It is a new decade, 2020! Organizations are continuing to invest millions of dollars in transformational change initiatives and innovation – digital transformation. We see digital transformation due to innovations in technology, for example, Artificial Intelligence (AI), augmented reality (AR), virtual reality (VR), internet of things (IoT), machine learning, cloud-based services, robotics, big data, and big data architecture. Rapid advancements in technology, regulatory changes, pressure from investors to increase profit share, and new competitors in the market are some factors resulting in disruptive times.
In this era, organizations that do not pursue one form of digital transformation initiatives or another, are rapidly becoming impossible to function – or function properly. For example, organizations have to conform or “die-off.” Remember Blockbuster, Blackberry, Polaroid, Kodak, Nokia, Compaq, et al.- anyone? Hence, digital transformation is no longer an option for organizations but steadily, becoming a reality! Jeff Immelt, CEO of GE, said, “anyone who denied that digitization is going to impact every corner of the economy would get left behind.”
Digital transformation, innovation, and challenging the status quo are not just fads but the way of the future now!
Organizations have to remember that return on investment (ROI), increasing data efficiency, and overall bottom line are critical drivers for digital transformation. It is pivotal that digital disruptors and disruption become the new normal to gain competitive advantage. Hence, a vast number of organizations are driving digital transformational change initiatives.
Digital transformation could be disruptive, and as such, it introduces certain levels of stress on organizations. According to cnbc.com, “last year alone, organizations spent $1.3 trillion into transformation initiatives — 70 percent of which was wasted on failed programs at organizations like GE, Ford, and Procter & Gamble. Among those organizations that didn’t fail outright, only 16 percent saw improvements in their performance. The ability to sustain change over the long haul is what organizations are striving to achieve. Cnbc.com went further to say that even for digital-first industries like high-tech, media and telecom, only 26 percent saw success”. Forbes stated that these failures equate to circa $900 billion worth of spend that will miss the mark. Thes failure is undeniably mismanagement on a colossal scale.
With new technologies and systems changing so quickly, Daniel Herbert, Director, Project Management Support Organization, Department of National Defense, Government of Canada, stated, “everything is moving fast.” Danie Herbert went further and said, “Between the time we initially identify a requirement to the time of first delivery, technology has progressed so quickly that new and better systems have overtaken portions of the initial requirement….”
Executive Director, Capital Planning & Delivery Telstra Corporation Bronwyn Clere, recognized that keeping up with the pace of change is pivotal to their future relevancy. She stated, “we are focusing on very rapid delivery cycles, asking ourselves: How do we mobilize a project very quickly? How do we use the right delivery techniques to work through it quickly?
Organizations, therefore, have to be very agile; speed is critical; time to market is crucial considering the ever-evolving nature of technologies. Organizations must develop a cost-effective and productive strategy to swiftly detect and adapt to internal and external changes to deliver significant results while positively impacting the bottom-line.
Every shareholder expects the organization to deliver on the strategies to ensure the profitability and sustainability of the organization. Where digital transformational initiatives fit, these initiatives should be delivered on time, efficiently, and effectively. Organizations have to manage all the moving parts, striving to remain relevant, drive change and increase revenue – all in the same breath!
So, to ask, how can organizations attain the benefits from digital transformation initiatives, avoid the pitfalls from the somewhat-convoluted implementation and reduce – if not eliminate – the high rate of failure. The big question is, HOW? Recognizing these challenges and the new reality that organizations are faced with, a paradigm shift (a re-think of strategies in optimizing the value delivery compass) is highly required.
The Harvard Business Review (HBR) in their article stated that digital transformation isn’t just necessarily about technology, “As most digital technologies provide possibilities for efficiency gains and customer intimacy, organizations are moving in that direction. But if organizations or its people lack the right mindset to change and the current organizational practices are flawed, then the digital transformation in and of itself will magnify these flaws”.
Digital transformation has been successful for some organizations. The HBR stated that Li & Fung’s transformation initiatives were a success. “…because their leaders went back to the fundamentals: their strategy focused on changing the mindset of their employees as well as the organizational culture and processes before deciding what digital tools to use and how to use them. What management envision to be the future of the organization driving the technology, not the other way around”.
Furthermore, to say that technology in and of itself cannot solely transform organizations; the technology is just the vehicle – a catalyst of sorts – for achieving these transformations. The people – employees, customers, and stakeholders – are vital to attaining success. According to Forbes, the digital IQ of employees is critical. Where the term digital IQ is “a measurement of an organization’s abilities to harness and profit from technology.” Organizations that are investing in their people by increasing their digital IQ, by correlation, directly increases the rate of success of these digital transformation initiatives.
Jeff Immelt, CEO of GE, points out that raising an organization’s digital IQ will help gain a competitive advantage.
Leading organizations now have to focus heavily on their people, which is one of their significant assets. Also, embrace project, program and portfolio management best practices, amongst other things; this gives them a shot at delivering these digital transformation initiatives successfully. However, there is always more that can and must to be done. Considering the impact of saving billions – even trillions – of dollars could have on organizations, markets, and the global economy. Organizations need to shift from just striving for on time, on budget on schedule but, a shift in mindset to focus on their people, striving to be better and continuously improving to maintain a competitive advantage.
The diagram below shows the PMI’s analysis as to some of the factors responsible for failures of strategic initiatives.
Diagram 1: Some factors responsible for high-rate of initiatives failures. Source – Project Management Institute(PMI) – Pulse of the profession 2017
We can see that there is a common thread that ties all these factors together – people. Here are some key focus areas to hone on during this period of critical digital transformation, to help address these factors responsible for the colossal failures. Organizations need to:
• ensure adequate planning backed with a robust strategy;
• focus on benefit realization management;
• provide c-suite support and an actively engaged executive sponsor;
• implement appropriate scope management;
• build employee capabilities and mature project management practice;
• increase employee engagement and change management to combat “change fatigue”; and
• empower a strategic PMO.
1. Ensure adequate planning backed with a robust strategy
A robust strategy is essential as this will drive the detailed plan for any digital transformation effort. Transformational leaders who aim to enhance organizational performance using digital transformation tend to have a specific tool in mind already.
For instance, a CIO was asked what the short to midterm plan for the organization will be, and the retort was “Our organization needs an AI strategy.” Organizations may be looking to, i.e. reduce production lead times, increase speed-to-market, and improve the use of data. The starting point must first and foremost be to understand the customers and stakeholder needs, then ensure it aligns with the organization’s strategy. Once there is alignment – customer needs, organizational strategy, goals, and objectives. After that, different solutions could then be investigated. There is no single technology that can or will deliver all functionalities an organization may want, i.e. speed, increased sales, or innovation, as such. Hence, several options may need to be investigated and analyzed before arriving at the optimal solutions or suite of solutions. Strategy alignment to organizational strategic goals and objectives is key to success not by following the trend doing what others are doing, but by determining the best strategy to be adopted for the endeavour.
Once the business case that validates all the drivers of the transformation has been approved, detailed planning should be kicked off. Planning is one process that the benefit of doing it right cannot be overemphasized. As the saying goes, you never plan to fail but fail to plan. The planning process has to be done well in advance before work can be executed. This will help establish the scope of the transformational effort, define and refine the objectives and helps develop the course of action to attain those objectives.
These digital transformational successes are dependent on how well the requirements are identified. This is so important as organizations cannot afford to spend money and other resources on failed projects. in some cases, a project can be the difference between an organization failing or becoming successful. Organizations need to engage their internal resources – employees-, in the planning process and throughout the life-cycle of the initiative. The future state needs to be mapped out, and activities carried out with all identified stakeholders detailing how the transformational change initiatives will proceed, with phases and interim deliverables that guide progress. This helps paint the picture of the future state and keeps all stakeholders at all levels focused on their specific piece of the journey.
As more details relating to schedule, scope, cost, and quality come to light, the plan will need to be progressively elaborated. This plan should align with all objectives and scope outlined in the charter and business case. There should also be a governance process in place to ensure that the desired outcome and deliverables in the plan are still relevant throughout the life of the digital transformation.
Organizations also need to pay close attention to the day-to-day business operations as part of planning to ensure business operations occur with minimal disruption.
2. Focus on benefits realization management
Transformational leaders need to ensure that the initiatives being executed align with the organization’s strategic goals and objectives. Benefits realization management – which is the collective process of identifying benefits at the outset of a project and ensuring, through purposeful actions during implementation, that such benefits are realized and sustained once the project ends. A culture of benefits first needs to be created. It is easy to get sucked into the vortex of new technology and more functionality by extending the breadth of the project, which may result in crucial benefits being lost in the process. Benefits realization is essential; the ability of projects to deliver what it set out to do – the expected business benefits – is what organizations need. Some benefits from the initiative may be realized before project completion – the quick wins.
Organizations need to have well-formed processes to guide investment decisions on initiatives that will deliver on strategic goals and business benefits. This is also a challenge as benefits may be identified at the start of an initiative. Still, in the end, the project is either delivering or not delivering according to those identified benefits, says Phillipe Husser Senior Partner of Progress Direction at Michelin.
Define the ROI. “Every project plan should begin with an explanation of the business value that project brings to your organization,” says Mr. Kasabian. The benefits management plan must detail:
• the target benefits;
• the time frame for realizing the benefits;
• how they align to strategic goals and objectives; and
• on project completion, how do you measure their effectiveness?
Organizations that invest in maturing their benefits realization management process achieve better project outcomes.
3. Ensure c-suite support and an actively engaged executive sponsor
Having c-suite support is priceless. Having a named executive sponsor from senior leadership actively engaged and championing the change adds tremendous value. This helps to bridge the communication gap between the digital transformation delivery team and stakeholders to significantly increase collaboration and support, reduce project risk and increases the rate of success. Experience has shown that the dominant driver for projects meeting their original goals is linked to an actively engaged sponsor. According to the May 2010 Economist Intelligence Unit report on project management in industrial manufacturing industries, having c-suite support and sponsorship for a strong project management discipline is directly linked to better project results. The report shows that when project managers answer to c-suite leadership, they are almost twice as likely to bring projects in on schedule. They also meet or exceed budget expectations 50 percent more often than at an organization where project managers answer to a mid-level project sponsor. This percentage is now on the rise as more organizations are beginning to see the value in an executive sponsor leading successful transformational change. Their level of influence is far-reaching and thus, exponentially increases the overall success rate of initiatives.
Tony Meggs, Chief Executive, Infrastructure and Project Authority (IPA) …. “Part of being a great leader is being an actively engaged sponsor as it helps ensure stakeholders are aligned, and the vision is effectively communicated.” The IPA has taken steps to engrain actively engaged sponsors within their organization by partnering with the University of Oxford’s Saïd Business School in developing a significant project leadership academy school to support their sponsors.
The executive sponsor should have detailed knowledge about the digital transformation and how it links back to the organization’s strategy. The sponsor has a huge part to play, from the creation of the charter to continuous team engagement throughout the life cycle of the initiatives. The executive sponsor helps break down barriers, remove roadblocks, make quick, effective decisions and influence stakeholders. A culture of collaboration needs to be built, and a close relationship with the sponsor, one founded on trust and transparency. When required, relevant training opportunities should be provided to the executive sponsor so the role can be effectively performed and, in turn, achieve successful outcomes.
4. Implement stringent scope management process
The scope of the project must be clearly outlined and documented at the start of the project – part of the initiating phase. As the digital transformation progresses, some level of change is expected. However, all changes should be tracked and closely monitored to prevent scope creep. Scope creep happens when changes are not adequately managed and in-turn impact scope, budget, and schedule. Scope creep could negatively impact project outcome, decreases stakeholder satisfaction, increased cost and delayed project benefits.
Lack of clarity of requirements makes it almost impossible to control scope creep; therefore, customers’ expectations should be used to establish the scope of work. Hence why the planning process needs to be correctly executed; the approved scope needs to be accurately documented and signed off by the executive sponsor. A formal process for managing all changes need to be put in place through an approving authority – like a change control board. A critical function of the change control board is the review and approval for all change requests received. So, to recap, some of the reasons for project failures include but not limited to erroneous requirements; change in project objectives and organization’s priorities are all contributory factors to uncontrolled scope, all leading to scope creep.
5. Building employee capabilities and maturing the project management practice
Organizations need to develop talent from within. Developing talent and skills throughout the organization is an essential factor for success in a digital transformation effort. According to Forbes, organizations need to factor-in employees in their digital transformation journey, and proactively implement strategies to increase the digital-IQ both on an individual level and across the organization to fully benefit from digital transformation. Boosting digital IQ can be done by organizations investing in employee training in-house or via third-party organizations providing training solutions. Interestingly, with digital technology, training could be done digitally, making training even more accessible.
A survey by consulting giant McKinsey & Co. found that nearly 60 percent of senior executives said building a strong project management discipline is a top priority for their organization as they look to the future.
Organizations also need to strive to mature their internal project management capabilities. In a world where the pace of change is fast, organizations now need to start moving towards more agile processes to deliver value quickly as there are several variations of agile methodology, i.e. hybrid, blended, adaptive, and incremental. Any of which can be adopted or even customized to meet an organization’s needs. The challenge may be trying to integrate agile into exiting project management frameworks; however, organizations need to access their current requirements then create a bespoke methodology and an approach that meets their needs.
Phillipe Husser – Senior Partner, Progress Direction Michelin stated, “we believe that agility could also be used in multiple ways – in everything we do. The world is changing very quickly around us, so much so that we have projects taking two to five years to deliver, because, during this time, the initial requirements have changed.
According to the Project Management Institute’s “Pulse of the Profession 2017: Success Rates Rise, organizations that invest in proven project management practices waste 28 times less money because more of their strategic initiatives are completed successfully.
“Good project management discipline stopped us from spending money on projects that fail,” says Ron Kasabian, general manager at global IT giant Intel, Folsom, California, USA.
“The delivery of business outcomes is realized through the success of projects, and in essence, that is the way that project management strategies drive organizational success,” says Adrian McKnight, PMP, Program Director at Suncorp-Metway Ltd., a financial services firm in Brisbane, Queensland, Australia.
6. Increase employee engagement and change management to combat “change fatigue.”
Organizations need to carry employees along and help them understand the need for – and the requirement of – the digital transformation. Employees can quickly become overwhelmed when too many change initiatives are occurring concurrently.
Digital transformation successful outcomes are highly dependent on employees working together to achieve the initiative’s goals and objectives. The whole organization, not just a selected few, all must be on the same team, everyone must collaborate, work towards the same organizational goals to ensure successful outcomes. Unfortunately, most organizations are siloed, with functional areas and business units struggling to communicate, coordinate and collaborate as it relates to transformational initiatives – this has to change – to ensure success.
According to Garther.com, employees need to be engaged and need to understand how these digital transformations will affect their working conditions. Organizations stand to benefit when avenues are created for employees to contribute to these transformational initiatives. High employee engagement correlates with higher performance and output, which will, in turn, increase revenue growth, net profit margin, customer satisfaction and earnings for investors. Where the change may be perceived as a treat to their jobs, employees may consciously or unconsciously resist the change. Employees may choose to sabotage the efforts with the hope that if the initiatives are unproductive, leadership will eventually abandon the undertaking, and their jobs will be saved.
It is critical for leaders to recognize these fears and to emphasize that the digital transformation process is an opportunity for employees to upgrade their expertise to suit the marketplace of the future. Employees need to understand the change as it affects their day to day roles and responsibilities; here, the organization must establish appropriate mode and frequency of communication for all impacted stakeholders. Also, direct leadership support, i.e. line managers of employees, should be positive agents of change and advocates helping to remove obstacles that may inhibit performance due to the transformational change underway.
Mark Little CEO of Suncor stated: “Technology and digital solutions will be a big part of Suncor 4.0, but unleashing the full potential of our people is what will get us where we need to be.”
Suncor showcases a focus on the people to drive transformation. A key ingredient for success.
Change management – the people side of change – must be effectively managed. The organization needs to be able to support employees on a very personal and individual level and focus on them to drive successful transformation.
7. Empower strategic PMO
Organizations can bridge the gap between delivering on their strategic objectives and ensuring proper execution of the digital transformation initiatives by empowering a strategic project management office (PMO). Several organizations can point to the fact that a PMO exists in their organizations; however, these PMOs are not directive – not operating at a strategic level with c-suite support. Often, the type mentioned above of PMO is merely just an administrative function.
According to Pulse of the Profession 2017: Success Rates Rise, PMOs with c-suite support will experience greater success, 38 percent more projects meet original goals and business intent and 33 percent fewer projects are deemed failures. The PMO provides standards and governance while ensuring strategic alignment between the organization’s business objectives and the transformational change being delivered. The PMO ensures all initiatives undertaken serve to directly further the organizational-wide mission, vision, goals and overall direction set by the c-suite team. Overall, this also reduces wasted resources and ambiguity. The PMO can also ensure adequate communication and employee engagement.
Diagram 2: Projects operating at a strategic level across the whole organization: Source – Pulse of the Profession 2017.
Should organizations take to leap to align their PMO to be more strategic? If your answer is yes then, you are aligning your organization’s compass towards to right direction.
The value of a strategically-align PMO needs to be demonstrated to the organization and the value proposition seen in other to gain acceptance; may be delivered over time, bearing in mind the PMO’s role should help increase the overall successes of projects. Measuring and monitoring the PMO’s performance regularly to show:
• reduction in troubled projects;
• better utilization of resources;
• improved processes;
• projects delivered to time and cost estimates;
• increased customer satisfaction;
• more accurate performance report of the portfolio health; and
• more strategically aligned projects delivering business benefits.
The c-suite and the organization as a whole need be able to understand the value the PMO brings to the organization.
According to Killian Kenny, PMO Director for Ireland, Stryker Corporation, confirmed the expanded role of the PMO and how perceptions are changing. “When I first started here, many did not understand and value the PMO. The initial step was to paint a picture of what the future looked like, sell the benefits, and fully integrate leadership on that journey. The key was to evolve and pursue the low-hanging fruit, where tangible returns were very evident. In a relatively short period, people began to understand the value proposition, and as a consequence, the PMO has grown exponentially in the intervening period.”
The diagram below shows the structure of the PMO reporting directly to the Chief Operating Officer (COO) through the EPMO Chief; in some cases, the PMO could report to the Chief information officer (CIO). This structure gives the PMO the ability to work closely with and influence the executive team. This proposed business model does not undermine other corporate business unit functions, i.e. IT, HR, Finance et al. Instead, all these business units working together in concert as strategic partners to drive the organization’s strategic goals and objectives. The PMO focuses on using projects to drive the strategy by ensuring project management excellence in project delivery to ensure success.
Diagram 3: A suggested structure of a strategic PMO source – Cio.com
The strategic role of the PMO is vital. The structure and function may differ from one organization to another and may include but not limited to responsibility for aligning the transformational initiatives (portfolio, programs, and project) to strategy, monitoring progress, optimizing the delivery of strategy, navigating risk, driving benefits realization, enhancing governance, accountability, and managing talent. Some organizations may already have this function but may be named something else, i.e. center for excellence.
In conclusion, a paradigm shift needs to happen – and happen fast. With so much at stake and for organizations to thrive, failure is not an option. This paradigm shift needs to have a big focus on people, strategy, and optimizing the value delivery compass to ensure successful outcomes of these digital transformational initiatives. As an answer to the question asked earlier in the article per attaining benefits, avoiding pitfalls and reducing failure rates, the application of the seven focus areas described above will help organizations achieve a higher rate of success.
Finally, success is attainable – as in the case of the earlier-mentioned Li & Fung’s transformational initiative and your next digital transformation.
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