Why do 70 percent of digitization projects fail?

A few years ago, the head of a company with a turnover of over 100 billion forints realised that the team simply could not cope with the increased customer demands. His colleagues were searching for data across several different systems, writing Word documents, and copying almost all information manually from one place to another. The question is no longer whether digitalisation is necessary, but how quickly we should get started – because competitors won’t wait.

Six months later, following a well-planned process of digitalisation, the company in question was processing all incoming requests for quotations on time, and the number of contracts signed had increased dramatically. At the same time, more than 70 per cent of Hungarian companies are unable to accurately demonstrate the business impact of their digitalisation projects once they have been completed. Whilst the introduction of a well-chosen process digitalisation system can deliver efficiency gains of up to 2.5 times, the majority of medium-sized and large domestic companies still launch digitalisation projects on an ad hoc basis, without a strategy. The stakes are enormous: according to research by Deloitte, the world’s largest companies stand to lose 1.25 trillion dollars by 2030 if their digitalisation efforts fail.

Hungarian companies are struggling with problems that are constantly eroding their competitiveness, with pressure coming from three different fronts.

1. Labour shortages and wage pressure: according to data from the Hungarian Central Statistical Office (KSH), a labour shortage exceeding 4 per cent emerged in both the manufacturing and service sectors during the first half of 2024. During the same period, the average gross wage rose by 14.3 per cent – meaning fewer people can be hired at a higher cost. Given this, automation is no longer just an option, but an urgent necessity.
2. Declining profits: according to a survey by the Hungarian Chamber of Commerce and Industry (MKIK), profitability has fallen at nearly half of Hungarian SMEs in recent years. Energy, wage and procurement costs are rising, whilst administrative costs may harbour untapped potential for savings – these can account for as much as 15–25 per cent of a company’s operating costs and are often spent on manual, low-efficiency tasks.
3. Loss of competitive advantage: Hungarian companies that have already invested in process digitalisation respond 30–40 per cent faster to market changes. They make decisions based on real-time data, rather than on last month’s Excel spreadsheets.

Digitalisation is a long-term process for a large company; it is not a 100-metre sprint, but rather a marathon. Experience shows that – from the perspective of results – implementations typically consist of three phases.

The first results will become apparent within a few months. In the case of a typical administrative process – such as invoicing, contract signing or customer onboarding – time savings of 30–40 per cent can be achieved. In practice, this means that in a team of ten, three or four people are freed up to carry out other valuable tasks. One service provider was unable to cope with the increased volume of customer enquiries, resulting in the loss of a significant amount of business. By introducing a new, more carefully selected digitalisation platform, the quotation process was automated to a considerable extent, enabling them to significantly increase the number of deals closed.

In the second phase, we are not only faster but also smarter. With digitalised processes, we can already see the KPIs. We know how much each case handler is achieving, which processes are the bottlenecks, and where quality issues lie. At one financial firm, this meant that department heads could anticipate which types of tasks were causing backlogs and, by reassigning staff with just a few clicks, were able to resolve the problem before deadlines were missed. Customers received answers to their queries more quickly, and no failures had to be reported to the supervisory authority.

The third stage is the least tangible, but it is here that the greatest potential lies. Digitised companies are able to launch new services within a matter of weeks. The younger generation also enjoys working for them, as they do not have to contend with archaic systems.

1. Unclear strategic objectives: in 73 per cent of projects, precise, measurable objectives are not defined at the outset. “We want to be more efficient” – that is not enough. “We will reduce the average turnaround time for the contract-signing process from eight days to three days in the first quarter” – that is adequate. If we cannot measure something, we cannot manage it, and so we cannot achieve the objective either.
2. Organisational resistance: clerks fear they will lose their jobs. Middle managers worry that transparency will expose performance issues. If we do not consciously address these fears, we will encounter significant passive resistance. The system works well technically, yet the results are not forthcoming.
3. At one financial institution, although a workflow management system had been introduced, six months later staff were still carrying out the old manual tasks as usual, using the previous Excel spreadsheets in parallel ‘for security reasons’, and not all data had even been entered into the new system. Instead of increased efficiency, more staff had to be taken on due to the increased workload.
4. Commitment from senior management – the most common mistake: the CEO or COO gives the project the green light, appoints a project manager, and then ignores it for three months. Meanwhile, the project grinds to a halt – decisions are delayed, resources are wasted, and priorities are not adjusted – and the project manager cannot resolve these issues on their own.