Digital Economy Dispatch #037

23rd May 2021

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Why Digital Transformations Fail

I was asked recently about the success rates of largescale digital transformation efforts, and why the reported numbers of failed programmes is so high. Regularly you hear comment about “70% failure rates” and individual stories of high profile digital transformation failures abound. What is being assessed when these activities are classed as a failure? What lessons can we learn from these efforts?

To address these questions, I turned to a book I had been meaning to read for a while. Written by Tony Saldanha, “Why Digital Transformations Fail” aims to address these questions and provide pointers to the answers. I must admit that I really didn’t expect too much from this book. It started when I saw the title. It strikes me as rather presumptuous and more than a little insulting to claim to bring insight and discipline to this complex topic. But I must say that this book is very good.

The book is written by Tony Saldanha, a former executive and IT leader with a long career at P&G, the huge US-based multinational consumer goods company that has faced many significant market changes over the years. Published in 2019, it was described by Forbes contributor Michelle Greenwald as the “best business book ever that you’re yet to read”. As I’d yet to read it, I thought I had better take it down from my virtual bookshelf and get on with it.

At the core of the book is a broad digital transformation maturity model identifying 5 stages in the journey to a digital-first approach. In most cases, I am not a big fan of maturity models. A long history in defining and applying such models has made me wary of the ease with which they become a straitjacket for organizations and encourage an overly programmatic approach to process improvement with metrics that penalize innovation and differentiation.

However, in this case the maturity works well as a simple structuring device to breakdown the key messages of the book into meaningful chunks. From the foundational stage where digitization is used to drive automation, Saldanha sees digital transformation as proceeding from a set of isolated silos toward partial and fully synchronized efforts where benefits are seen beyond individual departments and functional teams. Finally, a sustainable operating model ensures that the organization maintains its leadership position.

Beyond the structure of the book, what appeals to me directly is the narrative style that is used. The key ideas of the book are described via a combination of review, narrative, and examples. A balance that works well for today’s time-poor audiences.

A good example of this style is the section describing the role of IT services in delivering the “digital engine room” necessary for success. He clearly positions the historical role of IT as a supporting cost centre providing stability and scalability for large established organizations before then outlining the new fundamental enabling role IT plays in digitally native organizations. His commentary on this shift, including a recognition of the damage played by excessive cost-cutting through outsourcing IT, illustrate his powers of observation and insight.

Saldanha describes this future-ready IT team as a “digital resources function” providing digital governance and capacity building in both technical topics and the soft skills necessary to lead digital solution delivery. Many people struggle to recognize and define this critical shift. Saldanha brings a strong perspective on why the renaming of the IT team as “digital delivery” means much more than a simple edit to the company org chart.

It has become clear to many organizations that investments in technology aspects of digital transformation are necessary but not sufficient. Saldanha agrees. As the use of digital approaches matures, he points to the importance of an agile culture to encourage constant change. Furthermore, he recognizes that an agile culture to drive perpetual digital transformation includes three sets of disciplined activities—customer-focused innovation, creating an adaptive environment, and establishing a shared common purpose.

Perhaps the most appealing aspect of the book is the result of the many examples that Saldanha spreads across each of the chapters. He brings a great deal of his own personal perspective and experience to the book through a wide variety of realistic and insightful vignettes. Many, of course, are based on his role at P&G where he led many of the IT-based digital change efforts over many years. However, he also offers perspectives into several other large corporate digital transformation efforts. In each case bringing a good blend of description, analysis, and opinion.

The final third of the book is a broad reflection on P&G’s various digital transformation activities over the past decade. From IT-based improvements to radical business model redesign, Saldanha offers a window into the strategies and operations they executed to drive change. Saldanha uses these insights to suggest where large established organizations can find opportunities in the future.

So, in the end, why do digital transformations fail? Perhaps to no great surprise, from Saldanha’s perspective the reason why digital transformations fail is that they take more discipline than many people expect, and far more than most organizations can provide. To succeed requires a surprising amount of structured change over a long period of time, driven by an enduring positive outlook of the possibilities for digital transformation. Large established organizations struggle to maintain the rigor, persistence, and support essential to make this work.

Digital transformation is a major undertaking across many aspects of the organization. This book is a realistic, well-informed guidebook to take with you on that journey. Take a look!

Digital Economy Tidbits

Dear Startups: Don’t repaint, reinvent. Link.

A very useful discussion about the way startups need to readjust for the post-pandemic world.

For tech, the questions that we will be debating are bigger than if “that conference will be virtual or in-person.” Instead, we’re now trying to figure out what the future of work and education are for the second time in a year. The United States is reopening and that means a lot of the culture of how we work will be rewritten. Shifting from an individual mindset to a collective, more distributed world is going to be harder than taking a mask off and popping an aspirin.

Startup founders new and old are about to start making decisions on how to lead in this changed world. They will have to consider things far more consequential than if free lunches come back. More serious questions abound: How do you give flexibility along with accountability? How do you repair the universal toll on mental health? How do you offer opportunity equally between remote employees and in-person employees? What happens when half of your workforce can go to happy hours while the other half is in a city under lockdown?

 

The Pret Index. Link.

How can we understand the trends in going back to work across the country? For office workers, one way is to look at the ebb and flow of lunchtime sandwiches being bought from chains such as Pret-a-manger. Hence the Pret Index.

The Pret Index, based on exclusive data from U.K. sandwich chain Pret A Manger Ltd., shows that bankers, corporate lawyers and asset managers are slowly repopulating central London, with last week seeing a notable increase in business. Transaction volume in the City and Canary Wharf areas rose to nearly half of pre-Covid levels last week, the most since U.K. schools reopened in March.

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