From Hype to Disappointment: The Root Causes of Technology Failures in Digital Transformations

Written By: Eric Kimberling
Date: June 2, 2023

Technology is not typically the primary reason why digital transformations fail. However, it can be a contributing factor to their failure. It is essential to understand why technology fails and how it can lead to the failure of your digital transformation.

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Technology can contribute to failure by presenting challenges and problems throughout the implementation process. Today, I want to discuss some common technology challenges that can ultimately lead to failure. While they may not be the most significant contributors to failure, they are important factors that need to be addressed and mitigated to avoid failure.

Business Process Misalignment

One of the primary ways technology can contribute to the failure of a digital transformation is through a lack of alignment between business processes and technology. Specifically, there is often a misalignment between the desired future state of business processes and the actual outcomes achieved through technology implementation. It is important to clarify that this misalignment is typically not due to technology limitations, but rather the configuration and deployment of technology that does not align with the intended business processes.

Several factors can contribute to this phenomenon during a transformation. It could be that the software vendor or technical implementer did not fully comprehend the business requirements. It could also stem from a lack of clear articulation of needs from individuals within the organization. Additionally, inadequate testing of functionality during project testing phases may play a role. In rare cases, it could be that the software itself is incapable of fulfilling the desired objectives. In such instances, alternative options should be explored to address the specific process or function, rather than attempting to force technology into an unsuitable solution.

The misalignment between technology and business processes is a significant challenge frequently observed. Often, it arises from attempting to fit technology into a framework that does not align with the desired objectives. During the digital strategy and planning phase, it is crucial to allocate sufficient time in the project plan to address these areas of misalignment between processes and technology.

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Paving The Cow Paths

Another common technological failure we often encounter is when businesses adopt highly advanced, sophisticated, and robust technologies with significant potential for improving their operations. However, they choose to deploy the technology in a manner that merely automates their existing practices. This approach, known as "Paving the cow paths," was coined by Professor Michael Hammer many years ago, but organizations continue to fall into this trap even today. By simplifying and dumbing down advanced technologies to mimic old processes, they demonstrate resistance to change and organizational change issues. Consequently, what should be an organizational problem becomes a technological problem when we force-fit or modify technology to align with familiar practices.

This approach not only increases the risks associated with digital transformation by automating flawed processes but also diminishes long-term business value. By reverting to outdated ways of doing things, we fail to leverage the advancements in technology that have occurred over decades. To mitigate this technological risk, a somewhat counterintuitive solution is to address the organizational change issues inherent in any digital transformation. By doing so, we can better manage the technological risks discussed here.

Data Migration

Another significant technological aspect that can lead to failure, often serving as a common root cause, is the neglect of data migration. In other words, insufficient attention is given to cleaning and appropriately mapping the data, resulting in unsuccessful data migration efforts. Unfortunately, data is frequently treated as an afterthought in the context of software deployment. When engaging a software vendor and system integrator, their primary focus is on establishing the foundational technology structure or solution. The responsibility of cleaning up the data and transferring it from legacy systems to the new one is often left to the client. If this process is not executed effectively, even with sophisticated and advanced technology in place, the absence of accurate and relevant data diminishes the potential business value.

To ensure technological success, it is crucial to initiate data migration activities as early as possible. This approach guarantees not only the smooth transfer of data to the new system but also the implementation of appropriate data governance processes. Additionally, it allows for the integration of data analytics and business intelligence outputs, providing the necessary information to make informed decisions and gain clear visibility into the organization's performance.

Software Customization

Another significant point of technological failure is software customization. Often, organizations attempt to make substantial changes to the software by customizing it and altering the source code to force it to perform tasks it was not originally designed for. While it may be the right solution for specific organizational needs, determining whether to take on the technological risk associated with customization is a challenging aspect of this discussion. Frequently, the perceived need for customization stems from resistance to change rather than a genuine requirement. In other words, people request software customization because they desire to pave the cow paths, as mentioned earlier, by automating existing processes through technology.

The problem with software customization lies in the fact that it introduces implementation challenges. By adding tasks, risks, and problems during the implementation process, it becomes more difficult to maintain the customized software post-implementation. Attempting to modify the software in a way it was not intended to function poses risks when it comes to future upgrades, module additions, or integration with other systems. Customization, therefore, becomes a slippery slope. While there may be legitimate cases where customization is necessary, it is crucial to be targeted and selective in deciding if and how software should be customized along the way.

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Software Integration

In today's era of agile and rapidly advancing technologies, it is almost inevitable for most organizations to operate with multiple systems and technologies. These systems and technologies must communicate with each other effectively. There was a time not long ago when organizations believed that a single ERP system would suffice and provide all the necessary functionalities without the need for integration. However, the flaw in this approach lies in the fact that most organizations are now shifting towards a best-of-breed model, even if they choose a single software vendor like SAP, Microsoft, or Oracle. Integration becomes crucial, even between modules within the same system. Moreover, software vendors themselves are acquiring third-party systems to enhance their core offerings, further emphasizing the need for integration.

Without integration, end-to-end business processes cannot be achieved. Accurate data flows and a single source of truth are compromised. Integration is also vital for obtaining reliable business intelligence and predictive analytics. Therefore, successful digital transformation requires robust integration between multiple systems. Unfortunately, organizations and their implementation project teams often overlook this critical technological workstream. It is essential to ensure that software integration is adequately addressed to guarantee overall success in your digital transformation journey.

Software and User Acceptance Testing

User Acceptance Testing (UAT) is a crucial series of milestones designed to identify deficiencies, risks, or problems with technology during deployment. However, organizations often overlook this step and fail to thoroughly test all necessary scenarios or involve the appropriate business stakeholders. Insufficient iterations of testing may also occur. Regardless of the reasons, it is important to recognize that skimping on software testing, integration testing, and UAT—the three major testing phases—increases the likelihood of failure.

Organizations are complex entities, and technological deployments for these entities are inherently complex, making them susceptible to human error. Therefore, it is essential to have a robust testing strategy as part of the overall digital transformation strategy to mitigate common risks associated with testing cycles.

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I would enjoy brainstorming ideas with you if you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, so please feel free to contact me at eric.kimberling@thirdstage-consulting.com. I am happy to be a sounding board as you continue your digital transformation journey.

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

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Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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