Failing to Achieve Your Digital Transformation Outcomes?
A first principles-inspired guide for guaranteed success on your digital journey
By Gaurav Aggarwal, Suzann Stone, and Staci Bissani
More than ever, companies are diving headfirst into the metaphorical digital swimming pool. Both the pandemic and pace of modern technology have accelerated companies’ needs to become “digital first.” According to IDC, global spending on digital transformations is forecasted to reach $2.8 trillion in 2025.
In a Tech Pro Research survey, 70% of survey respondents said that their companies either have a digital transformation strategy in place or are working on one. Since so many companies have taken the plunge, why are so many failing to swim? BCG research shows that 70% of digital transformations fall short of their objectives, often with profound consequences.
So why are $1.96 trillion of these digital transformation investments set up for an unsightly bellyflop?
Many have similar missed outcomes:
- Underachievement of business objectives
- Cost significantly exceeds initial estimates
- Missed target timelines (sometimes by years)
- Complete failure with costly write-downs (and impacted careers)
“First principles” thinking for success
According to Merriam Webster, first principles are defined as “principles that are basic or self-evident.” Elon Musk has recently mainstreamed this concept by applying it successfully at Tesla and SpaceX. Based on our collective 48 years of delivery experience, we’ve broken down complex challenges and arrived at first principles (or fundamental building blocks) that increase the chances of a successful digital transformation.
These first principles include:
- Macro before micro
- People-first leadership
- Progress over perfection
- Project management as a strategic function
- Simplify for speed
Digital transformation first principles
Macro before micro
Macro denotes “big picture;” it’s synonymous with strategy, top-down, and “doing the right things.” Micro denotes lower-level detail and is synonymous with execution, bottoms-up, and “doing things right.” The key to success is to look at both the macro view and micro view. However, always begin with the macro followed by the micro. While the devil is in the details, sweating the small stuff is meaningless without getting the macro right first.
Successful transformations focus first on getting the macro right. This vision and value proposition is then driven top-down. Key macro elements include:
Sponsorship — According to the Project Management Institute (PMI), “A project sponsor is typically responsible for initiating, ensuring, approving, and establishing a series of key aspects in relation to the project, which can be summed up under categories of vision, governance, and value/benefits realization.” Unfortunately, sponsors are usually spread thin across multiple initiatives and often not adequately engaged, or sometimes even absent. A great sponsor helps define the vision and keeps the transformation aligned throughout the journey. In addition to being the champion, change leader and coach, they also help drive governance.
Governance — Active sponsorship lays the foundation for good governance to happen. Appropriate governance entails:
- Business alignment authorizes and champions the project while also aligning the overall investment and transformation objective to the organizational strategy and business objectives. This alignment sets the high-level direction and helps gain organizational support.
- Program strategic direction and oversight sets up the project for success by providing leadership and strategy direction. This allows for making unbiased decisions, resolving issues (scope, schedule and budget), and holding the program accountable for results.
Operating model — A robust operating model maps the formal project team hierarchy to specific responsibilities. This ensures that each role on the org chart has clear ownership, key responsibilities, and deliverables that are mapped to their roles, eliminating any gaps.
Now let’s get to the micro
There are many programs that focus on getting the macro right first, but then assume that the program will automagically get executed, which can also lead to issues. Focusing on the micro is required to get the details right and successfully execute on them.
Key micro elements include:
- Mid-level project plan/work breakdown structure
This is the mid-level detail that is an elaboration of the high-level roadmap/Gantt chart. It’s in a MECE (mutually exclusive, collectively exhaustive) format at a level of detail that allows the project team to understand all the high-level activities that need to be accomplished — when, by whom, and in what sequence — while also noting their interdependencies. It doesn’t include low-level activities or tasks. It’s also exhaustive in the sense that all facets of the project are represented: functional (business process related) work, technical (data, integration, etc.) work, and organization change enablement work. - Detailed requirements
It’s recommended that requirements be properly organized under a proper structure such as Business capability > Feature > Epic > User Story. This allows for full traceability from the highest level to the lowest level. The level of detail progressively increases. For example, development should only begin once a user story is considered “build-ready.” A build-ready user story is written from the user’s perspective and includes acceptance criteria that will allow a product owner to sign off and ensure the business capability will be met. It also allows the technical team to estimate the level-of-effort and translate it into functional software, and the Quality Assurance (QA) team to write and execute appropriate test cases.
People-first leadership
While we pay a lot of lip service to “people” and “human capital,” we frequently fail to look at or fully understand the “human” aspect that is essential to transformation. People engagement, cooperation, collaboration, alignment, skill and many other facets are critical to success.
“The Great Resignation” further exacerbates this given people’s need to have better work-life balance and avoid heroics at work. The Work Trend Index survey conducted by Edelman Data x Intelligence for Microsoft found 41% of employees are considering leaving their current employer this year. Taking a people-first approach means actively creating a desirable work environment that considers and fulfills the needs of your people. People-first leadership focuses on vision while also prioritizing people, empowered communication and decision making, and a strong company culture. Transformations are hard, but when people are empowered and given the roles and tools to be successful, you can shift a program from exhausting to energizing.
Progress over perfection
Transformation requires lots of people coming together, collaborating, and problem-solving. They need to align on vision, as well as future state business capabilities and processes, while leveraging technology to achieve outcomes. This organized process of people coming together happens slowly before it accelerates. “Minimum viable product” is a term coined by Frank Robinson and popularized by Eric Ries, founder of the Lean Startup methodology. According to Ries, an MVP is the version of a new product that allows the team to get a product to market quickly and gather the maximum amount of proven customer knowledge with the least amount of effort.
Large and complex programs require a significant amount of upfront alignment, planning, and foundational work before a repeatable and agile cadence of ongoing product increments can take place. This is akin to building the foundation and the first floor of a physical structure; it takes time, but when done right, sets a solid foundation on which a tall building can be constructed floor by floor. Unfortunately, product-driven software projects are frequently planned in a way where capabilities and features are being promised to the business within short (typically 3 month) Program Increments (PIs) without creating the foundational product which can then be built upon using PIs. There’s no product without a project.
The best evidence of this are programs running in their second or third year, largely failing to meet the core business needs. They’re often kept running until it becomes clear that the program needs to be reset or shut down — we call this “the emperor has no clothes” moment. The figure below illustrates the “typical” versus “recommended” approach.
The recommended approach has sufficient time for the “discover” phase that allows the target state business processes and associated requirements to be fully defined and agreed upon by all the key stakeholders. The discover phase timeline should be flexible and the team should not start build activities until the agreed upon exit gate criteria are met. Many organizations balk at investing this time upfront to get the macro right and proceed with build activities, often resulting in false starts, project delays, or a solution that doesn’t deliver business value. This should never be an area where corners are cut.
Additionally, decisions should be made by applying a value and impact lens across the business. Seemingly unimportant things that can make a huge impact can frequently be delivered by using out-of-the-box (OOTB) approaches on SaaS-enabled digital transformations. The product roadmap should be reviewed and reassessed after every PI to ensure alignment to business value and impact.
Project management as a strategic function
A strong project management function is critical to any large transformation. Organizations with mature PMO capabilities make sure that projects stay aligned with the strategic priorities of the business. They will evaluate the expected value and benefits of the projects against that strategic horizon and give priority to the projects and initiatives that best support the company’s direction.
In order to ensure that the projects or programs are executed in a way that helps realize business objectives, we suggest strong rigor in the following areas.
1. Manage to “Triple Constraint”
PMI’s Project Management Body of Knowledge (PMBOK) covers the “Triple Constraint” as one of the initial core concepts. The Triple Constraint says that cost is a function of scope and time or that cost, time and scope are all inter-related. If one changes, then another must also change in a defined and predictable way.
This concept is sacrosanct, yet regularly flouted. You can’t easily fit 50 pounds into a 10 pound bag. It is the job of the program managers to stay true to this, and Project Sponsors to clearly articulate to all stakeholders that triple constraint must be rigorously managed to guarantee outcomes. “Change” happens, and good governance ensures that an agreed upon change control process is followed to accommodate changes and account for associated impacts. Project leaders should consider moving to a Hybrid Waterfall-Agile methodology that lends itself well to accommodate changing/evolving scope within the bounds of a constrained framework.
2. Enable feedback loops
The “Deming Cycle” is core to most methodologies — PMBOK, Six Sigma, ITIL, and more. Good governance should ensure that appropriate feedback loops are established, and feedback acted upon.
Failing to build and act upon these loops in a timely manner usually results in mismatches between intent/plan and results. Feedback during build cycles are now the de-facto approach for software development since they allow business users to provide early feedback and the iterative nature of the process allows for a product that is aligned with business users’ expectations.
3. Adherence to project gates
According to PMI, project gates and project gate reviews provide key communication opportunities as projects move through the processes and application-specific elaboration steps. They also provide a formal way of controlling project risk, monitoring scope changes, and maintaining stakeholder interest.
Consistent and disciplined use of “gates” is a core tenet of a mature software delivery framework that makes this predictable, repeatable, and scalable by effectively de-risking delivery. They serve as critical checkpoints throughout the project to ensure success for all parties involved. In consulting arrangements, they protect the client by ensuring completion of key activities and deliverables, and provide client sign-off and approval to the consulting partner before moving on to the next phase.
Large digital transformations have a lot of moving parts that must fall in place to achieve success. Reduction of risk can also be addressed by having:
- An actionable Master Data Management (MDM) strategy
- Key stakeholder alignment on business processes and taxonomy
- A pragmatic rollout strategy especially for large and global rollouts
- Proper risk and project management rigor and discipline
- Data based sprint capacity planning and forecasting
5. Simplify for speed
Transformational programs are inherently complex; breaking down the complexity into simplicity is essential for moving quickly. Anyone who has worked in the start up world, knows how quickly you can move when you’re not held down by a complex organizational structure with many layers for decision making and legacy technology that doesn’t easily scale or adapt to new business models. When engaged in a digital transformation, it’s important to analyze and reduce any unnecessary complexity in process, operations or technology to reduce roadblocks or delays.
Examples of keeping it simple include:
- Actionable governance: A fifty-page governance document may look great, but is neither actionable nor sustainable. Enable team members in their roles and try to always make rapid decisions at the lowest level, often within the core team and only escalate up if decisions cannot be made.
- Standardization of project tools and processes: One example is establishing a single repository of scope. If a scope element is not captured in this repository, it doesn’t exist. This repository should also operate under a strict governance process with full traceability and auditability.
- Standardization of program/project communications: N(N-1)/2 is the formula to calculate the number of communication paths on a project where N=the number of team members/stakeholders on a project. The number of communication paths approximately quadruples every time the number of stakeholders doubles [i.e. N=50, Comm Paths =1225; N=100, Comm Paths=4950]. This would make a good case to simplify and standardize program/project communications. Getting this right is critical due to the number of communication channels that continue to grow in today’s business world.
Conclusion
Digital transformations don’t need to be intimidating, but also shouldn’t be underestimated. We’ve found that incorporating a first principles approach is the most repeatable and predictable path to achieving successful outcomes.
Applying structure and rigor — and laying the right foundation — will deliver small successes early on, creating the organizational capacity and confidence to drive massive transformational change over time. Slalom has a proven track record in partnering with organizations of all sizes and helping them achieve their digital-led business transformation outcomes.
Slalom is a global consulting firm that helps people and organizations dream bigger, move faster, and build better tomorrows for all. Learn more and reach out today.
