Digital transformation projects see GBP £8m spend amid AI impact
New research has found that businesses are investing an average of GBP £8 million in digital transformation projects, with over one third failing to achieve their objectives and many more encountering delays and cost overruns.
A study by VML surveyed mid-to-senior level business leaders involved in digital transformation initiatives and highlighted persistent issues in financial forecasting, return on investment, and the impact of technological disruption, particularly artificial intelligence (AI).
Financial planning difficulties
A significant majority of respondents (76%) reported challenges in accurately estimating budgets at the outset of digital transformation projects. As a result, 77% noted that initial budgets are often underestimated, which can lead to further complications as the projects progress.
The complexity of financial planning is compounded by the rapidly evolving technological landscape. Businesses frequently find that their original forecasts no longer match the requirements once projects are underway, forcing periodic reassessment and reallocation of resources.
AI disruption and shifting strategies
The emergence of AI as a critical component in digital transformation has had a notable effect. Of those surveyed, 77% said that the arrival of AI has obliged them to review and adapt their transformation strategies, and 73% have recalculated budgets to include AI-driven activities.
In many cases, these AI-related changes further disrupt previously agreed project scopes and demands for evidence of effectiveness. The research found that 67% of leaders have experienced scope creep - the gradual expansion of project objectives or deliverables - which often results in both cost and schedule overruns.
Demonstrating return on investment
The ability to prove return on investment (ROI) remains elusive for most organisations. According to the study, 73% of business leaders said it is difficult to demonstrate ROI on digital transformation endeavours, a situation compounded by the current economic climate, where financial prudence is paramount.
The research also found that what constitutes ROI varies significantly between organisations. While increased profitability remains a target, many leaders also consider operational efficiency, employee productivity, and improved customer experience as part of the overall return.
Collaborative barriers
Challenges related to alignment and collaboration between different teams were cited as a key friction point. Of respondents, 73% believed that contrasting objectives across teams often undermine project success. Issues such as lack of a shared vision, misaligned objectives, and insufficient skills across teams can all impede progress.
The report indicates that 81% of businesses are seeking third-party support to help manage and deliver transformation projects. This trend underscores the significance of selecting suitable partners to navigate the complex requirements of digital transformation.
Leadership perspective
This research exposes the historic but also the new challenges businesses face in their transformation journeys. The report reveals that successful digital transformation is as much about embracing change and adapting to evolving technologies as it is about strategic clarity. With 74% of leaders experiencing shifting objectives and 77% revisiting strategies due to AI, organisations must approach transformation with boldness, creativity, and flexibility. By fostering innovation, taking creative risks, and aligning efforts around customer needs, businesses can turn challenges into opportunities for sustainable growth.
The research is compiled in the VML Enterprise Solutions report, "Unlocking the Power of Digital Transformation", which analyses eleven key areas impacting transformation initiatives, including business strategy, leadership, AI implementation, customer experience, and standards in data governance.
VML's technology and transformation division, VML Enterprise Solutions, is noted in the report as supporting businesses in navigating digital challenges, with a focus on uniting commerce, customer experience, consulting, and technology transformation for clients worldwide.
