Imagine for a moment your house is to undergo a major renovation – a complete rebuild that, if all goes to plan, will transform its structure, function and appearance into something incredible.
‘Incredible’ is what the transformation manager called it, but nobody, even they, know how exactly the end result will look. The designers say the house’s shape will evolve organically as it’s built. Naturally, some of your family members are anxious. They aren’t sure they’ll like the new house, or, more importantly, if it will include a room for them!
The designers and tradespeople working on the house use strange processes, that they say, help them to ‘fail-faster’ and be more agile. The architect says that you mustn’t get too concerned with cost over-runs because they ‘usually happen’ on transformations like these.
Before you know it, your once peaceful and organised house is flooded with crazed-looking people carrying tablets, pinning coloured notes to walls and using strange words like ‘customer centricity’ – all while ignoring your anxious-concern over what will be the impact to your bank account!
This scenario is clearly some light-hearted fun, but it also summarises what many finance leaders say is their worst fear about digital transformations. This fear of course, is all about identifying and controlling the multitude of risks that stand in the way of ROI.
According to research conducted by IBM, 84 percent of digital transformations fail to realise partial or whole objectives. This same research found that this failure-rate could be further broken down into two broad categories:
- 25 percent of failures occurred for technical reasons. For example, problems with integrating with legacy systems. Or a problem with a new digital solution.
- 75 percent of failures occurred for organisational factors such as ineffective communication, inadequate project delivery or change management skills.
“Every organisation has its own unique context and business model, therefore there is no such thing as a ‘normal digital transformation’. For the same reason, there is no recipe to achieving digital transformation success.”
While there is no discrete list of risks that must be controlled, we can learn about the source of many risks facing organisations when undertaking a digital transformation.
Here are three powerful strategies for de-risking digital transformations that should be on the radar of every finance leader:
1. Get the right information
Digital transformations involve making changes to organisational capability including people, process and technology. Without clarity of the starting point of the organisation, there is no effective way to design and undertake uplifts in capability. Many leaders who use a ‘give it a go’ approach find that gaps in capability are larger than they expected. Or else, the integration of new capabilities into their organisation had impacts in ways they didn’t anticipate. The solution to information gaps of this kind is to prioritise a current state assessment to map and collect targeted information that should be shared with those in the digital transformation teams.
2. Bolster data governance capabilities
Data governance is about defining policies related to data, including:
- How and where it is stored and sent
- Who has access to it and to what level
- What actions can be performed on the data
When we step back and consider the bigger picture, data governance is an obvious prerequisite to digital transformation. However, many leaders fail to recognise this key link between their organisation’s data governance capability and the outcome of their investments in digital. Finance leaders should ensure their organisation’s data governance capabilities are adequately developed in order to support their digital aspirations.
3. Bridging gaps between risk and digital teams
Striking a balance between innovating for the future and controlling risks that threaten what we have today is a tension few organisations resolve. Digital teams can be seen as irresponsible risk-takers; and corporate risk teams are too often accused of impeding innovation and change processes. As a result, many digital transformations suffer from the inability to identify and control risks before they create a negative impact.
The key is for people to recognise that everything in your organization is connected. Ultimately to achieve the same vision! Your organisation’s digital transformation and corporate risk functions needn’t ‘pull’ in opposing directions. The solution is to foster a culture of proactive risk management into your digital transformation and build a bridge between corporate risk and digital teams.
The good news is that it takes just a relatively small budget allocation put toward some targeted de-risking strategies to be one of the 16 percent of companies that succeeds at digital transformation.
No matter if it’s a small investment in building digital capability or a large-scale transformation, ‘de-risking’ is the strategy used by companies that succeed at digital transformations.
Marcel is Principal Consultant at Human Sparks with extensive experience in aligning digital and business strategy and de-risking the implementation process. Marcel has consulted to leading organisations on strategic alignment, development of key system roadmaps, de-risking digital programs and transformations. Marcel has held senior management positions within the education, engineering and resources sectors, and in recent years has been a consulting advisor to healthcare, not-for-profit, education, finance, aviation, agribusiness, government and resource organisations.