66% more value, 82% improvement in corporate abilities, and reached 120% more on-time goals than those that failed.

Winning transformations further created 29% more profit, 20% improvement in capabilities, and met 32% more targets on time compared to worrisome transformations.

(BCG)

 

10. 75% of digital transformations settled for dilution of value and mediocre performance.

The above figure compares to 68% of conventional transformations that experienced the same.

The same amount of 20% of the cases was unsuccessful in both conventional and digital transformations, achieving less than the 50% of anticipated outcomes.

Conventional transformations met or exceeded expectations in 12% of the cases, whereas digital transformations met or exceeded expectations in only 5% of cases.

75% of digital transformations settled for dilution of value and mediocre performance.

(Bain)

 

11. 41% of organizations invest in digital transformation without conducting in-depth customer research to use as guidance.

To provide more context to the above figure, 54% of transformation efforts continue to focus on updating customer interactions and 45% on enabling infrastructure.

(Prophet)

 

12. 40%-50% of sales employees do not use their CRMs (customer relationship management software).

However, additional studies reveal that among those who use it, 76% of sales leaders claim the majority of the features supplied are never used by their teams.

Besides the resistance to change, employees frequently believe that the systems they created are more reliable than other software systems. Furthermore, they may lack the essential training to properly use new technology and may choose to put it on hold for the time being.

(Hubspot)

 

Statistics on the Importance of Preventing Digital Transformation Failure

13. Businesses spend $1.3 trillion every year on digital transformation projects.

This attempt is intended to increase efficiency and efficacy in a variety of business fields, as it has been demonstrated that digital leaders outperform their competitors in almost every discipline and business area.

In any case, digital transformations intended to improve efficiency fail up to 90% of the time, severely limiting companies’ and leaders’ ability to innovate further.

(IEEE Xplore)

 

14. The global market for digital transformation was valued at $998.99 billion in 2020.

By 2026, it is expected to reach $2.7 trillion. Between 2022 and 2027, the digital transformation market is anticipated to grow at a CAGR of 17.42%. Additionally, the societal and industrial value of DX might exceed $100 trillion by 2025.

(Mordor Intelligence via My Hub, WE Forum)

 

15. Digital transformation spending is expected to reach $1.8 trillion in 2022.

While the first time DX spending reached $1 trillion was in 2018, by 2025, this figure is estimated to hit the $2.8 trillion mark. Additionally, it is estimated that between 2017 and 2022, digital transformation spending will reach a compound annual growth rate of 16.7%.

(Statista, IDC via My Hub)

 

16. Although 87% of businesses believe that digital would disrupt their industry, an equal portion admit that they lack the necessary leaders.

Another 83% say their organization lacked the necessary employees with the change management skills to succeed. As economic uncertainty rises, executives face increased pressure to succeed in the short term, resulting in leadership methods that are ineffective in successful transformation.

Data further reveals that, autocratic leadership is highly common, with 20% at risk of failure due to an overexpressed feeling of self-confidence, 50% struggling to inspire followership, and 40% of the leaders needing to do more to convey a vision that engages people.

(Deloitte)

 

17. Income growth for digital leaders is 1.8 times higher than that of those who oppose digitalization, and the total business value increase is more than double.

Investors believe that 50% of companies should increase their investments in digital skills and software.

In the short term, digital technology and styles of working will boost productivity and customer experiences. In the medium term, digitization creates new perspectives for growth and business model innovation.

Successful transformations also position companies for long-term success; if they grasp ongoing innovation, they won’t need to digitally transition again.

(BCG)

 

18. Nearly 40% of the companies had post-transformation changes in growth or profitability of ±5%.

Only 27% of the 143 transformations from 2008 to 2020 that were the subject of data analysis were successful, i.e., saw both revenue and profitability improvements.

Following the change, equal 26% portions of businesses saw a decrease in both profitability and growth or increased profit but not revenue, while 21% produced revenue growth only.

(KPMG)

 

19. 51% of digital transformation efforts are motivated by potential growth opportunities.

Digital transformation is motivated by a desire to take advantage of potential growth opportunities. In fact, according to a recent survey, 51% of respondents said that potential growth was their primary motivator for pursuing digital transformation.

There are many reasons why companies might want to pursue digital transformation. But it’s clear that one of the main motivations is the possibility of unlocking new growth opportunities. If your company is considering embarking on a digital transformation journey, be sure to keep this in mind and identify ways that you can take advantage of the potential benefits.

Another 41% are motivated by rising competitive pressure. This means that companies are feeling the need to digitize in order to keep up with their competitors.

With increased data leakage stories in the news on a regular basis, new legal criteria such as GDPR are also providing motivation for firms to reform (38%).

(Prophet)

 

20. 72% of the companies claim they were ­first in their industries to experiment with new technologies during the COVID-19 pandemic.

Another 67% claim they spent more on capital projects connected to digital than their competitors in the same industry. 33% claim that throughout the crisis, they weren’t the first to try out new technology, and 31% say they did not invest more than their business competition.

(McKinsey)

 

21. 19% of companies refocused their entire business around digital technologies during the COVID-19 crisis.

38% said they invested more in technology to use it as a competitive advantage, while 30% said they modernized core tech capabilities to keep up with the competition.

Another 10% said they relied on technology primarily as a way to save money.

(McKinsey)

 

22. During the pandemic, consumers increased their usage of digital technologies for health support by 15%.

In the future, 37% of consumers are very likely to use telehealth. Virtualization has the potential to save up to $250 billion (20%) in current US healthcare spending. Following the epidemic, the utilization of telehealth increased from 11% to 76%.

(McKinsey)

 

How to Prevent Digital Transformation Failure

23. Six factors can increase the chances of digital transformation success from 30% to 80%.

Six factors can increase the chances of digital transformation success from 30% to 80%.

Based on research by BCG, the first factor relates to strategy, yet only 40% of organizations are able to overcome the obstacles to create a properly integrated digital transformation strategy.

The second factor is associated with leadership commitment to digital transformation, ranging from C-level leaders to middle managers. Luckily, a whopping 75% of executives estimate they have good leadership engagement. However, only one of three say they had middle management committed to digital transformation.

The third factor relates to having the right talent to execute the transformation. Yet, only 25% of organizations make sure to have the right people in transformation leadership positions based both on digital expertise and other skills.

As per the fourth factor, digital transformation must be controlled by leadership that has an agile mindset. According to the research, effective agile leadership characterized over two-thirds of the successful digital transformations, in contrast to 90% of those that failed which lacked it.

Progress tracking and monitoring are viewed as the fifth factor of an effective digital transformation. Only 40% of the organizations in the study adequately addressed this factor, as opposed to 90% of organizations with successful transformation programs.

Finally, the sixth factor relates to business-tailored technology and data platforms. The research found that more than 50% of the participating businesses battled with unaccommodating technology platforms. On the other hand, two-thirds of organizations with successful digital transformations had modern and customizable tech and data platforms that helped support and scale their digital transformation efforts.

(BCG)

 

24. 88% of leaders who had successful organizational transformation agree that the execution teams were supportive of it.

The above figure compares to only 30% of those with failed transformations.

On the topic of scope and planning, another 80% of leaders of successful transformations state they considered both cost take-out and investment in growth initiative, which compares to only 42% of leaders of unsuccessful transformations.

Furthermore, respective 63% and 16% of leaders of organizations with successful and failed transformations agree their organizations set appropriate workload expectations and didn’t take on many initiatives.

The same applies to 62% and 17% who agreed their organizations set the right incentives to change behaviors and working ways.

(KPMG)

 

25. 81% of leaders who had successful organizational transformation agree improvement happened at a pace adequate for the change.

The above figure compares to only 25% of those whose transformation efforts failed.

In regard to execution, 79% of leaders whose organizations had successful transformations agree they effectively deployed transformation-supporting technology, which compares to only 25% of leaders with unsuccessful transformations.

Respective 75% and 31% of leaders of organizations with successful and failed transformations agree they had enough dedicated resources (both internal and third-party) to execute the transformation.

(KPMG)

 

26. 85% of leaders who had successful organizational transformation say there was an appropriate level of ‘new thinking’ and challenging the status quo.

The above figure compares to only 19% of organizational leaders whose transformations failed.

On the topic of culture and change, 83% of leaders whose organizations had successful transformations say that change management transitioned to the business model effectively, which compares to only 14% of leaders with unsuccessful transformations.

Respective, 78% and 17% of leaders of organizations with successful and failed transformations say teams were effectively trained in the new ways of working in line with the transformation.

(KMPG)

 

27. 62% of companies with strong inner and outer games are financially successful.

orchestrating-digital-transformation-fig02_full.gif (950×615)

“Inner game” is about choosing the right investments, testing them in real-time, and scaling them for maximum impact, whereas the “outer game” is about working on customer engagement or the supply chain.

It is clear that companies which are financially stable and have good reputations in their industries are most likely to be expanding their digital initiatives while balancing both inner and outer games.

Of companies expanding their digital initiatives with the help of a strong inner game, 43% are financial leaders, while out of those companies that have implemented digital technology and methods partially throughout their organization, 29% are financial leaders.

17% of companies that employ emerging digital initiatives to mobilize their outside games are financial leaders in their industries, and so are 15% that have some digital activity in certain areas but lack an outer game or a smart strategy.

(Bain)

 

28. 85% of companies with successful digital transformations used traditional web technologies.

85% of companies with successful digital transformations used traditional web technologies.

81% used cloud-based services, and 68% used mobile internet technologies. Big data and IoT were used in 56% and 45% of companies with successful digital transformations, followed by design thinking (44%), AI (31%), robotics (21%), advanced neural machine learning techniques (17%), AR (15%), and additive manufacturing such as 3D printing (13%).

(McKinsey)

 

Conclusion

So there you have it—the latest digital transformation failure stats. And while it’s admittedly a bit of a bummer to think about all the ways digital transformation can go wrong, we hope that this article has helped equip you with the knowledge you need to avoid these failures in your own business.

After all, the best way to learn from these mistakes is to know what they are so that you can avoid them in the first place. So take these lessons and run with them—your business will be better for it in the long run.

By careful planning and execution, you can ensure that your digital transformation initiative is successful. Good luck!

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