Many digital transformations fail to deliver the value initially promised -- according to Forbes, the risk of failure in digital transformation is 84%. Instead of cost savings and lowered stress, they often serve up budget overruns, extended timelines, exhausted teams, and frustrated executives ready to throw their hands up and walk away.
The root causes of these failures include lack of agreement on business outcomes; inability of technologists to translate story into non-technologist language; lack of training for internal users; lack of control over external vendors; and more. Largely, these are not related to the digital technology itself, but rather to people, actions, and decisions made.
No transformation is devoid of challenges and surprises, and companies ought to heed lessons learned from failures. However, past transformation challenges don't need to define your future. Help your digital transformation find success with these steps.
A New Take on Transformation
Change is the most crucial and hardest aspect of any transformation. Approximately 75% of change efforts flop -- either failing to deliver the anticipated benefits or being abandoned entirely. People don’t want to adopt new ways of working (tools, processes, etc.), so value erodes quickly and exponentially unless there’s an implied reward. Getting change management right requires extensive planning as well as agility -- plus a huge dependency on HR to manage talent impacts. A strong and senior team pushing, driving, defining, and preparing is critical to assure success.
Any long-term transformation program needs to indicate the oncoming shift by creating an internal transformation management office. This office monitors and escalates any issues, pushes the thinking, solves problems, and motivates teams. It also handles key strategic services areas -- reporting up to executive leadership and the Board; organizational change management and communications; enterprise strategy alignment and conflict resolution; and acting as the “venture capital” arm by shifting funding as needed.
An internal team should own not only the transformation’s direction, but also the delivery of the strategy. If the company doesn’t have any internal talent with these capabilities, then it should hire or contract until a permanent solution is created. MillerCoors learned this the hard way in 2013 after spending about $100 million on a failed ERP implementation without the internal expertise or advisors to steer the transformation or guide their implementation partners.
Any transformation should keep those outside the transformation office engaged and accountable for both successes and failures of the transformation. Each initiative should be assigned one C-suite sponsor (ideally not the CIO), accountable for the publication of KPIs, milestones, financials, and high-level status across their programs. This leader should regularly update the CEO, showing progress against defined, manageable, and measurable outcomes, sharing any forward-looking failures, such as “being $X million over budget,” with executive compensation tied to the success of the transformation.
A goal is an ambition for what will be achieved --"reduce COGS by 7% this year” -- whereas a target is a commitment for what will be deliver – “supply chain organization to reduce production cost by $50 million in the current fiscal year.” Realistic targets should follow three principles: Aspire to stretch beyond targets, for example, by shifting focus to where the most value can be delivered instead of continuing to follow the business case; promote unbalanced scorecards -- external targets should be devolved to each business unit and provide context for the targets; and resolve issues swiftly as they arise, using existing governance mechanisms.
A transformation isn't a project with an endpoint but a new way of doing business that delivers added value and requires permanent maintenance. As described above, accountability should be driven by the executive business sponsors and led by the named program leaders for the initiatives.
Almost 77% of organizations adjust their digital transformation plans with “major” or “noticeable” modifications -- the question is how to respond and adjust accordingly. An agile approach is a best practice in digital transformations because it’s iterative in nature and allows for taking small steps to ensure the business needs are being met at each turn. Beware of indecision! There are no right or wrong decisions, only learnings.
All companies must evolve to stay relevant, whether through rebranding (e.g., Lego) or modernization (e.g., Dominos). In all cases it’s about change, and change is always hard. When transformations are digital in nature, they compound the challenge because companies are both learning and changing at the same time. Make no mistake: transformation is not optional -- but getting it right means finding new and innovative ways for your organization to evolve.
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