Beating the Digital Transformation Odds
Beating the Digital Transformation Odds
Learn how to make digital transformation initiatives a success
I love readable and extendable code. I’m also passionate about modular and scalable software architecture.
A couple of years ago, I moved away from software engineering. Failed or abandoned transformation projects were the main reason.
There was the occasional benefit of playing with new technologies. However, I was sick of spending months or years creating something which did not provide any or enough value. I wanted a role with more impact and more chance to prevent these failures from happening.
I guess it's no surprise but my team was not the only one experiencing failed transformations. It appears that an astonishing number of corporate transformations fail.
In this article, I will talk about why digital transformations fail, what’s wrong with the traditional way of working, and how an organization can beat the digital transformation odds.
Some Numbers
Harvard Business Review mentions that three-quarters of digital transformations fail. In 2016, Forbes assessed the risk of failure in digital transformation to be 84%. According to McKinsey, BCG, KPMG, and Bain & Company, the risk of failure varies between 70% and 95%.
Many businesses seem to blame inadequate implementation for failure. They try to mitigate future failures by placing more focus on execution. While it’s true that flawed execution leads to a bad outcome, it is only one part of the problem. Many change initiatives also fail because of misdiagnosis.
Focus on the What
I think we can all agree that Albert Einstein was quite a smart guy.
This is one of his famous quotes:
If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions.
This learns us that we should avoid jumping to solutions and start thinking about the problem first. We should first focus on deciding WHAT problem should be solved before focussing on HOW to solve that problem. Following Einstein his advice, everything discussed in this article will be solution agnostic.
It’s a People Problem
It’s important to get more insights into these transformation failures before diving into the steps required to mitigate those failures. I did some research and I bumped into this interesting article. It does an amazing job summarizing the reasons why projects fail.
According to the article, one main reason for failure is the lack of a solid business case supported by quantitative and qualitative (financial) data. This lack can result in:
Prioritization based on politics
Shiny toy syndrome that leads to the wrong technology choice
No alignment with business outcomes
Slow-decision making process
The business case should also be a team effort and all stakeholders should be involved. If you have no or minimal buy-in, it will be tough to succeed. Some things that can happen:
Employees will sabotage the initiative because of the fear of being replaced.
When people don’t understand what you want to achieve and what the benefits are, they will reject new tools, software, and processes.
Someone should also be responsible for the initiative that does not get lost in implementation details but focuses on the high-level goals. Some managers focus too much on details and lose sight of the bigger picture.
The important takeaway here is that most of the time the technology is doing just fine, but the people are getting in the way of success.
After examining and agreeing to this, I kept on questioning what the underlying cause could be. I came to the following conclusion for myself.
Business cases that are initiated by project managers that are operating in an organizational silo are a major recipe for disaster
This is a great point in favor of BREAKING DOWN THE SILOS.
Breaking Down the Silos?
What is a business case? This is the description according to projectmanager.com.
A business case is a project management document that explains how the benefits of a project overweigh its costs and why it should be executed. Business cases are prepared during the project initiation phase and their purpose is to include all the project’s objectives, costs and benefits to convince stakeholders of its value.
This is a great summary and it’s also more or less what I have experienced in past projects. The quality of business cases was often not great. I also recognize some of the failure symptoms of a digital transformation presented before.
Guess what? I was operating in a siloed organization before and the business cases were initiated in that silo. As already mentioned, business cases were often inferior. They were vague, biased, focused on a specific technology, and were not supported by qualitative or quantitative data.
It would be easy to blame the project manager. However, these flawed business cases are not only the fault of the project manager:
He is expected to initiate business cases.
He feels responsible to land the necessary budget and work for other team members from the same siloed team.
There are often close deadlines for business case submissions.
It’s difficult to present the best solution because the team has no helicopter view over the company.
Very often quantitative and qualitative data for supporting the business case is also out of reach.
If I have to guess the root cause of these bad business cases, it is the company. The company is often what causes the problems for the silo including inferior business cases.
A company that operates in a silo nurtures employees to care less about the company as a whole. Employees are loyal to the silo and its objectives. The employees also lack information about the other silos.
For a higher success rate, business cases should be initiated at the level of the business. These initiatives can, later on, be decomposed into multiple lower-level projects. Teams can then further develop these projects. Working in silos makes everything more difficult and will lead to at least some of the problems mentioned before.
Helicopter View
The first challenge to succeed as a company is to pick the right battle.
A business capability model is a great tool to make the right strategic choices on where to focus first. I see it as a helicopter view of WHAT a business does independently of processes, technology, and organizational structures.
Be aware that all these three elements (people, processes, and technology) should be kept in balance to maximize the efficiency of a business. That same balance holds for each business capability.
If you want an example overview of a business capability model to get you started, check out this page.
I will also add some quick definitions for better comprehension:
Business capabilities are the functions a company needs to execute its business model. Business capabilities tell what a company does independently of processes, technology, and organizational structures.
A business model describes how you create, deliver, and capture value back from customers.
Capabilities can be categorized:
Strategic: The things that the organization does well that sets it apart in a meaningful way. These offer the company competitive differentiation
Core: These are part of the business model and relate to the creation, delivery, and capture of value.
Supporting: These support the core or strategic capabilities. They don’t directly create value for customers. But they are a necessary prerequisite for running an organization.
This capability model is a great asset in the following scenarios:
Knowing where to invest and devest
Prioritizing initiatives
During mergers and acquisitions
When buying products or building new solutions
A digital transformation can be focused on either core, supporting, or strategic capabilities.
All of them can lead to either financial or non-financial benefits. Some examples:
Financial: Cost avoidance or reduction, Productivity improvement, Revenue/Sales
Non-financial: Accelerated investment, Employee experience & satisfaction, Expansion
It’s critical that the strategy of the company and the focus of the digital transformation are aligned.
Conclusion
An impressive number of digital transformations fail. The tech is often not the problem, the people are.
There are some things you can do to increase the chance of success.
Don’t jump to solutions, focus on the WHAT first before exploring the HOW
Breaking down the silos will help to create team-wide focus, involvement, alignment, and understanding
Digital transformation initiatives should be initiated at the business level where a helicopter view is present
These initiatives should be aligned with the company strategy.
A business capability model is a great and diverse tool to assess the state of business capabilities and to discover WHAT should be improved.
Learn More
How to create a capability model by Raj Ramesh
I am always looking forward to hearing your thoughts about this topic:
What do you think contributes to success or failure in a digital transformation project?
How do you or your company select what should be improved as part of a digital transformation?
Are changes at your company triggered by technology or by problems?