Given all the attention that ‘digital’ is getting at the moment, you would be forgiven for thinking that it is something new. That is, of course, what many analysts, consultancies and vendors and others with vested interest would like you to think.
In fact, the relentless drive to embrace digital technologies has been ongoing for many decades. In the 1980’s, seeking out opportunities for IT in the pursuit of competitive advantage – what we now call digital disruption – was de rigeur. Earlier still, decision support systems (DSS) were the forerunners to today’s analytical tools being used to uncover insight from ‘big data’. The 1990s was all about reengineering business processes to take account of IT capabilities rather than simply overlaying existing workflows with technology. The arrival of the internet and associated technologies saw the emergence of new ways of conducting business, a forerunner to today’s always on, frictionless, on-demand and connected world.
What seems to have been forgotten are the lessons from these earlier attempts to leverage IT (remember that IT is a digital technology). Unfortunately the history of IT investments in most organizations is far from stellar, with research suggesting overall failure rates hovering around 70% common. We know that when IT projects fail, it is usually not because the technology didn’t work (although this can sometimes be the case), but because the required organizational and people change wasn’t managed effectively. Quite simply, possession of technology does not automatically confer expected benefits; these benefits have to be unlocked.
As a starting point, it is imperative to think about investments in digital as essentially investments in change – although it is popular to speak about ‘transformation’ rather than mere ‘change’ today – hence the label ‘digital transformation.’ Such change includes how an organization interacts with its customers, citizens or patients; changes in operational processes; changes in business models; changes in supply chain relationships; changes in how employees use information to generate insight.
Some change can be considered as strategic with the outcome generally dependent on forces outside of the direct control of the business, particularly customers. Firms do, however, try to influence this change with marketing or through the power of their brand. Increasingly, technology is playing a central role in the delivery of value propositions (e.g. collecting, transmitting and generating insight from data by manufacturers as they shift from selling products to services) and overall customer experience so it is important to get it right through focusing on user experience (UX) and channel integration.
Other change, however, is more operational and under the direct jurisdiction of the organization itself; unfortunately most don’t explicitly exercise this control through its planning and managing. For example, giving managers access to a mobile collaboration platform without implementing new processes, work practices, reward systems, providing training and perhaps even changing the culture is unlikely improve collaboration and deliver the expected benefits of this!
One tool that I have used for great effect to improve the likelihood of a successful result from digital investments is the Benefits Dependency Network or BDN for short. This tool seeks to get managers to identify and map all the changes that they will be required to make if expected benefits and outcomes are going to be delivered. It also illustrates very clearly how this change will be enabled and shaped by digital technologies. The resultant network shows how each of the expected benefits will be delivered through a combination of technology and business changes and how these are related to each other – see figure below.
So it is not just a case of proposing to invest in cloud applications or mobile technologies and expecting that they will deliver particular benefits; the BDN forces you to show exactly how these benefits will be achieved. As many have discovered, change is unlikely to happen spontaneously but must be planned and actively managed for.
To develop a BDN, you work backwards, or right-to-left, from the agreed investment objectives and the expected benefits, and map the required changes to structures, processes, work practices and how staff would need to work, through to the new technology necessary to enable those changes to be made. Investment objectives themselves should be closely aligned to critical business drivers if the digital transformation initiative is going to have momentum.
Doing this ensures that digital investments are driven by business-demand, shown on the right hand side of the network, rather than technology-supply on the left, which has traditionally steered many projects. This right-to-left working also ensures that investments in technology are only made if they will provide explicit business benefits.
Changes can typically be categorized into two types: sustaining change or enabling change. Sustaining changes are permanent changes to working practices, processes, and/or relationships which will cause the benefits to be delivered. They cannot normally be made until the new IT system (e.g. devices, software, and infrastructure) is available for use and other necessary enabling changes have been made; e.g. defining and agreeing new working practices, redesigning processes, agreeing changes to job roles and responsibilities, establishing new performance management systems, training in new business skills (as well as the more obvious training and education in using the new system). They can often be made, or have to be made, before the new digital system is introduced.
Once the initial BDN has been constructed, measures for each of the benefits and responsibilities for all of the benefits and changes must then be assigned and time-scales established. Assigning ownership increases accountability for both achieving the desired outcome and carrying out the activities needed to get there. In a major UK bank, for example, managers had to personally sign the business case for each benefit they were claiming to show their commitment to realizing them. These benefits were then included in their personal performance targets.
I have successfully used the BDN with many organizations across different industries addressing a myriad of issues, supporting many investment objectives. For example, streamlining patient administration in a hospital; introducing electronic product codes (EPC) and radio frequency ID (RFID) tagging at the item level for a retailer; implementing a customer relationship management (CRM) system in a financial services organization; rolling out a global enterprise resource planning (ERP) system for a pharmaceutical company; promoting collaboration in a technology company.
One European product manufacturer that built a BDN for a new supply chain management system investment, sought to overcome problems with its supply chain. Supply chains create value by being reliable and responsive in matching demand and supply. So called ‘glitches’ in a supply chain can cause serious performance issues and can occur due to many reasons including inaccurate forecasts, poor planning, part shortages, quality problems, production problems, equipment breakdowns, capacity shortfall, and operational constraints. Simply buying and deploying technology will not address any of these problems. By building a BDN the company realized that their digital investment was only going to be successful if how the things that are currently being done in the supply chain leading to the problems are changed or they begin doing things that are currently not being done. Required changes would then be supported by the new software they were considering implementing.
A tech company that I worked with rolled out a suite of collaborative tools on employees’ desktops. With a young and tech savvy workforce, they naïvely assumed that it was only a matter of time before they would seem an improvement in collaboration. Six months later, and with no improvement in sight, they constructed a BDN and realized that considerable change would be required if an increase in collaboration was going to happen. The resultant network of enabling and sustain changes led to a 36 month program of work.
The BDN can also be used to explore potentially innovative uses of IT to improve operational performance. This time you work from left-to-right to understand how a combination of organizational changes and technology deployment will create a worthwhile advantage by pursing an opportunity and what the organization has to do to gain the advantage. Developing a BDN for such innovation-based investments is inevitably iterative, since the benefits are difficult to define and are dependent on the nature of the changes the organization is willing to make and its ability to develop and deploy new technology. This often requires a pilot to be conducted.
The power of the BDN is that it forces managers to understand and map out the changes that will be required for the transformation and to allocate accountabilities, significantly increasing their understanding and buy in. It is also visually very powerful as it clearly shows that achieving digital transformation will require more than just deploying technologies like the cloud, social media or mobile. And, when presenting it, flip it around as people read from left to right, so show the initiative is being driven by clear business drivers not technology.Joe Peppard is a professor at ESMT Berlin.
[This article has been reproduced with permission from ESMT. Views expressed are personal.]