Report: 80% of Digital Transformations Fail to Deliver Value

- A primary reason digital transformations fail is the underestimation of hidden costs, which can exceed initial budgets by over 30% and include expenses for training, system integration, and ongoing maintenance. Forrester Research found that companies often overlook 45% of indirect costs related to the transition, such as drops in productivity during training and employee burnout. - While an Overall Equipment Effectiveness (OEE) of 85% is considered world-class for discrete manufacturers, the industry average is typically between 60-65%, and it's not uncommon for facilities just beginning to track performance to have an OEE as low as 40%. In the pharmaceutical sector, a 70% OEE may be considered excellent due to regulatory constraints and necessary processes like cleaning and validation between batches. - Regulatory compliance is a major hurdle in pharmaceutical manufacturing's digital shift, as evolving global standards require significant investment in adaptable technology and validated processes to ensure data integrity and avoid penalties. Upcoming regulations like the EU's Carbon Border Adjustment Mechanism (CBAM) will require manufacturers to have deep visibility into their supply chains to report on embedded emissions, adding another layer of digital complexity. - Escalating US-China trade tensions continue to impact manufacturers, with the US imposing tariffs of up to 145% on certain Chinese goods in 2025, prompting retaliatory tariffs from China. This has led many companies to adopt "China+1" strategies, diversifying their supply chains by relocating manufacturing to countries like Mexico, Vietnam, and India to mitigate geopolitical risks. - Internal audit's role is shifting from retrospective compliance verification to that of a forward-looking strategic advisor, helping to navigate the risks of digital transformation. To be effective, audit functions must become more digitally fit by upskilling talent in data analytics and emerging technologies and adopting more agile methodologies to provide real-time risk assurance. - Key barriers to digital adoption include a lack of skilled workers to manage smart manufacturing systems and organizational resistance to change, with 44% of manufacturing professionals citing cultural issues as a tougher challenge than technology itself. A significant digital skills gap persists, with 57% of manufacturing leaders feeling their organizations lack the necessary talent. - The Environmental Protection Agency (EPA) and Occupational Safety and Health Administration (OSHA) continue to introduce regulatory changes affecting manufacturers. For instance, OSHA now mandates that Personal Protective Equipment (PPE) must properly fit each employee, and the EPA is reconsidering certain air pollution standards for iron and steel manufacturing facilities. - CFOs in manufacturing are evolving from a focus on cost control to strategic leadership, now holding more responsibility for risk management (63%) and digital transformation (57%). They face pressure to demonstrate ROI on technology investments in an environment marked by economic volatility and supply chain disruptions.