In a world where digital transformation is hailed as the holy grail of business evolution, a stark reality looms: despite a projected $3.9 trillion global investment by 2027, up to 95% of these initiatives are doomed to fail.
The culprit? It's not the technology—it's the humans. As companies pour millions into cutting-edge systems and strategies, they're overlooking their most critical asset: their people. This disconnect between astronomical spending and employee adoption isn't just a stumbling block; it's an existential threat that threatens to swallow the ambitions of digital leaders whole. But there's hope, and it starts with understanding that true transformation begins not with technology and infrastructure, but with the people asked to make it happen.
At the core of many digital strategies is a desire to enhance employee productivity. In fact, 87% to 91% of businesses are prioritizing digital strategies to improve workplace efficiency, with many considering digital transformation a top priority for their operations.
The AI goldrush is also injecting new urgency into the C-suite. A staggering 99% of Fortune 500 companies are already using AI.
These trends will only accelerate in an increasingly interconnected world. A recent McKinsey report underscores this dynamic, noting digital transformation is critical to not only compete, but to “survive,” emphasizing, “Digital transformations are not a one-and-done project; most executives will be on this journey for the rest of their careers.”
While industry is unanimous on the role of digital transformation, the path forward is littered with obstacles.
Alarmingly, transformation initiatives have failure rates ranging from 70% to 95%, with an average of 87.5%. High failure rates are often linked to factors such as limited budgets (cited by 34% of companies) and resistance to change (27%). Change resistance can manifest in various ways, from active sabotage to passive reluctance, often driven by fear or uncertainty about the future. This is where organizations can seize opportunity.
Many businesses fall short by prioritizing the bold new technology itself and underinvesting in the internal engagement and change marketing process.
A prominent example of a digital transformation project that failed in part due to these factors is Haribo's infamous SAP implementation, where the global candy manufacturer attempted to upgrade its systems with SAP software but faced significant supply chain disruptions and sales losses because it didn't adequately prepare employees for the new system and processes, leading to confusion and resistance to change across the organization.
At LOCAL, we see this every day. Whether it’s a merger, or new technology, or a reorganization, companies that treat employee engagement and communication as an afterthought find themselves “in the hole”, spending more time apologizing and figuring out how to retain a frustrated workforce than preparing for the next transformation.
Leaders feeling “stuck” or unprepared for digital disruption should look to their workforce for the answer. After all, your employees are your organization’s immune system. When your workforce is engaged, adaptable, and empowered, your company is healthy and resilient. If they are left behind, your transformation efforts will falter.
At LOCAL, we’ve found that the key to successful transformation lies in understanding your employees deeply. Decades of research point to three key friction points for many organizations:
Our method to address these core issue focuses on Insight—Story—Craft.
Transformation doesn’t start with technology; it starts with insights. Gather deep insights from your employees, then craft authentic narratives[DO1] that speak to the emotional and functional benefits of the change in question, and deliver with excellent execution. This people-centered approach ensures that your digital transformation has the crucial support it needs from within the organization.
1. Gather Insights
Just as you would conduct market research to understand buyers for a new product, leaders must also research internal constituencies to pre-emptively identify implementation challenges. Conduct surveys, interviews, focus groups, and fieldwork to gather insights about how digital transformation impacts your people. Ask them directly: What are their concerns? What do they not like about the changes? What do they need to help navigate the transition? These insights are invaluable for building a transformation plan that addresses real concerns and paves the way for acceptance.
2. Craft a Strategic Narrative
Once you’ve gathered insights, it is essential to build a core narrative around the transformation, and tailor it to different internal audiences. But do not carry the burden of communicating the narrative alone—empower your employees to tell it to create a shared sense of ownership. People trust their manager and peers more than top-down communication[DO2]. Ask influential employees to share their own experiences of embracing the digital shift. Use intentional narratives and proof points to highlight the values and behaviors needed for transformation, and quantify their impact to build belief. By personalizing the message, leaders build trust and engagement.
3. Deliver with Craft
How you communicate is just as important as what you communicate. Remember that your employees are savvy digital consumers. They know when a message is poorly executed. Deliver communication with precision, quality, and relevance. Take the time to understand how employees prefer to receive information—whether through email, video, social, peer-to-peer, or in-person meetings—and at what times. Rote, clunky, uninspired communication will not motivate them to invest their energy into a complex transformation. The delivery channel must match the significance of the change.
The success of digital transformation hinges not solely on the technology or the budget, but on team members. A healthy, engaged, and resilient workforce is an organization’s greatest asset to navigate perpetual change. Companies that thoughtfully invest in their employees—through upskilling, continuous learning, and fostering a culture of adaptability—are destined not just to manage change, but to unlock growth, gain share, and thrive in the digital-first era.