Why Digitization Projects Fail and Costs Retailers at EUR 330,000: Fujitsu Survey

Digital transformation is well advanced in retail, but while 93 percent of organizations claim to have a clearly defined digital strategy, the sector lags behind when it comes to completing projects that deliver outcomes, according to Fujitsu’s latest global survey report, The Digital Transformation PACT¹.

Fujitsu’s research was carried out among 189 business leaders in the retail sector, as part of a wider study of the perceptions of 1625 executives regarding the four strategic elements required for successful digital transformation: People, Actions, Collaboration and Technology (PACT). The research shows that fear of failure is a serious barrier to retailers undertaking digital transformation, with 70 percent admitting that it is slowing them down. One in five (19 percent) has experienced at least one failed digitalization project in the past two years, costing an average of EUR 337,381. In addition, nearly a quarter (23 percent) of retailers confirmed they had canceled digital projects, incurring an average loss of EUR 182,321.

Despite these setbacks, the majority of retailers expect a financial return and operational benefits from digitalization projects within the next 18 months. Supporting this optimistic outlook, the vast majority (86 percent) are confident that there is a culture of innovation in their organizations – and they believe that processes and behaviors (which fall under the “actions” pillar of transformation) are the most important factor in realizing their digital strategies (34 percent), followed by people (24 percent).

Fujitsu highlights the retail industry’s consensus on lack of digital skills

However, much improvement is necessary in key areas: 71 percent of retailers agree there is currently a clear lack of digital skills in their organizations. Nearly 7 in 10 (69 percent) worry that their organizations focus too much on technological change during transformation, rather than the skills, processes and behaviors that must support it. Moreover, while almost half of retailers are investing in Internet of Things systems, nearly three quarters (73 percent) are concerned about their ability to adapt to new digital technologies such as Artificial Intelligence.

Many retailers are already addressing these shortcomings, with 87 percent taking measures to increase their access to digital skills and expertise, as well as investing in collaborations with external technology experts, customers and start-ups. However, compared to other sectors, retailers are the least willing to undertake co-creation projects with partners to deliver digital innovation with only half doing so, and this may prove to be a disadvantage for them.

Richard Clarke, Executive Director, Global Retail at Fujitsu comments: “Digital disruption is hitting the retail sector hard with the whole competitive landscape changing unrecognizably. Keeping up with both their customers’ expectations and the market dynamics is a major challenge for many retail organizations, which can only be addressed by adopting new ways of thinking. There is much more involved in realizing digital transformation than just the technology. Of course, the right tools are crucial but so are the right skills and co-creative partners: If retailers want to succeed and achieve digital excellence, they must learn to effectively balance the four key elements of People, Actions, Collaboration and Technology (PACT).”

Digitalization is affecting processes, revenues and business models

The research showed that 35 percent of retailers have already implemented digital projects; another 38 percent have projects in progress. Over half (54 percent) of the surveyed retailers are implementing digitalization in existing business processes and functions. For a third (31 percent), digital transformation means transforming their organizations’ business models and revenues, while 58 percent are seeing new digital business processes being created. However, shadow IT remains an issue, with 70 percent feeling that shadow digital projects are the only way that parts of the organization can complete meaningful innovation.

Customers are driving digital transformation

Unsurprisingly, for two thirds (66 percent) of retailers, customers are the biggest driver of digital transformation. Ninety-one percent admit that their customers expect them to be more digital, and 69 percent believe that digital transformation is leading to increased competition. In fact, digitalization is shaking up the retail sector more than other sectors: Three quarters (75 percent) agree that it is impossible to predict who their competitors will be in ten years’ time. Overall, 86 percent think that the ability to change will be crucial for their business to survive in the next five years.