Will your digital transformation be one of the few that succeed?
Considering as many as 70 per cent of technology-led programs fail, the odds aren’t in your favour. Yet as the transition to cloud-based solutions becomes an increasing necessity, the interest and opportunity to transform business through technology is unprecedented.
This blog is an opportunity to find out what we’ve learned, supporting large-scale digital transformations for ASX-listed companies for the past decade. Let’s start with a joke. How many developers does it take to change a lightbulb? None, that’s a hardware problem…
Terrible joke? Yes. However, it serves as a metaphor for an issue that’s vital to the success of all digital transformations. We’ll come back to it. For now, let’s focus on a real-world example of a digital transformation fraught with issues.
Metcash’s $210m over-spend.
Info sourced from AFR article: How Metcash’s $80m tech upgrade blew out by $200m
Metcash’s digital transformation intended to replace nine IT systems with a single Microsoft solution. The timeframe: Three years. The budget: $80-100 million. The plan was for Metcash to dispose of legacy systems fast approaching their used-by dates, allowing its group of food, liquor, and hardware ‘pillars’ to operate on one, cloud-based system.
The reality proved more challenging. Eighteen months into the three-year program, implementation costs were more than double the original budget ($190 million), with the finish line not yet in sight. The planned IT transformation, now business transformation, is expected to cost $290 million and be completed in 2025 – two years behind schedule.
It’s worth noting the program blow-out led to Metcash’s current CEO, Doug Jones (who inherited the program from his predecessor), taking immediate ownership and focussing on ‘righting the ship’.
So, in our opinion, what went wrong?
1. Lack of leadership alignment
In Jones’ words, “I got the sense this was being done to us and alongside and in parallel”. The original implementation had no clear business owner, with frequent downgrades in reporting arrangements, seeing the program director go from reporting directly to the group CEO to the CEO of the Food Pillar. The lack of a clear business owner meant Metcash’s pillars didn’t take ownership of the change.
In our experience, it’s vital to the success of any change that leadership teams are active in defining, designing, and leading the change from the beginning. Leaders with different, limited, or passive views on the need and direction of the transformation will misdirect or confuse the organisation and their project teams.
2. Technology-led, not business-led design
Remember that terrible joke? The one about developers not changing the broken lightbulb because it’s a hardware problem. Well, it’s a metaphor for a technology-led design process, where the technology partner can be so focussed on implementing the software that they lose sight of the fact it doesn’t work for the business.
This was exactly Metcash’s issue, with Jones lamenting the move to a single system across all Metcash’s pillars, as it ignored the fact that each operated in vastly different markets and had unique needs.
True digital transformation needs to be an ‘end-to-end’ process, led by the business (not your technology partner). Digital transformation impacts more than just your systems – it touches your operating model, people, and business processes. This requires a holistic approach to the design phase, considering how the technology integrates with your people, processes, and technology, and how it will all come together to deliver increased value for the organisation.
3. Change management lacking
“I got the sense this was being done to us…” That quote from Metcash CEO Doug Jones rings true in this context too. There is a general sense that leadership impacted by the change felt that it was being forced on them and that ultimately, the vision (a single ERP architecture) wasn’t something the business considered necessary or even possible.
Change management supporting digital transformations is often conflated with ‘telling and selling’. Programs engage change management to communicate go-live dates, and to facilitate system-led training.
Successful change management needs to start early and be focussed on your people’s needs, not the projects. Ensuring people understand why the business is transforming, what you will get out of it, and what it means to them gives you the best chance of success.
Ultimately, supporting people to understand what your transformation agenda means to them will help realise the benefits outlined in the business case!
4. Unsuitable and unsustainable
Ultimately, the change wasn’t perceived to be one that would enhance Metcash’s capabilities. In fact, there was a view that the change would dumb the business down and that the dream sold to Metcash was neither good for the business nor practical. In this instance, sustainable change would never have been possible.
In our experience implementing the technology should be the starting line for your transformation. However, so much energy has typically been poured into go-live that there isn’t much left to address the substantial changes that need to be introduced and maintained to realise the benefits.
Organisations often fail to address the ways of working, capabilities, culture and performance processes that will bring the transformation to life and sustain it over the longer term.
Spending time embedding the change and supporting people to adopt the technology and your new ways of working ensures people don’t just side-step investment with costly workarounds.
Can we sum it up for you?
In summary, our experience has shown us that for your digital transformation to be successful, you need:
Visible and engaged business ownership from beginning to end
A clear understanding of how your business delivers outcomes today, and how this aligns with the technology you’re implementing
An approach to change management that starts early and is focussed on your people’s needs, and
Benefits and improvements that are visible and ‘game-changing’ to ensure the change is sustained.
Failing to have just one of these factors in place will mean your transformation is facing an uphill battle, and with the failure rate so high, why risk it?
Have a question about anything you’ve just read, or want to talk about your digital transformation? Reach out! We’d love to hear from you.