When digital transformations fail, many people blame the software, the system integrator, or some other technical component. However, internal organizational dysfunctions frequently undermine and ultimately doom a digital transformation, as explained below.
To begin, one of the most important things I discover when working with clients all over the world is that internal dynamics and dysfunctions are extremely powerful. They have the ability to destabilize any project at any time. A failure can be caused solely by cultural factors. Many organizations are unaware of how internal dynamics and a skewed company DNA can affect the success of a digital transformation.
Here are five of the most common organizational dysfunctions I encounter when assisting organizations with their digital transformations. These are the five key risks you should address and mitigate as part of your digital transformation.
1. Approval and Assistance from Senior Management
A lack of executive buy-in and support is one of the most powerful forces that can derail any digital transformation. This is one of the most common things I see, especially in project recoveries and expert witness engagements where I am working with failed projects. Many of those challenges can often be traced back to a lack of executive buy-in and support.
Executives believe that approving a project, signing checks to pay for it, and receiving a weekly or monthly status update on the project constitutes executive buy-in and support. Personally, I don’t believe it does. However, executive buy-in and support extend far beyond simply approving the project, providing timely updates, and paying the bills.
There are several critical questions to consider here:
- What will our future operating model look like?
- What will our organization look like after the transformation process?
- What are the roles and responsibilities going to be?
- Will we restructure our company as part of this transformation?
- How does this overall transformation support our organization’s overarching goals, objectives, and strategies?
What executive buy-in and support ultimately mean is the ability and engagement to make key decisions about what the organization wants to be when it grows up. Alignment around these core strategies is critical for a project to stand a chance.
Only executives can or should make these decisions, and that is what constitutes buy-in and support.
Obviously, you want your executives to approve the project and communicate to the organization what it means and how they can contribute to the project’s overall success. We want to ensure that executives are providing the resources necessary for the project’s success.
These are all important, but executive buy-in and support failures are frequently traced back to a more fundamental lack of decision-making.
Finally, executives must not see this as an opportunity to simply delegate the entire project to a project team. Certain key decisions should be made solely by that executive team, and this is one of the key dysfunctions that any organization must address as part of its digital transformation.
2. An absence of proper alignment
Another common issue in organizations undergoing digital transformation is a lack of alignment. Typically, this misalignment is not the result of the project, but it is exposed and undermines the ability to be effective in the digital transformation.
When there is a misalignment, there will undoubtedly be headwinds. If a company has disparate goals and objectives or lacks a unified vision, digital transformation is unlikely to succeed in that environment. That friction and tension will stymie your project more than anything else in a transformation.
Executive alignment is one of the most powerful strategies for ensuring success. All stakeholders should be aware of project objectives, execution planning, and how it relates to overall company strategy throughout the organization.
3. An unhealthy reliance on third-party suppliers
When organizations undergo digital transformations, they are often the first to admit that they are not digital transformation experts. It’s not what they do for a living; they have other skills, but digital transformation is usually not one of them. Most organizations have little experience with transformations as well.
This lack of knowledge and experience inevitably leads to an unhealthy reliance on third-party vendors such as software providers, system integrators, third-party consultants, and anyone else assisting with the overall project.
You want to make use of your outside experience. I’m not saying you shouldn’t, but you should avoid inequity between internal resources and project vendors. Furthermore, that unhealthy dependency frequently leads to nefarious behavior, such as consultants overbilling on projects and a lack of transparency.
Companies must not rely too heavily on these resources to avoid being steamrolled by those outside parties.
This is a common dysfunction that emerges during transformations. That is why one of the most important things you can do is educate yourself before you begin.
You won’t become an expert in digital transformation overnight, but there is a lot you can do to arm yourself with knowledge. Read up on best practices, begin to comprehend successful strategies, and seek technology-agnostic advice and thought leadership from organizations like Creative Index Technologies. These are just a few examples of how you can educate yourself to become a more equal partner with your vendors rather than someone who has an unhealthy reliance on those partners.
4. Recognizing the Scale of Change
Organizations frequently underestimate the magnitude of the change that is about to occur. This is especially true for organizations transitioning from a legacy product to another from the same vendor.
To be honest, it’s not that big of a deal, especially in this day and age when the majority of new flagship products from the leading vendors are complete rewrites of older technologies that are now meant to be delivered in the cloud. These are entirely new products, not incremental upgrades.
It is critical that you separate yourself from old systems because you do not want to become engrossed in old technology. It does not translate well and runs slowly, which is undesirable during a digital transformation. You should look for something modern, such as cloud systems with all of the latest capabilities.
There is a widespread belief that that organization will have little difficulty adapting to new technology because they are prepared for it. Going from an old legacy system to a current cloud modern system is, in reality, a massive change. Most organizations underestimate the magnitude of that quantum leap, as well as the impact it has on their operations and overall organization.
The transformation will have an impact on all of these things. It’s critical to recognize that the magnitude of change you’re experiencing is probably greater than you realize, and one of the most common dysfunctions we see is organizations underestimating the level of change they’re about to experience.
5. Hopes that aren't realistic
Lastly, but by no means least important, organizations have unrealistic ideas of what the change will require.
Businesses often underestimate,
- The plan for the project
- The finances
- The work and inputs put into change management
- How it will affect the IT department, front-line employees, customers, etc.
In the end, how it will affect their infrastructure as a whole. So, they don’t have a plan with enough time, money, and other resources to deal with these and other problems.
Now, one of the main reasons for this dysfunction is that, as I said before, most organizations don’t know any better. They have not done a lot of digital transformations before.
They will listen to their vendors and trust them when they give them a tight deadline, a bigger budget, or a deadline that can’t be met. We also need to remember that software vendors and sales reps from our outside vendors are usually trying to sell us services, and they have an incentive, quite frankly, to underestimate the amount of time, cost, and risk that comes with buying their technology and services.
In the future, we should all take these things with a grain of salt and clean up the proposals we get from outside vendors to make them more realistic for us. That’s probably the best way to fix the problem and stop it from getting worse. We want to have a realistic idea of how long our project will take and how much it will cost, as well as a realistic project plan and a way to deal with changes.
Start planning your digital transformation
Understandably, digital transformation is a difficult task. It takes a lot of perseverance and hard work over a long period of time. It poses broad, all-encompassing challenges to many industries and all levels of your organization. However, with a well-thought-out and effective digital transformation strategy, you can completely transform how your company operates and contribute to its long-term success.