In today's rapidly evolving business landscape, digital transformation has become a critical priority for organisations seeking to stay competitive and drive growth. However, organisations often get little return from their investment or, in many cases, fail to achieve any of their objectives.

Why does this occur?

McKinsey defines Digital Transformation as “the rewiring of an organisation, with the goal of creating value by continuously deploying tech at scale”. This ‘rewiring’ of an organisation's operations builds the competitive advantage required to compete in today’s landscape.

However, an organisation is not just made up of technology but also people. What makes digital transformation projects so challenging is that during the ‘rewiring’ process, the digital element can directly clash with the talent and aspirations of the human element.

In order to understand – and overcome – this clash, we must view the challenge from both perspectives.

The human element

How people affect the success of a digital transformation project is much discussed by industry experts. Executives spend days attending strategic workshops delivered by consultants, listening to how they need to:

1. Foster a collaborative culture and bridge the gaps between stakeholders in order to work towards a shared vision.

2. Have clear and transparent communication channels, clear ownership of tasks, and regular progress updates.

3. Have a program manager in place to ensure delivery (and be held accountable if things go wrong).

Those are certainly valid. And yet, even with all strategy documentation, a vision statement and a business-backed and fully supported hero program manager, the risk of failure falls somewhere between 70% and 95%.

Why?

Building upon Forbes’ 12 Reasons Your Digital Transformation Will Fail, we believe the culprit is clear – organisations are not built on tech but on humans and the human condition.

 

More people, more complexity.

 By definition, most digital transformation initiatives span across functions within different departments across the organisation. To succeed and deliver value, programs will integrate channels, requiring many departments and functions to work together towards a common goal.

Consequently, the network of intertwined processes increases exponentially when mapping each affected team. On paper, the larger the scale of the program, the greater the complexity; at the same time, the greater the potential of extracting value and ensuring return on investment (ROI) from transformation programs.

Dealing with this complexity can be challenging. While many people have their day-to-day work affected by such projects, not everyone can attend the two-day strategic workshop or shape its direction. Including everyone logistically would be impossible, and it may not be the most effective approach either.

When change management efforts occur after defining the program, the opportunity to demonstrate the benefits of transformation to individuals and involve their functions in decision-making is lost. As a result, teams and functions, each with their unique perspectives, goals, and priorities, are impacted by a transformation program that fails to understand their needs or address their challenges. Communication breaks down, and collaboration becomes limited to only a few individuals. The knowledge and input of other team members are often overlooked, resulting in missed opportunities and inefficient delivery.

Siloed mindset and lack of cross-functional expertise.

Mature organisational structures often lead to a mindset of working in isolation – a cultural obstacle that affects all aspects of the organisation.

The main challenge this poses for digital transformation projects specifically is that departments, teams, and functions tend to work independently without considering the broader implications of their actions on processes, adoption of platforms, and overall solutions.

This siloed mindset is not rooted in mistrust or personal gain but in the years of investment, individuals have made in improving their functions and implementing systems that work for them and their peers.

On average, everyone in the organisation possesses expertise in their respective areas and understands their functions well. The flow of information and ways of working across departments may function adequately despite the quality of upstream or downstream processes.

Departments control information, and any challenges that arise are typically addressed through meetings, emails, or informal discussions around the water cooler.

The concept of cross-functional expertise, or even the need for it, is often unfamiliar to most individuals and their organisations. It is not seen as a holistic problem that needs to be addressed across the entire organisation, nor is it recognised as a single point of failure (SPOF) for the entire system to function effectively.

The digital element

Humans fail frequently, and that is our strength.

Organisations leverage technology to assist humans in maximising output through informed decision-making, enhancing our efficiency and effectiveness. Still, decisions are often based on incomplete or flawed information. In the course of a workday, we continually make and correct mistakes, change course, and seek clarification.

Our siloed way of working has its advantages. It reduces the number of SPOF. The flow of information across functions relies on human review from departments and processes up or downstream. This ensures that information is clarified or corrected within each department. We can achieve our overall output with multiple sets of eyes, hours of 'Teams' meetings, and quite a few cups of coffee.

While technology can greatly improve efficiency and productivity, it also introduces new risks that must be managed effectively. With the ‘rewiring’ of organisations by deploying tech at scale, we exponentially increase the number of SPOF that could affect the output of cross-functional processes. This is the trade-off we must consider.

To better understand this trade-off, let's look at the successful launch of the James Webb Space Telescope. In a short space of time, this project has given humanity unprecedented insight into the cosmos, leading to ground-breaking discoveries that have expanded our understanding of the universe. This is despite costing $10 billion and having 344 SPOF. It is a prime example of the delicate balance between utilising technology and managing potential failures.

Understanding the trade-off.

Digital transformation projects generally aim to improve internal and external communication efficiency between functions with customers and suppliers. Another goal is to develop new digital products by utilising technology and data.

To understand human communication, the machine must translate information into hard data. Technology doesn't magically create this data out of thin air. Instead, it ingests information input by humans and human-designed sensors and uses this information recorded as data to facilitate human interactions and bring value to users and customers.

When humans input information into the system, the machine doesn’t validate the quality of information. The system can have some rules for data input. Still, those are normally developed by humans who aren’t the end user, meaning the subject area expert who competently knows its function and, when identifying mistakes or missing information, seeks clarification by dropping a Teams chat to a colleague before pushing forward the workflow to the downstream function or team.

Let’s look at another example; in keeping with our space exploration theme. In 1999, NASA lost the Mars Climate Orbiter probe because the ground computer was set to measure thrust using imperial units and the onboard computer was set to metric units. The lack of a data strategy or a simple data dictionary cost NASA 515.39 million USD in today’s money.

When machines collect incorrect, incomplete, or biased data, this leads to communication breakdown, creating an SPOF for the overall process, resulting in inefficiency and, in NASA’s case, quite a catastrophic failure.

Back to earth. To prevent such problems, it's crucial for organisations to fully grasp the value as well as the risks of technology and data-driven projects. This involves identifying potential SPOFs and taking appropriate measures to mitigate them before implementation. Moreover, organisations should ensure effective communication among project delivery teams, functional teams, and the end user.

Understanding human communication and its existing systems and processes is critical to minimising miscommunication and errors that could result in incomplete or duplicated data collection.

A system implemented without considering the subtleties of human elements fails to achieve the desired increase in efficiency. Consequently, the investment in transformation is wasted due to lack of adoption and, in some cases, a space probe heads towards the sun instead of orbiting Mars.

The value of digital transformation is clear: digital systems can improve efficiency and productivity. Technology is no longer a competitive advantage but a must-have for organisations to survive.

The competitive advantage comes from understanding the inherent risks that can impact the program's effectiveness and the knowledge of humans who operate the business.

Mitigating risks and avoiding SPOFs in digital transformation programs.

Traditionally, digital transformation programs start with a strategic approach. Whether internal or external, consultants develop proof of concepts (POCs) to test the technology against business requirements.

This approach often follows a ‘top to bottom’ structure, where the selection of a vendor or solution is based solely on technical requirements mapped against a generalised or 'ideal' process. It often neglects solutions already in place and, more importantly, human subtleties such as creativity, relationships, and years of investment across individual functions.

As a result, the outcome is often incomplete or flawed, with limited capabilities to simulate real-world scenarios.

To avoid this issue, organisations should adopt an 'inside-out' approach.

They should start by sharing the strategic vision and aligning the direction across functions. This ensures consensus is reached on the desired outcome, taking the first steps to minimise SPOF.

The next step is to involve a diverse range of stakeholders from the outset, especially key influential individuals, not only managers; this allows organisations to leverage their influence to thoroughly assess existing processes, people, technology, and solutions in place.

This analysis is instrumental in determining what can be leveraged and what needs to change. It allows the development of a comprehensive end-to-end process, technology, and stakeholder map that reflects real-world scenarios. This approach helps identify any SPOFs and enables the implementation of effective mitigation strategies.

Once the map is finalised, the data strategy becomes clear. It creates a unified 'language' established across functions, eliminating the intake of duplicated information (data collection) and addressing data gaps.

Only then should we lay down the architecture and design solutions, all compiled under a single blueprint.

A blueprint for success.

This blueprint should be transparent and accessible to everyone involved. It defines the implementation roadmap and POC schedule and should be used as a reference point throughout the program.

The program blueprint ensures alignment and keeps all stakeholders informed and engaged during implementation. It allows for feedback and adjustments as needed to meet the requirements and objectives of all stakeholders.

Furthermore, the blueprint outlines the governance process to ensure continuous compliance and maintenance. This involves conducting regular reviews, audits, and data strategy and architecture updates as needed.

Once implemented, it enables ongoing monitoring and evaluation to track the program's effectiveness and identify areas for improvement. This includes establishing and analysing key performance indicators (KPIs) to identify optimisation opportunities.

Developing a comprehensive program blueprint – one that factors in the human and digital elements – is crucial for organisations to deliver value from their digital transformation investment effectively. This includes mapping the end-to-end process, outlining a data strategy, and designing a tailored architecture based on business needs. It promotes a unified understanding of the program, data integrity, collaboration, transparency, and ongoing improvement.

By continuously monitoring and adjusting the program blueprint, organisations can stay ahead in the fast-paced digital landscape and drive successful outcomes for all stakeholders.

Technology has never been more essential to the success of an organisation; putting these measures into place is now essential for a resilient future.

At Miriol Consulting, we develop and run successful transformation programs with empathy, understanding and expertise. Empowering your teams to think differently, whilst maximising the use of technology and data.

Our experts are ready to help you find the right balance between risk, reward, and best practice. Contact us today to arrange a free consultation.