How to avoid a ‘haphazard’ digital transformation

No project is without its pitfalls, but it’s crucial to remember that these are far outweighed by the dangers of inertia

A yellow U-turn traffic sign, indicating a change in direction

Business transformations are risky at the best of times, but the job has become a whole lot harder since the Covid crisis. Companies overhauling tired legacy systems still have to splash out on the latest technology; manage the costly and complex process of implementing it; ensure that business continuity is maintained; and get the whole organisation to embrace the new way of doing things. 

Now they have to do this against a highly unstable and unpredictable economic backdrop, where weak demand and rising operating costs are squeezing profits

Managing all these risks can feel like “building a plane while it’s in flight”, according to Sabrina Feng, group head of technology, cyber and resilience risk at the London Stock Exchange Group. But she adds that, while the associated risks may appear daunting to some organisations, they need to consider the risks of either not transforming or approaching the task in a disorderly way. 

“Without a structured and considered transformation programme, change can be haphazard, with the potential to create more issues and risks to the organisation,” Feng says.

Some business leaders face a challenge in convincing the risk management function in their organisations that the benefits of transformation will surely outweigh the risks. But in tough times, how can that be done, and how can companies give themselves the best chance of making the project a success?

Developing a comprehensive transformation strategy

Connie Chan, a senior managing director in the business transformation practice at FTI Consulting, says that firms undertaking a transformation project need a “completely different way of managing risk”. They also need to review how they plan, budget and operate, especially if they are global businesses with highly complex supply chains. 

The role of the risk function is to enable risk-aware decisions and enable safe growth - it’s not about avoiding all risks

Chan believes that firms should adopt a “crisis, semi-restructuring mindset”. Her advice is to take a rigorous and data-driven approach to transformation, establish tighter business controls; refocus sales and marketing activities; optimise cost categories; and manage the supply chain aggressively. 

“Managing a business transformation effort during these times is challenging as the business needs a comprehensive transformation approach and an ability to course-correct swiftly when and as circumstances change,” Chan says. “Businesses need a more hands-on and proactive approach with frequent monitoring of financial and operational performance.”

Leaders must communicate the value of digital transformation

The first big challenge of any business transformation is to secure support for the plan from across the business, which can be more difficult when economic conditions are tough. 

Jon Lucas is a co-founder and director at Hyve Managed Hosting, which helps organisations to migrate legacy tech into the cloud and build and deploy new systems. He thinks it is crucial to ensure that everyone in the business understands all the desired benefits of the transformation. If that doesn’t happen, there is a greater likelihood that corners will be cut and core operations harmed as a result of budget constraints and inadequate infrastructure. 

Various departments also need to be on the same page to ensure that the transformation does not become siloed, which often leads to system integration failures.

“It’s important to showcase and communicate the transformation’s value to the entire business,” Lucas says. “For example, benefits such as the centralisation of processes, the sharing of resources and the utilisation of data -analytics can all show how it can provide a competitive edge.”

Senior strategic decision-makers have a vital role in selling the concept to the wider company and should lead from the front. That’s the view of Philip Songhurst-Thonet, senior director of risk management consultancy Control Risks. 

Transformation is founded on cultural change – and convincing people to break old habits and develop new ways of working is key, he stresses. “Setting the tone from the top and linking the objectives to clear outcomes supports the case for change.” 

Firms also need to invest in appropriate governance and processes before the start of any major business transformation project, Songhurst-Thonet advises. Such projects are usually complex, fast-paced and uncertain and any change to scope during the project can lead to time and cost overruns. As such, it’s vital to devote time beforehand to understanding cost estimates, their assumptions and uncertainties.

Remember, some disruption is inevitable

Organisational transformation almost always disrupts business-as-usual tasks, leading to a reduction in overall organisational performance. For instance, if a large retailer starts a transformation project to modernise payment handling, it could lead to temporary loss of revenue and severe reputational damage if they encounter any major disruption during the transition to a new platform. 

Similarly, banks could find that customers cannot access their finances if there is unplanned disruption during the implementation of a new core banking platform. 

Setting the tone from the top and linking the objectives to clear outcomes supports the case for change

Control Risks advises its clients to take a stage-gated approach, so that the risks and rewards of the transformation are continually assessed and challenged throughout the project. Songhurst-Thonet also thinks that while leadership should be “communicating broadly” and keeping the wider company up to date on the project, formal engagement should be limited to a smaller group, allowing the organisation to focus on core business.

Dynatrace is one of a crop of companies helping organisations to mitigate the risks of digital transformation by harnessing artificial intelligence and automation. Greg Adams, its regional vice-president for the UK and Ireland, says firms need to put an “observability strategy” at the front and centre of their planning. “This gives the teams delivering a business transformation the ability to monitor and manage the customer experience before, during, and after the transition to new systems and processes,” he says.

WalkMe helps businesses see how well their new technology is being used and to ensure employees get the most out of it. This can overcome any roadblocks to adoption, says digital transformation officer Vivek Behl. The firm also helps clients to target their technology investments and ensure staff have a consistent experience across all applications. 

While there are many tools and strategies to aid a smoother business transformation process, no project will ever be risk-free. That said, Feng believes firms can greatly mitigate against unforeseen threats if they ensure individuals within their organisation are “risk aware” and use data to inform their decision-making. 

“Every transformation is different. If done right, they will drive efficiency, make firms more profitable and enable better risk management,” she says. 

“The role of the risk function is to enable risk-aware decisions and enable safe growth - it’s not about avoiding all risks.”