Two thirds of digital transformation projects fail

28 September 2015 Consultancy.uk

Large companies are throwing away roughly $400 billion (£258 billion) a year on digital and analytic business transformations that fail to deliver what they promise. According to a new study from Genpact, more than two thirds of digital transformation projects entered into fail to meet expectations. Problems aligning communication between IT and business teams is cited as the central issue for implementation failure, with legacy integration and talent earmarked as other major bottlenecks. 

The application of technology in the business world is booming. The growth follows the massive potential digital can bring – a recent report from Accenture for example finds that the use digital technologies in the world’s top 10 economies could add a combined $1.36 trillion to their GDP in 2020. The awareness seems to have landed safely in the boardrooms of corporations, with a recent survey from Dicitas Consulting revealing that 80% of managers agree that digital technology is at the very least likely to be here to stay. The trend is visible across all sectors and industries, from media & telecom to energy, retail and public sector. 

Digital transformation

Despite all the potential, awareness and focus on digital, clients are struggling with phenomenon. While some large corporate players are experimenting with and implementing digital technologies, many are finding it difficult to keep up, according to recent research by KPMG. On the strategy side, businesses are struggling with drafting digital strategy, and embedding strategic objectives throughout the organisation, and as a result only third of businesses are able to apply digital in a strategic manner, and one in five organisations can label themselves as ‘digital proof. 

Yet even once a digital strategy has been developed and an implementation plan has been mapped out over time, businesses also come to struggle with execution, highlights a new study from Genpact. The report, conducted among managers working at 100 large global enterprises, finds that only 30% of respondents agree that a return on investment (ROI) was achieved in sync with business case expectations. Only 26% of managers agreed that their analytics programme had met or exceeded their expected business outcomes, while digital initiatives fared only slightly better at 31%.

As it stands, the report suggests that at best only “some benefits” are gained from the current implementation of digital and analytic transformations. The project failures come with a hefty price tag, estimated to total a waste of £258 billion a year. “The billions of pounds poured into the technology is often failing to provide the benefits expected from the technology,” write the authors.

Two third of digital transformation projects fail

According to Genpact, 64% place high or extremely high value on analytics improving their business performance, and 71% of respondents place a high or extremely high emphasis on digital technologies improving their business processes, showing that there is a considerably mismatch between what companies desire and where they are currently situated in terms of preparedness for such transformations.

Holding back implementation
The report presents a number of reasons for poor ROI from digital and analytics projects within the firms. Slightly less than a third cites poor communication between IT and business teams as an issue for the implementation of business transformations processes. A lack of business intelligence tools, legacy processes and systems unable to collect relevant data and a lack of access to talent was cited by another third of respondents.

For consulting firms, the digital boom, and the need for expert advice and support, remains big business. In the UK technology consulting is the fastest growing segment of the consulting market, estimated to be worth £6.4 billion, while across the Atlantic in the US, technology consultancy is the number two fastest growing segment, expected to grow by 12% this year.

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”