Nobody Said Transformation Programs Were Easy, but They Can Be Successful. Here’s How…
By Joe Flynn
According to research firm IDC, $1.7 trillion will be spent on digital transformation projects around the world this year. Despite the money being spent, however, companies are struggling to get it right. In fact, McKinsey & Co reckons that 70% of transformation programs fail – that means that over two-thirds of companies can’t deliver on their expected goals. It’s staggering.
McKinsey’s analysts reckon there are a number of pitfalls for large, complex change programs. These include inability to engage employees effectively; inadequate management support; poor or non-existent cross-functional collaboration; and, crucially, a lack of accountability. They also found that in order to sustain a transformation’s impact, it requires a major re-alignment in mindsets and behaviours across the organization, which is something that few leaders genuinely know how to achieve.
There is a caveat, however. We must take into account the market and indeed the organization’s definition of failure. Maybe expected goals haven’t been delivered to 100% of expectations. Were the expectations set to high? Did the end-client fully understand the transformation journey? Benefits often take time (sometimes years) to accrue from transformation programs whereas the organisation is demanding immediate results. The problem often lies with the structure of organizations – the failure to take a process view of change rather than tackling it across functional silos. Let me explain.
The majority of companies – probably as much as 90% – are organized by silo, according to business functions, e.g. sales, marketing, finance, etc. They’re rarely structured in a process way (or see problems in a process way) so it’s difficult for the organization to take a process view of change, of adopting, for example, a lean or an agile approach to transformational change across the organization.
The silo structure and its associated political model creates significant political and personal battles between departments. This very often results in outsiders being hired to drive the transformation, which in turn brings its own challenges. Determining failure on transformation programs requires a deep dive into the end results and new processes/business systems implemented. The organisation needs a new and more measured focus on transformation. There are five key pillars to consider.
Strategic Alignment: Will Our Projects Assist with Delivery of the Strategy?
It’s important to make sure that the projects you’re doing contribute to the business strategy. Often in organizations you’ll find that there’s a lot of maverick projects. Projects might be underway but they don’t necessarily contribute to the strategic direction of the business. With a maverick project, it’s often initiated because the originator wants to do it. Technology, unfortunately, is a major offender in this regard. Projects that might be exciting to do but don’t have priority at a particular moment in time.
To get transformation right, you must get a handle on the portfolio of projects that are currently underway with the company. Make sure they are all linked with the strategic direction. The strategy might be, for example, growth or it might be to increase exports whereas you might find the majority of the company’s projects are being done in the local country. There might be no projects underway that will help to increase exports. Or in a manufacturing plant it could be a need to reduce costs but when you look at the project list or portfolio, there are no projects underway that are driving lean or cost reduction.
One of the first things you’re looking to do is to get that alignment between the company’s strategic direction. One of our local government clients, for example, has three strategic pillars. It can now at the flick of a switch identify which project relates to which of its strategic goals. It’s something that immediately brings rigour to the corporate focus.
One of the first things the project sponsor at one of our big healthcare clients did was to create a number of strategic goals on Cora PPM. Objectives like “Acute Service Improvement”, “Disability Service Improvement”, “Mental Health Service Improvement”, etc. Whenever a project was set up, it had to be tagged to a strategic objective and it had to be approved. A project has to have a purpose – that aligns with a greater organizational goal.
Project Prioritization: Does the Organization Have the Agility to Take on the Correct Projects?
Can your organization actually do the projects that are planned? We still find that more than 50% of the companies we deal with cannot do the projects that are planned. It’s extraordinary when you think about it. Companies typically go through Annual Operation Planning, or AOP, and they’ll identify, say, the 20 major projects that they want to do.
There’s a section underneath that often gets left behind. It’s the rigour to ask: Can we actually do these projects with the people we have and the resources that we have right now? Very often you’ll see major gaps in that thinking – and execution. Companies need to become better at prioritising. It’s non-negotiable. Strategic capacity management allows them to do that. Then you can map out the outcomes.
Benefits Management: Can We Map the Outcomes of the End Vision?
When it comes to benefits management, it might be that we’ll reduce cost by 20%, for example, in this manufacturing department. We’re going to put in a new quality system. We’re going to put in a new process for manufacturing. What you’re trying to do is tag to the benefits here – to identify what’s achievable.
With one of our medical device clients, for instance, they run across 18 countries with their global cost improvement program. Their Global Operations team identify the costs at the start of a year on their project portfolios (300+ projects) and they continue to pursue them rigorously over the next 12 months.
They will say, for example, we’re going to reduce costs in quality assurance in our Switzerland plant by 25%. Every month, they’ll run reports. “How are we doing on that project?” It might mean consolidating management: “We have to drop three executives – from a pool of 20 – in this plant.” They pursue that strategy out of their headquarters in another country. They’re like ninjas on it. It’s enabled them to identify projects that have the potential to fail and to intervene early on.
Governance: Do We Have the Infrastructure & Processes by Which Compliance Will Be Assured?
With governance it’s about asking yourselves: Do we have the infrastructure processes in place by which compliance will be assured? Do we have the journey mapped correctly so we can deliver the transformation we’ve promised and achieve the benefits?
The roadmap is fine in theory, but it’s often difficult to stick to it. You’ll hit the hedge on occasion. You’ll hit potholes. But you’ll deal with those issues along the way if you have the right processes and the right infrastructure in place. Have we the project plan in place? Have we the resources allocated and tied down? Have we the senior executive commitment to it? This is where you need sponsorship to drive it – to ensure you’ve secured the right amount of resources up front. You need a forceful project manager on site to make sure you get them. Is there a budget for the project? Very often in large companies you just run out of budget.
I’m in the game a long time. It hasn’t changed since the 1990s. You need a governance structure. Meetings each week with the big chiefs if necessary to make sure the work gets done. And these things won’t change in 20 years’ time either.
Portfolio Insight: Can We Focus on the Future and Not on What Has Happened?
A lot of companies get bogged down. Occasionally, they look up to draw breath and ask: Where are we on the project? They’ll have very little time to concentrate on what’s happening out in the market or where they should we be going. But once you have a solution like Cora PPM and the structure in place and you’re well governed you can easily go in and take stock of your projects.
This immediately brings great peace of mind and control. You can’t put a price on that. You’re not all the time looking out through the rear-view mirror asking, “What went wrong?” Your projects and programs are up and running – and running well. You’re able to look out and say, “What else should we be doing?”
It’s a version of utopia, but it’s possible to deliver a program environment where everything is well governed. We’ve worked with clients where projects are structured. Resources are aligned. Budgets are in place. You will of course be hit by changes and unforeseen circumstances. Things will run late and be in trouble. But you’ll be in control.
Whereas previously you might have had to wade through 15 different systems. You might be looking at email for certain projects. You might be looking at MS Project or other PM systems for more. With a solution like Cora PPM, and a single, centralised view of the transformation, you can see where you are with a project. You’ll also get a good view on resourcing that, say, a certain project manager is busy for the next three months and unavailable.
Companies don’t admit it, but people like to thrive on chaos. People aspire to transformation but they love the chaos because they can move people left, right and centre and don’t seem to worry about it. Change management might be about systems and processes in theory, or at a certain level, but ultimately you have to change behaviours also. It’s often the hardest part of the puzzle to solve. The sweet spot is where those three things meet: People + Processes + Technology = Transformation.