More than half of companies’ digital transformation investments, in the form of marketing and trade spend, are being wasted, according to a new survey by AlixPartners, New York.

The firm surveyed 1,110 executives across China, France, Germany, India, the UK and the United States, who are or have been decision makers for digital transformation in consumer products companies, to better understand how consumer products companies can successfully drive profitable growth in today’s challenging environment. Each participant represented an organization in the food and beverage, among other sectors. Respondents were asked to rate their organization’s digital proficiency as being either leading, developing or emerging. 

The survey also found that physical and digital routes to market continue to converge rapidly, and for companies describing themselves as the most advanced in the digital journey, this convergence has largely already occurred. By 2023, the report estimates that digital sales of consumer products will grow by approximately double from today’s $218 billion per annum to around $440 billion. For many mature companies with relatively flat revenues in their traditional channels, digital can be a significant driver of future growth, the report says.

However, in pursuing this growth opportunity, many executives surveyed cited low returns on their investments. Of the $79 billion spent globally on online advertising and trade spend (everything from ads on Facebook and YouTube to digital coupons and discounts) in 2018, an extrapolation from the survey’s results suggests that over 60%, or about $47 billion, failed to deliver an observable a positive return on investment.

The survey showed that no matter where consumer products companies are on their digital journey, barriers to successful digital transformation still exist. Views inside companies differ on where they are on that journey, with those executives operating in functional areas of their businesses viewing the process as lagging vs. the views of their more senior colleagues, such as those at the C-suite level. As to the impediments to success, lack of talent (cited by 39% of all respondents on average as a Top 3 barrier), lack of funding (cited by on average 35%) and an unwillingness to experiment (cited by on average 34%) were raised across the board. Notably, those respondents who consider their organizations as leaders in digital transformation identified culture as a key factor, with 34% rating that as a Top 3 barrier, in marked contrast to those identifying culture as being a top impediment in developing (12%) and emerging (10%) companies.

“Technology has fundamentally changed the way companies operate, and has migrated from a back-office function to the commercial front end, disrupting the relationships between manufacturers and suppliers and reinventing the entire business model for consumer products companies,” says David Garfield, global leader of the consumer products practice. “For many large, traditional consumer goods companies, their long-established brand and channel strategies, a legacy core strength, make it difficult to pivot to digital. Many have innovated quite well at a micro level, but find it challenging to apply those changes across the whole organization, as their sheer size and complexity make cultural change difficult. Ultimately for digital transformation to be successful, company leadership, starting with the CEO, must shatter traditional cultural, organizational and structural silos that are frequently the most intractable impediments to change.”

“Many companies, in an effort to chase the promise of growth through digital, have simply thrown money at the problem, leading to billions in wasted investments,” adds Brian Major, a managing director in the consumer products practice. “However, digital for the sake of digital will serve no one, and as our survey shows, there are many expensive mistakes being made in pursuit of digital nirvana. Success is achievable over time by using more precise and targeted methods, which have greater opportunities for consumer engagement and data analytics. Those who are lagging need to catch up, and fast, as now is the time for rapid transformation in pursuit of a share of the available prize.”