Introduction
Although “Digital Transformation” has become a bit of a buzzword – it does quite elegantly sum up what most companies are struggling with – how to leverage technology, or improved digitization, to enable a company to grow faster, be differentiated in the market, more competitive, a more attractive place for top talent, <insert your own strategic goal here>, etc. This article highlights some of the most common challenges of digital transformation initiatives, and how to avoid them, or how to course correct if they are already hampering your progress.
Why This Matters
Anyone who has worked for a technology company (products, services, or both) for more than a few years has seen a “transformation initiative.” These days, they are usually called “Digital Transformations” – a big, broad term that usually translates into a somewhat panicky….“Wake up! We are falling behind!” This term could just as easily have been portfolio transformation, sales transformation, strategy transformation, and so on.
Regardless of the type of transformation being tackled, it is usually positioned as a well-communicated company imperative for change. This initiative will take months, or years, have a significant budgetary impact, yet will rarely result in achievement of the original goals for meaningful change, strategic growth, or improved competitive positioning.
When we were launching OIC, a key focus of ours was helping organizations to improve “operational velocity” – or more simply stated, “How do we help companies adjust their operational levers to achieve their growth and scale targets more quickly?” That in turn, made us collectively reflect on how and why transformations do not go to plan. Are there common causes of failure that we have seen again and again? (Hint: The answer is yes.) Identifying them enables companies to avoid the most common transformation mistakes that are made by countless other companies, large and small. Some of the reasons that these transformations fail are obvious and well documented. Other reasons are more subtle and difficult to mitigate. This discussion will cover both.
One tip for leveraging the suggestions below – you do not need a plan to solve ALL of your transformation initiative challenges at once. Pick the most painful ones and get started. Don’t let the team be overwhelmed by the volume of issues or complexity of the transformation, but have a prioritized plan to tackle the most challenging areas, and be sure to call out your team’s successes often!
What we have Learned about Why Digital Transformations Fail
In our experience there are five key areas where organizations fall short when trying to drive a digital transformation effort – there are more than five, but these are common and critical ones. Additionally, we polled several senior technologists across industries, to see if they agreed with our list of why many, if not most, complex transformation initiatives fail (or at least do not bear the desired results). Surprisingly, we had similar findings for companies whether large or small, start-up or established, regulated or not. Everyone agrees you need strong leadership support and proper funding, but here are some other very common themes. We have colloquially called these problems “failing on the basics.” These are areas that are foundational to driving a successful transformation.
Problem 1: Disconnects between stated company strategy and existing execution plans
How to recognize it
There is often a well-stated company transformation goal for a certain time frame – e.g. double revenue by the end of the next fiscal year, launch the flagship product in nine months, hire X account representatives and launch business in these two new regions by the end of 2024.
What is lacking is a CLEAR plan for all of the tactical actions that need to happen to achieve the goal, including who is being held responsible, what resources they need, and how progress will be reported. If you do not have this in place, you need to better define the bridge between strategy and execution.
How to fix it
In a normal “run the business” mode, the standard metrics for operating the business may suffice. However, in a transformation scenario, you may need to adjust roles, training, metrics, compensation, etc. to ensure your tactical plans match your strategic goals, and to ensure everyone knows their role in achieving the goals. Start by making sure your key players understand the goals the same way, define the primary “goal owner” (or sometimes owners), and then help them to define the tactical execution plan. Along the way, make sure to identify all parts of the business that have a role, and how you will measure overall progress. Execution is rarely seamless, but you can course-correct as you make progress; the more transparent you are with your team, the faster progress you will make. Over time, transformation becomes a company muscle that drives operational velocity.
Problem 2: Lack of defined processes, methodologies, and/or effective toolsets
How to recognize it
This is one of the top two or three essentials to grow and scale your business, yet an incredibly common problem area. Have a look at the processes, methodologies, and tools that drive your core development and/or delivery processes. Are people regularly making “heroic efforts” to launch products or support customers? Are development and delivery processes consistent across teams, regions, partnerships? Do you have any/many “single points of failure” – if a specific person left, would you be in trouble because their talent isn’t replicable and/or because their knowledge is all in their head? Does everyone know where to store things in development, in delivery, as the official repository? Whether you are in a regulated industry or not, how would you fare if you were audited tomorrow? Do you have clear workflow, and supporting technologies, for your end-to-end processes? If a team member has an idea for core process improvement, would they know where to go?
How to fix it
If any of the above rings true, you need a plan to start addressing the gaps. If the operational foundations are not in place before you try to grow, scale, and transform, it only gets harder over time to establish effective operational norms. It may seem daunting, especially if your current culture is “dive and catch,” but your team will appreciate greater structure, repeatability, and the quality it brings.
Pull Everyone Together
First, sit down with representatives from each team involved in the process – ideally the people who are actually doing the work on a day-to-day basis. If you aren’t in a position to address the “end-to-end,” start with the most painful/slow/critical parts of the process.
At a high level, map out the workflow from the beginning (e.g. a product concept, a customer identified as a possible target…) through successful completion (e.g. product launch, customer land-and-expand…). For most product or services workflows, this will be a continuous circle rather than a left-to-right process with a defined ending. And for most companies, this should include not only “back-office” processes that help you scale with speed and quality (e.g. effective employee on-boarding, solid org design…) but also mapping of customer and user journeys to clearly document the flow of value.
Assess What you Are Working With
Next, map the current tools, technologies, platforms, customer journey, etc. that support each phase of the process, and where workflow data flows (or stops, as the case may be). Then have a brainstorming session to map out the ideal agile process – as this step is challenging for a lot of teams, consider using an external facilitator to encourage the team to think outside the current “what is” and without regard to existing organizational processes and boundaries. Even if you do not yet have the perfect end-state defined, you can still make progress, and you can make the improvement process iterative. Budgets, skills, product research/bake-offs, etc. will all come into play. The important thing is that your team is starting to be part of the solution, and it’s usually not hard to carve out time to continue progress once you have gotten started. Over time, revisit the questions in the section above to validate your teams’ progress. Keep the activities going to ensure that continuous improvement becomes part of the team culture.
Problem 3: Poor or legacy definition of organizational design, including roles and responsibilities
How to recognize it
Congratulations -- your team has decided to embark on a company-changing transformation! At this stage it is critical to review your organizational design, and your defined roles and responsibilities. Do they support how you got to where you are, or do they also support where you are going? It is rare that the same organizational design will seamlessly support both without some adjustments. Importantly, do you have a well-defined continuous improvement culture, where everyone in the company regardless of role or seniority, is invested in and rewarded for high levels of customer satisfaction and continuously improving operations?
There is also a common dynamic where a CEO, Board, or leadership team wants to reward past heroic behavior of a key leader, even though they may not have the skills to take the company to the next level in their assigned role. In those cases, you are not doing the company, or the leader, any favors by allowing them to continue in the current leadership role.
How to fix it
As part of the planning process for the transformation, make organizational design an explicit step in the process. Start with a clean slate, reviewing what transformation success looks like, and then design the perfect organizational structure to drive achievement of the strategic goals. This is harder than it seems – people naturally get stuck with the “as is” and with the people/skills you currently have on board, and often your HR representatives are more versed in the tactical HR skills (hiring, benefits, etc.) than the strategic ones like organizational design. Again, this is a step in the process that can benefit from an external advisor who doesn’t have a horse in the race. Once you have an organizational design that you think will facilitate where your company is going, you need to plan the transition process and communications, and you need to map out the roles and responsibilities within the organization. Many teams who consider this last step as “unnecessary documentation” come to regret it later, when they find either: 1) two roles who think they own the same areas, or 2) a key area of accountability which no one thinks they own – so there is a gap in ownership of an important area.
You also need to ensure that you have concrete motions to measure customer satisfaction and to drive a continuous improvement culture.
Problem 4: Critical roles filled with “aspirational talent”
How to recognize it
We have all seen it – a senior person who has been with the company from the beginning who wants to try their hand at something new without having the proper experience or background – we call this “aspirational talent.” There is nothing wrong with allowing people to stretch and grow into new areas; in fact, that’s one of the best things about start-ups, where the learning curve is expedited because you get to wear many hats.
Where it becomes problematic is when aspirational talent is assigned to something that is mission critical to your transformation. For example, your strategic transformation goal is to launch your flagship product and turn the cybersecurity market upside down; yet your product manager came from engineering leadership and has always wanted to try product management. Big mistake – this is the definition of “they don’t know what they don’t know” and can torpedo your success. Any leadership role that is critical to transformation success should be filled with someone who has successfully done that role before, ideally more than once.
How to fix it
This is an easy one – just don’t do it. It can be an awkward situation, but your business is at a critical juncture, and your most important roles need to be filled by talent with demonstrated success in that specific area of expertise.
Problem 5: Relying on legacy approaches to change management to drive progress
How to recognize it
This is a symptom of a legacy way of driving business change – change management as a discipline has been around since the 1990s, in the same wave of business optimization as Business Process Reengineering and Total Quality Management. It had its place at the time, and potentially still today, if made more agile. Too often, however, “change management experts” bring with them heavy methodologies, checklists, and tasks that add no value beyond box-checking. Also, they are often incentivized for finding more problems, versus being rewarded for improving business outcomes. Look at your current structures for managing and tracking work progress, especially your change initiatives, and their incentives. If you recognize one of the following, it is time to adjust:
1) You have a heavily staffed team of program managers, change managers, or consultants, who only exist to run meetings and REPORT on progress; they do not have the domain expertise or knowledge of the business to add independent or incremental value.
2) You have internal change management professionals, or more commonly external consultants, who, in reality, are incentivized to extend the duration of the change initiative. Internal resources keep a high-profile role as drivers of change, external consultants get more money and follow-on engagements.
How to fix it
In this day and age, less is more. Pare down your program or change management team to a very small number of people who both understand the business, and have the expertise to drive the process and culture change needed to make the desired business transformation. Their incentives should be tied to operational velocity and speed of transformation, not a pre-defined and extended project plan. If your transformation is deeply technical, your drivers of change must also be deeply technical.
Final Thoughts
These examples of failing on the basics during transformation are all fixable once they are recognized. Not addressing them contributes to some of the reasons why digital transformation fail. Trust that your teams want to improve operations as well; often they are suffering in silence, recognizing problems without feeling empowered to voice their concerns. Reward team members who call out problems and make suggestions for improvements. Make continuous improvement and a drive for operational excellence a visible part of your company culture. For start-ups, make sure your teams understand that operational excellence is directly related to your company valuation upon exit.
In follow on parts of the series, we will look at somewhat more subtle symptoms of why transformations fail, including things like executive support for change, financial tracking challenges, the role of Board of Directors’ dynamics in transformation success, and team dynamics in an evolving world of work. If you have examples of agile and innovative ways to solve complex transformation challenges, we would love to include them!