Organizational exhaustion is the deadliest enemy of companies undertaking digital transformation. It may be hard to believe, but one reason this happens is that companies do a lot of work to prepare for an unknown objective. Therefore, they effectively dissipate their commitment, resources, money and energy in areas that don’t bring value. This exhaustion prevents companies from completing their digital transformation journey. Let’s look at why and how this happens, and I’ll share how to avoid it. The remedy likely will seem counter-intuitive, and it goes against all that technicians believe. But it works.
What causes digital transformation exhaustion? It starts by taking a technology-first approach to the transformation. There are two examples of how this occurs.
Example #1. One situation that leads to digital transformation exhaustion is when companies start by building the technology capability to do the digital transformation activities. They implement a data warehouse, upgrade their ERP system, move their digital estate to the cloud, or invest in developing a robust set of APIs or microservices. They essentially believe they are laying the foundations necessary for transformation.
A typical example of what happens is a company deciding to upgrade or reimplement its ERP system as the foundation for transformation. Perhaps it had a partial implementation and decides to push it across the whole company. Or the business is on an outdated version and decides to move to a new ERP system. The rationale for laying the foundation through the ERP implementation is strong.
Then they spend years and tens (or hundreds) of millions of dollars in building foundation components. There are no resources left – money, executive commitment, support from the business, IT resources, time or attention – to continue the transformation journey after they complete the foundation building.
Companies usually exhaust themselves in implementing the foundation. They believe they need to get the foundation pieces in place before they can get to the pieces that deliver business value. In the meantime, the business loses patience because it doesn’t get any tangible benefits. This leads to a loss of funding because a technology/foundation-first approach in digital transformation is very expensive; it typically consumes all the capital and leaves nothing for the other pieces required to drive the business value.
That’s not to say companies haven’t had value from ERP technologies; absolutely they have. But to get that value, they had to go on a long, torturous journey to change themselves to be able to use the technology. And companies always underestimate that effort in cost and time and effort. In fact, this is frequently the reason for underperformance of these technologies. It’s not that the technologies fail; it’s that the companies fail to change to be able to use the technology. Now we’re in the digital technologies era and, in the words of Ronald Reagan, “Here we go again.”
Example #2. With a host of new digital technologies, companies once again are rushing to the belief that if they buy and implement these technologies, they will transform their business and get profound business value. And once again, many will dramatically overpromise and significantly underdeliver and disappoint. That’s because the biggest part of digital transformation is not the technology; it’s the change in vision, change in operating model, change in organizational structure, change in talent that is required to get to the improved customer experience operating model.
Like ERP, companies have a delusion that if only they have the right technology, tool, or the right people implementing the technology, it will work. It’s a seductive illusion in the digital era but just as perilous as in past years.
One of our Everest Group analysts humorously refers to this phenomenon as “SPOT” (Steaming Pile of Technology). We pile up technology and expect it to achieve our goals, but that is clearly not the case. A technology-first approach of either (a) laying the foundation pieces first or (b) implementing the technology without making required organizational changes only leads to exhaustion and failure.
How can companies overcome this situation of digital transformation exhaustion? How can they give quick value to the business yet provide the foundations for end-to-end results that the company needs? The solution requires a different paradigm of thinking. The trick is to figure out which technologies to invest in and know that those are the only ones to invest in.
Determining what to invest in is not easy, and it’s impossible to do if you start with the foundation and build upwards to the result. To accomplish it, you need to start with the result in mind and work backwards.
What Is The Result To Aim For? It’s often helpful to think of digital transformations in terms of the stakeholder experience the company is trying to affect and recognize that each stakeholder has individual experiences. I recently blogged about the five stakeholder groups and this experience-first approach to digital transformation.
As I explained in detail in my previous blog, your company’s approach to digital transformation needs to start with engineering for the stakeholder’s experience. Define which stakeholder group, then define the experience you want to provide them. With a definition of the experience, you can then work backward and identify which parts of your technology estate are fine the way they are, which require a small amount of modification, which you need replace and what new components you need to add.
Don’t Create A “Field Of Dreams.” The foundation/technology-first approach often leads to building a “field of dreams.” Instead, use the “stakeholder experience lens to identify technology components that will contribute to improving the experience. Don’t create a field of dreams, thinking that if you build it, they will come. Rather, start with the existing stakeholder experience and make it better.