A large percentage – 70% according to McKinsey – of digital transformation initiatives fail despite substantial investment and resources. There are diverse reasons for the failures, ranging from lack of top management support and insufficiently clear, consistent and compelling communications, to a lack of urgency, badly defined goals, resistance from employees, poor coordination across the organisation and a lack of actionable, verified feedback with which to reset the course of the transformation as necessary.
A common thread that runs across them is poor governance. Here we look at the five biggest challenges facing governance in the context of digital transformation.
1. Who needs governance anyway?
Governance and governance structure are often seen as the domain of specialists, and something of a back-office function. Digital transformation is a fundamental switch from being product and service-oriented to becoming customer centric. Hence it’s a huge shift in process, mindset, culture and skills that ultimately involves everyone in the company, directly or indirectly, at any given time – and this all needs to be built into the governance plan and structure.
Failing to embed proper governance into the strategic planning for digital transformation, right at the beginning, may damage return on investment. This is not only because the principle of build once, reuse as much as possible is undermined (see APIs below), but because other advantages, such as increased business agility do not reach their potential. It’s important to remember that governance is not just about managing a specific deployment: It has a profound impact on what happens next and future options.
Torry Harris Integration Solutions (THIS) designed an Integration Framework – a detailed approach and process – in collaboration with Schneider Electric to help the company manage change during a transformation, which had four main strands: Organisational and people; business process; technology; and applications and services.
2. Technology and full-stack products are only one part of the story
As THIS’ Integration Framework mentioned above indicates, technology is only one strand of digital transformation, yet a persistent reason for such projects failing is that they are technology-led. Often there is isolated enthusiasm to deploy new technology such as artificial intelligence (AI), rather than a focus on business outcomes, without even checking fundamental building block are in place, such as useable data.
Another common assumption is that once a full-stack product or solution is in place, the job of transformation is done, but this is only addressing part of the overall transformation that is needed.
Digital native companies always look at technologies through the lens of how they will further customer centricity, not for their own sake. As Steve Jobs stated, “You’ve got to start with the customer experience and work back towards the technology”.
Many enterprises do not know how to go about designing and implementing IT governance, nor understand how it should work and dovetail into the company’s overall governance and culture. This is essential to the success of a digital transformation initiative, given that integration is foundational to digital transformation, and automated integration is a defining characteristic of digital business, along with scalability and platform-based business and operational models.
3. Leveraging the astonishing power of APIs
Platform-based models are the most efficient means ever devised of bringing buyers and sellers of products and services together. As Kristin R. Moyer of Gartner, observed, “The API economy [the exchange of value between consumers and providers] is an enabler for turning a business or organisation into a platform,” which is a major goal of digital transformation.
A good starting place with APIs is to identify any existing journeys that could be automated, and where and how APIs could be best deployed, remembering that digitalisation is not just about doing what you do already better, but enabling the company to do new things. For example, consider new markets for the company’s unique data or functionality, made available via APIs that can connect previously discrete systems. For example, LUCA is Telefonica’s data unit, which leverages the operator’s own, anonymised data, combined with other data sets and AI, to be what Forrester described as a leader in insights generation.
Amazon founder Jeff Bezos is widely credited with terrific farsightedness when he sent out his legendary edict outlining the mandatory use APIs circa 2002, according to former employee, Steve Yegge. Building infrastructure and services this way means that integration (for more efficient internal operations and with customers and partners) can be automated, enabling self-service and self-care, while keeping costs down and offering unmatched ease of use across all Amazon’s businesses.
To gain maximum benefit from APIs, they should be reused at every opportunity, otherwise speed, operational agility and economies of scale are reduced or lost. In THIS’ experience, an organisation’s typical reuse rate if it has 400 APIs is just 5%. To maximise their reuse, BT worked closely with THIS and took an agile API farm approach to integration after it acquired mobile operator EE, which enabled different lines of business to reuse APIs from a centralised library. The results speak for themselves in the infographic below.
4. Managing resistance
Arguably, managing organisational change and people through that is the most difficult and most important element. People typically do not like change in the workplace and the default response is to resist. There are two overarching ingredients to success here: First is visible and ongoing support by C-level executives. Lack of top management support is the most frequently cited reason that transformations flop.
Second are compelling, clear and consistent communications tailored to specific groups of employees (see graphic below) at particular stages. People can’t buy into change if they don’t understand what’s going on, or why, or how it will affect them and what they need to do.
An important aspect of planning is to accept there will be resistance to change and create a Resistance Management Plan for right across the workforce – at every level from senior executive to function-oriented employee. Schneider Electric’s entire workforce was guided across the stages shown in the diagram below, which is part of the Integration Framework designed by the company for THIS.
It is important to identify gaps: if a senior or middle manager is against the changes, it is likely their subordinates are too. Corrective action is required through communication, using a different mode than previously, perhaps a workshop or gamification.
It is essential that all milestones, no matter how small, are celebrated along with recognition for those who made them happen.
5. Closing the loop – how do you know when you’re winning?
As mentioned above, corrective action is needed constantly, based on feedback, analysis, verification of the feedback and verification of the governance plans. This constant checking is essential to ensure your digital transformation meets its objectives. This is a complex undertaking and constant recalibration as the unexpected happens and resistance persists need to be addressed in a timely way.
THIS has discovered that the tendency of projects to bypass integration is one of the greatest organisational challenges. There is a perception that the services-based approach inhibits project delivery and should be more of a ‘black box’ – with API-enabled integration seen as an internal mechanism rather than exposing a service for consumption. This thinking also leads those team to have poor processes for engaging with the project and API integration teams.
Surprises are common during integration testing due to mismatched interface specifications, changes that have been made but not recorded, poor inter-team communication and dealing with ‘moving targets’ as the project progresses. As automated integration is fundamental to a digital company, governance to deal with these issues has to be well thought out and carried through.
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