438 Marketing Study Reveals Digital Transformation Waste Bill Expected to be $2 trillion by 2026

New research explains alarming waste levels in digital transformation and the hefty price global businesses are paying for neglecting people in the process

Digital transformation, often hailed as the panacea for business growth and innovation, is continuing to prove to be a highly damaging leaky bucket for businesses both in the UK and world-wide – according to a new report by 438 Marketing.

Global investment in digital transformation is expected to almost double between 2022 and 2025 (according to Statista1), but given that many major business consultancies estimate the failure rate for digital transformations at 70 percent and based on their calculations of previous losses2, shockingly the price of wastage through digital transformation programmes not meeting their objectives could be around $2 trillion by 2026.

On the back of these startling statistics a recent study by leading strategic brand communications business 438 has unveiled that a major culprit for this waste is that often organisations forget the ‘people part’ in digital transformation. Recent studies have found that – of the 70 percent of enterprises that fail to create real value from their digital transformation efforts, 62 percent cited culture as the number one hurdle (McKinsey). A further study also found that 47% of digital transformation failures were attributed to employee resistance and a lack of change management (by Prosci)

“Given these estimates that ignoring the ‘people’ element of a transformation could be accounting for 50 percent of digital transformation failure, inadequate employee engagement could have a $1.4 trillion price tag come 2026!”, says 438 Director Andy Whitmore.

“But the other thing the monetary loss figures don’t show is the hidden cost of failed implementation. While digital transformation is often sold as a means to improving the employee experience, all too often, the opposite happens.

“One of the most notable roadblocks in achieving digital transformation success is a disconnection between business leaders and employees when it comes to technology adoption. Many companies invest heavily in new tech solutions, but they fall short in fostering a culture of tech adoption among their workforce.

“Whether due to a lack of training or the sheer effort it takes to manage multiple applications, a 2021 poll found that 35 percent of employees are frustrated by their organisation’s technology, and 44 percent say it does nothing to enable them in their job or in fact, makes their work harder.

To highlight the point further, 438 conversely highlights the positive impact investment in employee engagement can have on profitable transformation, including citing global giant PepsiCo as an example.  438’s study shows that a people-first approach to introducing new technology can improve the odds of successful digital transformation by almost three times, from 28 percent to 73 percent. 

Turning the Tide

Offering examples of how businesses can tackle digital transformation failure, Andy Whitmore, says:

“The statistics paint a grim picture, but there is hope. Successful digital transformation projects continue to yield substantial benefits, including increased efficiency, agility, and competitiveness. To mitigate the risk of failure, organisations are increasingly focusing on change management strategies, clearer objectives, and robust communication plans.

“While most organisations focus on the customer experience, the value of giving the same level of attention to the employee experience is gradually being realised. Yes, ironically, it’s the human side of digital transformation that ensures that change is successful, seamless, and sustainable and the anticipated value is truly realised.

“As Charlene Li, Chief Research Officer at PA Consulting, says so well: ‘Not enough businesses focus on the transformation part of digital transformation, and the transformation part has always been about people. This has been the blind spot for so many digital transformation efforts—it’s what a lot of companies are missing.”

All of which speaks to the need to engage users on an emotional level – and leaders who appeal to their teams through communications which empower, encourage collaboration and build community – are 260 percent more likely to be successful at transformations than those who don’t.

This supports the notion that even the best technology in the world is destined to not realise its potential if transformation programs are not anchored to an empathetic and compelling reason ‘why’.

Whitmore adds: “We’ve got first-hand experience of the positive impact that employee engagement campaigns can have.

“Using our work with PepsiCo’s internal AI platform, “Ada”, as an example, we have been able to centre the innovation empathetically and increase engagement in ways never seen before. Our user-first, integrated communications have driven a 98 percent increase in total logins and a 78 percent increase in unique users.

So while technology implementation, operating models and customer-centric initiatives are crucial for building a digitally transformed organisation, more and more evidence shows that it’s the changing beliefs and behaviours – the new ways of working, the new tools being used, and the new habits formed – adopted within the organisation that can make or break transformation.

Digital transformation isn’t about technology, it’s about people.

And when employees understand where their company is headed, how they contribute to that larger purpose, and how they’ll benefit, they’re much more likely to be engaged. All of which requires open communication, a dedication to a common goal, and a culture of acceptance and innovation.

Employee engagement communication campaigns are not just an option; they are the heartbeat of successful transformation.

Download 438’s full study and free White Paper “Uncovering the human-shaped hole in digital transformation successhere.