Digital Transformation Success and Failure – Part II Insights from the Academic Literature

Digital Transformation Success and Failure – Part II Insights from Academic Literature 

In my previous blog post – check it out if you have not seen it yet – I explored the industry and grey literature to find out what is known about the high failure rate of digital transformation initiatives, especially regarding the human and organisational factors that might contribute to the issue. 

This time, I am delving into the academic literature. Quick disclaimer, this is by no means a literature review. I have no intention of summarising the whole literature on the topic. Rather, you might approach this blog post as “scraping the surface” to get an initial general idea of what is said. 

Defining Success or Failure 

When looking at what defined success or failure in digital transformation, and how to measure it, I am sad to conclude that academic literature did not have great new insights. In general, my thoughts remain the same; more consensus is clearly needed on how to define and measure success and failure of digital transformation.  

That said, there are some interesting discussions regarding what it means to “digitally transform”. While in the industry literature there was little, if any, discussions regarding what defines digital transformation in the first place, the academic literature is very concerned with this matter.  

What is digital transformation?  

There are numerous definitions of digital transformation (DT) in the literature, but in general, DT is seen as process through which organizations leverage information, computing, communication, and connectivity technologies to trigger significant changes to its properties. Some authors see DT as a stage of transformation that follows the IT enabled transformation phenomenon in organisations and is particularly differentiated from digitalisation and digitisation for its transformation or redefinition of value creation paths. In general, academic literature points out to the disruptions and opportunities that digital technologies bring for business model transformation and the strategic renewal of firms.  

Along these lines, the understanding of success and failure in DT should be concerned with extent to which organisations are able to leverage digital technologies to redefine how the create and deliver value to customers.  

Challenges and Barriers in Digital Transformation 

Research and practice show that the pursuit of DT, and the related business model redefinition and transformation, is far from a simple and straightforward endeavour. In fact, the process is plagued by significant challenges and barriers.  

DT scholars have repeatedly stated that digital transformation is a huge and extremely difficult endeavour and that organisations attempting to digitally transform face significant challenges in making the change. 

First, at the organisational level, digital transformation scholars have paid particular attention to the issues of rigidity, change resistance and inertia. Further, they highlight that digital transformation requires organizational processes, structures, and capabilities that firms often lack. 

Firms also face the challenge of balancing the successful management of a healthy core businesses with the diverse development of multiple innovation efforts and the overall transformation process that entails substantial changes at all levels of the organisation. This is far from simple. In fact, trying to balance these efforts often lead to managerial paradoxes and tensions that are difficult, if not impossible to solve. 

Is leadership that important? 

Yes, but not alone. Aligned to the huge attention given to leadership in the grey literature, numerous digital transformations analysed the role of top management involvement and leadership in solving the challenges of innovation and transformation. In this regard, the literature agrees that yes, leadership is very important. However, studies also found that leadership involvement alone is not sufficient to solve the challenges of DT, with organisational design and competencies, being of key importance. 

Is scaling really a big issue? 

Yes, but it is seems like it still not as well understood as we would have expected. The academic literature seems to agree that firms often fail to bring DT initiatives to grow into a stage where they have transformational power. However, the academic literature tends to do the same as the grey literature; it focusses on the success factors as to demonstrate “how they succeed”, instead of “why they fail so much”.  

That said, so interesting insights do exist in the DT and aligned literature. Mostly, the academic literature highlights the same challenges as the grey literature but goes further in explaining why these challenges exist. 

Key Failure Factors 

In the scaling phase, projects face several uncertainties: 

• Technical uncertainties related to the underlying scientific knowledge, including technical feasibility, manufacturing, and maintainability.  
• Market uncertainties comprise to what extent customer needs are understood, transformed into products, and superior customer value is generated compared to competition.  
• Organizational uncertainties address the organizational and managerial conflict of fostering innovation while pursuing operational activities.  
• Resource uncertainties embrace all difficulties of internally and externally acquiring needed resources for innovation.  

Additionally, the academic literature points out that, especially regarding the new business models that are expected to come from digital transformation, the economic logic makes it hard for leaders and managers to prioritise these projects. That is to say, before scale, new business initiatives will never be as economically viable as the core businesses. Investing in the scale of these initiatives only makes sense if a future lens is applied. Because of these many uncertainties, innovation and transformation activities often get neglected in favour of day-to-day business needs.  

Further, multiple actors in the organisation will have different perspectives on the economic value of such new business and just the decision to scale is far from sufficient to guarantee scaling.  In fact, the academic literature highlights that scaling initiatives require significant changes for the core business units of the organisation. For digital transformation to succeed, the core of the organisation needs to migrate towards operating digital businesses.  

Thus, in additional to managing the successful scaling in the commercialisation of new digital businesses initiatives, companies need to manage the successful scaling in the transformational effect of these. Double the effort, double the trouble… 

What is next? 

Well, I just started to scrape the surface of the literature in digital transformation, so more insights will come soon. I will keep updating on the interesting discussions I find in the literature. Also, please do contribute! Any interesting insights into why digital transformation is so hard to scale? 

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