
A major study by MIT Sloan Management Review and CapGemini Consulting [1] identified a number of common barriers to digital transformation programmes amongst 1,500+ organizations:
1. Leadership
Lack of urgency and pace (63%) was frequently reported, though this is hardly surprising when only one third of the companies studied didn't share the digital vision openly with their staff, and made even worse where the executives were not aligned on the vision. To achieve the necessary buy-in and momentum, it is critical to establish the digital vision as part of the DNA of the organisation. This requires the value system to be updated so that everyone affected can see for themselves that the old way of doing things is now out of alignment with the new values. This helps to drive natural course-correction and can help generate a pull-force whereby people are asking for and welcoming the changes.
2. Business case
A number of companies struggled with defining a Return on Investment (ROI) for their digital transformation investment. Having difficulties with quantifying the benefits and therefore not spending enough time at the early stage to understand the benefits, this led to weak justification for the changes they wanted to make. My own experience has taught me that digital transformation can involve a lot of 'enablers' that in themselves do not offer significant measurable benefits. This can be challenging when the board is asked to approve investments with negative NPV based on boiler-plate business case models. Digital transformation may therefore include a new way of assessing business cases, e.g. new measures, new timescales.
3. Governance
Only 40% of the companies followed a formal governance model and three out of four did not have any formal KPIs to measure progress of the transformation over time. So, what is going on? Due to the wide impact of digital transformation, it may be difficult to decide where the transformation effort should sit within the organisation, who should sponsor it, and which budget pot the investment will come from. The Executive Sponsor must have full support from the Board to enable changes across functional silos and lines of accountability. Without formal programme governance established, it will be very difficult to set priorities across the organisation and to secure resource commitments against business-as-usual demands. The KPIs need not be limited to financial benefits, but should take into account other measurable benefits such as Net Promoter Scores (NPS), simplified processes, reduced hand-over points, etc. The key to measuring transformation progress is to start measurements BEFORE business changes are being implemented. Otherwise, you will not have a proper baseline to measure against.
4. Culture & Capabilities
Unsurprisingly, digital transformation programmes met the same barriers as other major business change initiatives: lack of skills to execute the programme, conflicting priorities and resistance to change. According to McKinsey & Co, most companies are limited to 2 or 3 concurrent major change initiatives [2] and a digital transformation programme is likely to count as one of them. The fit between a digital programme and other ongoing programmes need to be carefully assessed to resolve potential issues around scope, governance, resources and priorities as part of the digital transformation planning stage.
The risk of skills shortages can be partly mitigated by bringing in external consultants, but a successful transformation team must include respected managers from the organisation to lead in different areas.
With an openly communicated vision, a strong business case and governance framework, you have the means to manage priorities and avoid many potential conflicts. With strong leadership from the top, leading by example, this gives the confidence that staff needs in order to overcome skepticism and the natural resistance to change.
References:
[1] CapGemini: Embracing Digital Technology a New Strategic Imperative (2013)
[2] McKinsey: Finding Your Digital Sweet Spot