By Sundara Sukavanam, Chief Digital Officer at Firstsource
It comes as no surprise that digital transformation has catapulted up the priority list for business leaders – the pandemic made it a business mandate. This is reflected in a recent IDC study showing digital transformation investment growth rates are accelerating worldwide.
Yet, at the same time, 70% of digital transformation projects fall short of their objectives. To increase the chances of success, its important leaders learn from the experiences (and past mistakes) of others to sidestep challenges, from planning to implementation. Here, I highlight four common pitfalls when planning transformation and how avoid them.
#1 Focusing on big milestones over incremental benefits
Large scale digital transformation initiatives tend to have big, ambitious milestones that often overlook smaller checkpoints and incremental results. Let’s take a performance management project as an example. A common mistake would be to spread milestones over four long, distinctive stages lasting six months. For example, stage one – create a structure for key performance indicators (KPIs), stage two – define the KPIs, stage three – design a database, stage four – create the visualisations.
What happens when you get to stage four and discover you don’t have the data to measure the KPIs defined in stage two?
You need to break the project into smaller chunks and run a simpler version of all four stages in parallel. For example, as part of KPIs you want to measure Net Promoter Score (NPS) for an employee. You trial this idea and it fails – your ecosystem can’t give you this data. But this failure gives you visibility.
It is better to have five small failures in different places, learn and pivot, than failing the entire stage. Incremental touchpoints are important, they help you to sense-check those milestones. They also allow you to celebrate small successes along the way which are important for team morale.
#2 Budget decisions by consensus
You need clear accountability for transformation – through the appointment of an executive sponsor – with success defined on hard benefits. If you’re spending £20 million on the programme that’s expected to deliver ROI in one to two years you need to start measuring that today. The budget needs to be tied to those results.
Decisions by consensus don’t always work, this is especially true for transformation budgets. The executive sponsor must have clarity, accountability and authority over the project and the budget.
When the budget is coming from another department, the department head can outline what to track and act as a sounding board. But the executive sponsor leading the project needs to make the final decisions based on results they see (or don’t see) – because they are closest to the actual execution.
If the project has spent £6 million and lacks results the sponsor needs to ask – Should we continue doing this? Going back to the incremental benefits philosophy – as a sponsor, your ability to mitigate tough calls is improved by the visibility you get from having many small checkpoints throughout the project.
#3 Overestimating organisational readiness
Number three on the pitfall list is overestimating your organisational readiness. Every change has a knock-on effect on the rest of the business. Identifying potential ripples in advance can better inform the organisation about its readiness for change.
When it comes to digital transformation specifically, readiness includes understanding the current state and trajectory of digitalisation. Digital adaption goes beyond adding plug-ins or building an app for your business. It is about digitalising the core of a company model.
Evaluating readiness requires critically considering at the infrastructure, expertise, strategy, and workforce in place. Misjudging any of these can lead to poor outcomes. For example, in 2011, General Electric (GE) tried to assert itself in the digital software space by creating an IoT platform and modifying its business models. Four years later, it created a new programme to leverage data, with the view of turning into a tech powerhouse. Billions of dollars were spent, yet the company failed to realise its vision. The reason? Many felt GE tried to do too much across a large organisation at once. Many parts of the company just weren’t ready.
#4 Overlooking dissenting opinions
The fourth pitfall is glossing over dissenting opinions. While the leadership hold the strategy and make final decisions, it is people on the ground that implement and experience new systems and processes day-in-day out. Working with your people to understand challenges they face and getting their honest feedback on solutions sound obvious. In reality, this essential step is often missed. Or even worse, employees have an option to feedback but without real possibility or open forums for them to raise concerns.
To avoid this, senior executives need to introduce strategies like steering groups to empower freethinkers and encourage teams to confront uncomfortable topics. By gathering input early and often, employees will feel valued and part of the transformation journey, increasing their desire to implement and embrace new changes.
Success takes consideration…
Digital transformation, and its rewards, are undoubtably at the forefront of most business leaders’ agendas. It’s a well-trodden path that’s seen many sub-optimal results, and so it’s understandable why the leadership is wary. We’ve learnt a lot about the process over the past 20 months and it’s important that organisations build on the experiences of others. Avoiding the four common pitfalls discussed above is a good place to start.
