Balancing Bold Moves and Cautious Steps: A Pragmatic Approach to Digital Transformation
In an era of Digital Darwinism, where society and technology are evolving faster than businesses can adapt, companies are under immense pressure to adopt emerging technologies. The AI frenzy has enabled hype-driven adoption, and many businesses are too quick to steam ahead, prioritising technology without first integrating the change into their broader business strategy. A recent Gartner report suggested that 30% of generative AI projects currently in testing will be abandoned after proof of concept by the end of 2025.
While it is still early days for most businesses, it is critical to understand the fundamentals of digital transformation approaches before jumping on the AI bandwagon. Investing in emerging technology without an educated understanding of the correct approach can lead to failure. It’s a risk that no business can afford to take.
It is no secret that digital transformation has not lived up to its hype or delivered expected returns since the term was coined back in the 2010s. It is widely accepted that 70 per cent of all digital transformations fail. A recent Forrester report suggests that in 2025, only 20% of tech executives tasked with leading digital transformations will succeed. The report highlights, “Although many digital transformations are technologically enabled, the complexity and need for extensive coordination with business operations, HR, and other IT leaders make these initiatives difficult to execute, often leading to stalled projects and leadership turnover.”
So, how do you prevent digital transformations from failing? There is no silver bullet or one size fits all. Countless books have been written about this topic. Digital Transformation is difficult. We have observed significant challenges leading digital transformations and projects across diverse sectors. These range from resistance to change, cultural dynamics, and a lack of a coherent vision that aligns technology with business strategy to setting unrealistic expectations, under-resourced budgets, lack of expertise, and a lack of commitment to change management—the list goes on.
Success and failure can be attributed to the overall approach taken. For instance, does one take the incremental or transformational approach? Typically, many CEOs want to make their mark in their short tenure, so they opt for the latter and make significant statements – in other words, ‘go big or go home’. Other organisations we have encountered, struggle from the beginning due to misjudging the scale of the change required. Companies are either starting too small, believing that an incremental approach will mitigate the risk, or undertaking massive, disruptive transformation too soon. While both strategies have their merits, they can lead to failure if executed incorrectly. An incremental approach might not effect meaningful change, whereas a transformational approach can be costly and face significant resistance.
The debate between incremental and transformational change has been around for a while. It is central to understanding the best approach for digital transformation initiatives. Incremental change generally involves minor, gradual adjustments to existing practices and processes (Quinn, 1980). This approach is beneficial when an organisation is usually aligned with its current and anticipated future conditions but needs minor modifications in its mission, strategy, structure, or processes (Dunphy & Stace, 1988). Incremental change promotes stability and long-term information integration, helping organisations adapt and become ambidextrous—capable of pursuing both incremental and disruptive innovation for long-term survival and growth.
Conversely, transformational change involves making large-scale, fundamental shifts in an organisation’s operations (Dunphy & Stace, 1988). Transformational strategies are necessary when an organisation is significantly misaligned or when there are drastic environmental changes. This type of change often involves radical alterations to the organisational structure, culture, or operations. Advocates for transformational change argue that it is necessary to address deeper issues and bring about significant shifts to stay competitive and adapt to rapidly changing environments (Francis et al., 2003).
There are scenarios where neither incremental nor transformational change is suited to the transformation at hand. In these instances, a hybrid approach is necessary. Recognising that organisations may require both incremental and transformational change depending on their stage of development and the nature of their challenges is a key to successful digital transformation.
Navigating the complexities of digital transformation requires a deep and nuanced understanding of both incremental and transformational change. Each approach has its strengths, but the key to success lies in accurately assessing the scope of the change needed and aligning it with the organisation’s unique circumstances. This understanding is the roadmap to successful digital transformation.
In conclusion, we have found that a hybrid strategy, which blends incremental and transformational change elements, proves most effective. This approach allows organisations to tailor their transformation efforts to their specific needs, ensuring meaningful progress while managing risks. Ultimately, the goal should be to foster an ambidextrous organisation capable of continuous innovation and adaptation in an ever-evolving business landscape.
