Eighty-four percent of digital transformation efforts fail

What do these failures have in common? Better yet, what can predict success? To find out, we commissioned Forrester Consulting to conduct a global research study with 475 individuals leading digital transformation efforts at organizations spanning 10 industries.

In the study, “Beneath The Surface Of Digital Transformation: Why Leaders Modernize Enterprise Applications,” Forrester found that systems of record (SoR) — the core applications that organizations run on — have a profound impact on the success of digital transformation projects. Modernizing SoR and tapping vast data resources (80 percent of the world’s data is hidden inside organizations) helps established organizations, or incumbents, create new platform business models that help them compete with disruptors like Uber and Amazon. Organizations that prioritize their SoR are almost twice as likely to succeed at digital transformation.

I sat down with Liz Herbert, Vice President and Principal Analyst at Forrester during the Think 2018 event. Together we discussed the findings of the study. I also discussed with two IBM clients — Carhartt and Schlumberger — how some of the same themes have played out for their organizations.

Both these client organizations have radically modernized their SoR to tap their own data, their most valuable resource, for a competitive advantage.

Here are some lessons learned by John Hill, CIO of Carhartt, and Eric Abecassis, CIO of Schlumberger, during each of the three stages of their SoR modernization.

Tactical modernization
Whether it’s through microservices, cloud migration or automation, modernization is what enables digital transformation of your current business. In order to be successful with systems of insight (SoI) and systems of engagement (SoE) — those attention-grabbing and often resource-hungry shiny objects — it’s absolutely critical to modernize your SoR foundation.

Carhartt has digitized their operations and worked with IBM to maintain and manage their SoR, freeing up the Carhartt team to focus on innovation and higher value activities. As John Hill said at Think, “One of the best parts about being a CIO is getting to drive innovation.” With modernized SoR, the satisfaction of innovation can be experienced at all levels in the organization.

Strategic modernization
The modernization of SoR act as the jumping-off point to move into completely new markets — to become incumbent disruptors. Eighty percent of hidden data owned by incumbents, when deployed strategically, can offer hidden advantages. An IBM financial services client recently used their own data to boost sales to existing clients and disrupt their own market with expanded services. Carhartt is pursuing similar efforts, using its modern SoR as a platform to support B2B expansion.

Radical modernization
New functions and capabilities for SoR modernization are enabled by AI, automation, microservices, blockchain, cloud and new ways of working like DevOps and agile methods. But the irony of all this technological innovation is that it all comes down to the people.

In order to successfully modernize the SoR, we need to modernize the organizations and skills that were built to support it. The pace of technological change has been exponential, but the organizational and culture pace has been much more linear. We need to bend the organizational curve to accelerate alongside the speed of technology change.

Schlumberger’s Eric Abecassis recognizes that organizations must work to understand all the people and organizational interactions impacted by SoR modernization. He credits Schlumberger’s success, especially early on, to handbooks created to describe the impact to key operational processes and communicating how the organization is supposed to work.

Hill echoed the sentiment, describing how Carhartt’s use of agile methods has spurred the cultural change that has dramatically sped up the change curve.

With the right attention paid to the people who use the technology, modernization is able to become truly radical.

Does SoR modernization really drive success? When it comes to SoR modernization, the numbers back up everything our clients are telling us. Forrester uncovered that a staggering 71 percent of organizations that prioritized and invested in modernization of SoR (modernization leaders) reported their digital transformation efforts were successful. By contrast, only 42 percent of the so-called modernization laggards reported positive results.

By taking steps to update SoR, leaders surveyed in the research study — as well as Carhartt and Schlumberger — enjoy benefits like greater agility, improved SoR data access, better SoE and SoI integration, and increased productivity.

Whatever may be keeping you from prioritizing the modernization of your SoR, it’s clear that this is no longer an option. To take a closer look at common challenges, and dig deeper into the data on what it takes to lead, I encourage you to download the Forrester study.

Then I challenge you to take these insights on how SoR modernization leaders tackle digital transformation and use them to develop your roadmap for success.