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Common Pitfalls of Business Transformation

Introduction

We are living in a changing (business) world where, due to the impact of ever advancing technology, many of the old truths don't apply anymore. The speed and enormity of change is increasing and the impacts are broad. Most company boards and executive teams are aware of these changes (you can't miss it really as every other publication talks about digital transformation) and are starting to think how they can react to this. As a result, digital transformation is finding its way into business strategies and often results in some kind of business transformation program. However, many of these programs are reported to fail or not deliver as expected. Why is this the case? Based on my experience with transformation programs, I have identified some common pitfalls of business transformation. This is by no means an exhaustive list and any additions will be welcome.

Pitfall 1: Executive ownership

Who owns digital or business transformation in your organisation? It is often hard to get a clear answer to this question. Generally, the CEO is referred to as the ultimate owner, but usually ownership is 'delegated' to the CMO, CIO, HR or the leadership of the transformation program. Due to the fact that business transformation programs are often associated with the implementation and upgrade of technology, the program may be 'downgraded' to an IT program which tends to attract a lower level of involvement from non-IT executives. The technology aspect makes it more complex and harder to define the broader impacts to the organisation as a whole.

Business or digital transformation should be squarely owned and driven by the executive team. This is the only way to ensure that not only the technology aspect is addressed but also the resulting transformation of processes, data architecture & ownership, decision-making and performance measurement to name a few. It is central to the business strategy and therefore owned by the executive team as a whole. This should translate into active involvement and participation in the governance of the transformation program.

Pitfall 2: Lack of broad engagement - silo approach

In many organisations, transformation initiatives are developed and executed in isolation by particular departments or functions. Marketing may drive the transformation of how the organisation interacts with its customers through the application of mobile technology or the development of an app. Field services may undertake similar initiatives for repair & maintenance operations. These isolated initiatives lead to perceived quick wins in the particular area of application, but they don't drive digitisation of processes and/or better use of data across the organisation. Aspects like integration of data and end-to-end business process optimisation are not taken into account which results in rework or duplication of effort in the medium term.

True digital transformation is about the digitisation of processes and better use of data across the organisation leading to better products and services, higher customer satisfaction and/or lower cost. Digital transformation should be approached with the organisation's value chain in mind and focus on end-to-end processes. This doesn't mean that everything needs to be transformed at the same time. It does mean that cross functional teams work together on initiatives that drive improvements in a clearly measurable time using alternative methods (e.g. agile, design thinking) to achieve this.

Pitfall 3: Lack of attention for leadership and cultural transformation

Generally, business transformation programs utilise change management methodology to drive acceptance and improve 'stickiness" of the change. It often comprises of communication, training and measurement of acceptance of the change. This is largely focused on the organisational functions as a whole and the 'things' that change.

"Culture eats Strategy for Breakfast" - Peter Drucker

Digital and business transformation should address and include leadership and cultural transformation as well. Change management is not only about changing things, but, more importantly, about 'changing thinking'. This is much harder as it includes 'unlearning' or 'letting go' of an individual's normal way of working/leading in order to embrace the change and develop a new normal. This is a very personal and emotionally charged change process for the leaders in the organisation. Keeping in mind that many incumbent leaders have been successful in more traditional business areas like sales and operations rather than areas that are particularly important for digital transformation such as technology, business process optimisation and integration. This personal journey of transformation needs to be guided and facilitated in order for the transformation to be successful and derive long term benefits.

Pitfall 4: Organisational readiness

An incremental part of business transformation is the design of a business operating model that facilitates the development of new competencies like agile product development, digitised process alignment, data analytics, performance measurement and decision-making. An operating model is not only the organisation structure and organisational processes. It also defines required skills and competencies to succeed as a digital enterprise. The transformation may lead to the introduction of new positions like data architects, data scientists, process owners and process architects. It will also change skill set requirements for existing roles as these roles may evolve from executional roles to integration or monitoring roles. Especially soft skills like collaboration, entrepreneurship, innovation, influencing, risk-taking and fast failing are likely to be new to the organisation and need to be introduced in a considered way.

The business operating model design needs to be an implicit part of the transformation program as it forms a foundation for both the program itself, but also the future way of working. Too often, it is an afterthought or only addressed when the transformation is at risk of failure. The design of the business operating model obviously feeds into the change management approach and strongly affects the leadership and the people in the organisation. A well-considered business operating model will drive organisational readiness for transformation.

Conclusion

Transformation is hard and it should be. It not just about implementing new technology solutions and different interactions with customers. It not just about learning new hard skills like data analytics. It not just about change management and communication. It goes deeper. It is about letting go of old ways of doing things. It is about adopting not only an Open Mind, but also an Open Heart and Open Will. It is about changing thinking and embracing new ways of doing things. And it is holistic as it affects the whole organisation including leadership transformation. This cannot and should not be underestimated.

On the other hand, transformation is exciting. It is about competition and entrepreneurship. It is about customer satisfaction and the development of new products and services. It is about people in the organisation. It is about leadership. It is personal.

Have fun.

Frits de Vroet

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