The allure of digital transformation
Innovation is crucial to an organisation’s long term performance. Half of all listed companies on the S&P 500 are forecast to be replaced in the next 10 years, with a primary reason being their inability to adapt through innovation, spearheaded by the rising dominance of digital technology.
This has led to a “start-up effect”, with companies that begin their lives in basements and coffee shops exhibiting unicorn-like qualities, a magical allure enhanced by the seemingly effortless way they innovate through the use of digital technologies. While the world of start-ups has more WeWorks than Airbnbs, large corporates recognise the need to digitally transform to maintain their competitive advantage.
Digital transformation is however highly challenging. It is in fact so challenging that many corporates have found it easier to form a separate company or innovation unit to bridge the digital gap than run digital initiatives within their own organisations. These challenges have led to many an executive and board member getting their fingers burned due to the failure of past digital transformation initiatives.
Attempting to quantify the success rate of digital transformation is predicated on numerous assumptions and variance across organisations. Most studies rate digital transformation success rates below 30%.
Given that a large proportion of transformation projects are implemented in large corporates with healthy project budgets, these higher budgets have not necessarily resulted in higher success rates. On the contrary, more successful digital initiatives have been carried out by smaller startups with lean budgets and prudent angel investors. Where digital transformation is concerned, less is indeed more.
This view is supported by commonly cited obstacles to innovative performance in corporates, which include but are not limited to:
- Long development times
- Implementation challenges
- Selecting the right ideas and not enough practical ideas
- Risk averse culture
- Lack of coordination
- Marketing innovations
Long development times and implementation challenges are the most often cited obstacles for innovative performance, yet little attention in literature and corporate problem-solving forums has been given to why implementation fails.
The truth is, to succeed in digital transformation, an organisation must attain a number of objectives, often in parallel with one another.
The Red Flags of digital transformation
With exposure to numerous digital transformation projects, Letsema’s Digital Practice has had the privilege to witness, study and deconstruct the dangerous tendencies which sink budgets and drastically reduce the chances of digital transformation success. These collective challenges are so prevalent and challenging that without addressing them, digital transformation journeys are almost certainly bound to fail. Failure in this context means digital transformations not yielding intended outcomes, or in severe cases, not deriving any value whatsoever.
These challenges are the Red Flags of digital transformation, because they are signs of a particular problem requiring attention. There are many red flags that increase the chances of digital transformation failure. However, five are so severe that transformation success is predicated on resolving them.
For digital transformation success, Red Flags must be addressed should they appear. If they are not, failure is guaranteed
The questions we will seek to answer are how these Red Flags manifest and why they have such adverse effects on digital transformation initiatives, supported by our own experiences in the marketplace and working first hand with clients.
The battle map with multiple fronts
“Running multiple digital transformations with lack of focus”
It is said that “he who chases two rabbits will catch neither”. Committing to digital transformation initiatives requires utmost dedication and focus. All too often, high level digital transformations are composed of multiple, challenging building blocks and projects. Even the scope of a single digital transformation project is therefore almost always underestimated in terms of extent of work and resources required.
A root challenge of this Red Flag dynamic is assigning high level mandates or goals whilst underestimating effort, expectations, and resources. A classic example of this error are financial services establishing something as abstract, for example, “online marketplaces”. Whilst aspirations, ideas and investor feedback are best marketed with high level language such as “one stop shop”, implementing such aspirational ideas are in fact composed of numerous, challenging building blocks.
Building each of these blocks requires extensive unpacking and commitment. When senior stakeholders begin to appreciate the extent and complexity of each building block, the initial mandate, project plan and expectation breaks down, throwing off the digital transformation trajectory and stakeholder confidence.
How do you avoid this Red Flag? Simply put, avoid hyperbolic names and big expectations, and focus on each building block as necessary instead of the larger transformation itself. This goes a long way in maintaining sensible and judicious project direction.
The missing owner
“Lack of buy-in and ownership”
Practitioners of the Agile development methodology hold sacred the concept and role of the product owner. The product owner is something more than just a professional role, being those anointed few responsible for developing products for an organisation. Product owners own the business strategy behind a product, specify its requirements, and generally launch and manage its features.
Product owners have the power to launch a new product or service and are regularly passionately invested in its possible success
Whilst not all digital transformations progress within the framework of the Agile approach, the importance and concept behind the product owner, the custodian of the digital transformation, is critical. Someone must be the face of the project who has the authority to drive its requirements and success, but is ardently invested in the outcome. Any digital transformation that is not under the direction of such a leader is bound to drift away from broader corporate strategic goals.
It may seem incredulous that such challenges even exist, given that corporates do allocate high budgets and strategic priority to digital transformations. However, these challenges do exist, and they materialize in surprising and contrary ways.
On the one end, product owners often do not hold sufficient power with the board or executives and cannot sway critical decision making or drive adoption. On the other hand, the product owner is a senior executive and may be too divested or not understand the domain of the product. Understanding the domain in which the new product or process deploys is critical in specifying and driving its development.
The upside-down pyramid
“No craftsman to actually build the product or process”
In the realm of digital transformation, it is common cause to find oneself in the midst of a large project team, with an abundance of architects, business representatives, project managers and subject matter experts. Yet, they lack craftsmen who construct the envisaged product or process.
Half of these craftsmen are developers who code and deploy new digital products and services. The other half are “domain experts”, product owners who understand exactly what needs to be developed. In formal language, these types of craftsman are business analysts. A true “domain expert” is someone who might act in the capacity of a business analyst but has extensive experience in articulating the digital transformation challenge and the desired solution. They may be thought of as the “grey beards”, given their extensive experience and understanding of the challenges in the organisation.
The domain experts, together with the product owner, may effortlessly articulate the project’s direction and requirements, tightly collaborating with developers. These are the craftsman that build the pyramids and their absence reduces project direction to an exercise of high-level language, indirection and non-value adding work.
High ratios of craftsmen to project team sizes have been observed to correlate to higher project success rates, especially when digital transformations are more technical and complicated.
The craftsmen are the base of a pyramid because of their foundational and practical, hands-on work backed by the required team sizing. The vertex of the pyramid represents the higher level, and lesser resourced project management roles in the digital transformation process. If the ratio of craftsmen to project management is imbalanced, so appears the upside-down pyramid Red Flag, with project resourcing leaning dangerously away from the craftsmen.
The ship with a sail
“Overworking to complete a product”
A ship with a sail may not initially conjure warnings of danger for a digitally transformed product, process or service, yet real world experience runs contrary to this intuitive interpretation.
Startup companies’ primary advantage over corporates is their ability to understand where customer value is derived and what value may be deferred. As we’ve observed, they paddle across the English Channel instead of using sails.
In real world terms, corporate digital transformations are founded on the erroneous belief that there is an end, and that the end product or process must contain all the bells and whistles of what the business wants and must be produced in quick time.
However, while the business may assume customers want everything, careful observations reveal that a great deal of value can be extracted early on in digital transformation process by delivering minimum viable value. Or, in the parlance of product creation, delivering a minimum viable product. Minimum viable products, in very plain terms, are about delivering just enough value for the product to be useful.
At the core of this principle is the ability to deliver exceptionally, early.
A digital transformation is never complete
Early delivery is a profound strategic advantage. It allows for realistic run rate gauging, measuring expectations, and delivering value at the appropriate points in time. Work is measured not by asking how long it will take to complete something, but how much can be done for a unit of time.
Through assessing work in this way, the digital transformation team is forced to think in terms of what can be done in X amount of time, focusing minds on priority products or processes.
Success is reducing errors to a minimum
A maxim in conflict is the leader who makes the least mistakes wins. This describes a context where implementations go according to plan, and where moment of unintentional self-sabotage are eliminated.
Digital transformation is an inherently complex process. Almost one third of implementations fail, making it critical to reduce unforced errors which can be the difference between a successful or failed implementation. This is especially prudent in large corporations, where competing interests, sprawling project apparatus, becoming bogged down in detail, too much time spent on finalisation, and lack of practical expertise and authority dooms many a digital transformation before they even begin.
As business leaders consider and then execute upon a digital transformation strategy, they must take heed of how they can avoid undermining themselves beyond external factors that may affect the project’s rollout. By starting inward, they give digital transformation a greater chance of success, and in the long term, the ability of the business to meet modern market demands and needs.
Digital transformation is now a function of the status quo. It must be pursued if an organisation wishes to keep pace with its competitors and/or maintain their own competitive edge. Digitally transforming in the correct way is how an organisation can secure its future, so long as they get out of their own way, in a set period and with the right people at the wheel.
Does your organisation need help to digitally transform in an efficient and effective way? Contact Dejan and Letsema’s Digital team at digital.team@letsema.co.za, connect with Dejan on LinkedIn or learn more about the Digital team and its service offering.
