From decades of global research, we know that addressing seven common risks can help companies better prepare for transformational programs, save time and money, and lay the groundwork for a positive return on investment.
Change is constant
Successful competition in today’s constantly shifting markets will compel companies to transform their business more frequently than ever, but certainly at least once. Changing people, process and technology is expensive, and likely to fail to achieve objectives. McKinsey shared in 2013 that 70% of transformation programs fail. With such a high rate of program failure, how can companies prepare themselves to realize a return on that expense? There are commonly recognized risks that can be effectively addressed with seven transformation capabilities.
Through my 20 years of helping companies compete and change, I have seen a pattern of lack of readiness in any of seven core capabilities — capabilities that are critical for transformation program success. These can be considered as risks to the program that, if not addressed, can undermine the value of the investment made and impact careers. These should not be ignored.
1. Transformation Quality Management
- Key Risk: Aspects of the program execution and impacted business areas may not meet quality expectations and require rework, adding unplanned time and expense and undermining the perceived value of the change. This can also adversely impact adoption rates.
- Core Capabilities: Executive oversight, standards and leading practices, assurance and validation.
- Considerations: Program leadership should be directly accountable for the operations being impacted by the change. That will include not just the operation in scope, but also upstream and downstream operations as well. The challenge will be to keep the program leadership small enough that accountability is not too diffused and to allow for consistent participation. Make sure leadership agendas are aligned.
Leaders should demand the application of leading standards and practices exist as a prerequisite to program initiation. But when they do not, be honest and realistic about how they should be improved before the program begins. Has your company maintained an adequate inventory of system documentation? Do you have an effective and commonly applied method of project management and associated tools? Have you applied people with experience in your chosen development methodology? Are leaders appropriately engaged? Do you have a “single throat to choke” to drive the program?
Once you have things in place, you have to make sure they stay in place throughout the program. Assurance and validation processes and resources should be established, communicated and actively executed. Internal audits can be a good ally to routinely assess program success readiness and execution.
2. Benefits Management
- Key Risk: Desired benefits are unrealized.
- Core Capabilities: Defined metrics linked to business objectives/business case, portfolio management, continuous monitoring of key metrics, investment management, transparency, accountability, ROI measurement
- Considerations: Start by defining what success looks like in business terms. How will your business be improved by changing in this way? This will help align program objectives with business objectives. Create a business case with an ROI expectation. From that, define measurable criteria and be prepared to measure before the program starts to create a baseline — and after the program is complete so you can compare. Be prepared to measure ROI. Most companies fail to do this. The ROI case should be prepared to directly link the outcomes of the program to the metrics the business uses.
- Key Risk: Program leaders are unable to make decisions effectively.
- Core Capabilities: Accountability, traceability, issue resolution, sponsorship, leadership engagement, monitoring, communications, change management, strategy to solutions
- Considerations: Leaders need reliable information, appropriate organization, active participation and the ability to bring about program change throughout the organization. It is imperative to maintain strategic alignment between business and IT. If IT does not have a track record of delivering value needed by the enterprise, understand why and take steps to address it.
In my experience, IT success is very linked to business support of IT. Consider looking there first. Together, they should actively manage program risk and program resources. Program performance should be measured against organizational and IT objectives. Program accountability should be established and shared between both business and IT. Decisions should be traceable to help drive accountability.
In one case, a large U.S. healthcare company ran into a difficult situation when it elected to ignore the budget guidance its external partner had communicated. A budget range of $10 to $15 million was recommended. Program leaders elected to take the low end of the range to their senior portfolio governing bod, which then slashed the budget by $2 million. Ultimately, only $8 million was approved for a program that could go as high as $15 million.
Can you guess what happened? Program costs grew to $14 million. All of a sudden, the company began sharing that the program was over budget by 175% when it was actually within budget — had the recommendations of the third party not been ignored. By then it was too late; the program costs were set within the context of the larger portfolio of all programs across the enterprise. The program ultimately suffered because program costs almost always go up as the program progresses.
This decision ultimately undermined the benefit potential of the program by transferring pressure across the program, and also adversely impacted other programs. The lessons are to support the recommendations of the professionals that run transformation programs for a living and maintain a realistic portfolio in the context of that guidance.
- Key Risk: Program outcomes do not effectively support business objectives.
- Core Capabilities: Industry/regulations/business issue management, transformation plan, business case/ROI, change management strategy
- Considerations: Program success often hinges on a solid understanding of objectives and a definition of success. Make sure those are documented and understood across all stakeholders. Risks, issues and assumptions should also be documented and understood. Take the time to routinely consider and reconsider risk, and foster a culture of active mitigation. Also take the time to make sure that all stakeholders support the program throughout its life. That support can change, and you need to know and act when they do. Industry, regulatory and other business issues must be understood and can also cause direction change. Transformation plans should be established that account for all of these strategic factors.
- Key Risk: The solutions involved in the program may not be aligned with company strategy, supported by stakeholders or effectively consider legacy process and technology.
- Core Capabilities: Alignment to business strategy, scope definition, business technology, legacy integration, implementation/rollout planning, change management approach
- Considerations: The program solution is the “conceptual architecture” of what you are trying to achieve. It represents how all the pieces fit together. It is imperative that people understand this solution and be frequently reminded of what the end game looks like. The solution should be clearly aligned and linked to business strategy. Scope should be agreed upon and a constant benchmark against which decisions should be compared to and risks considered. Start with the conceptual architecture, consider all of the logical entities involved and how they operate today versus tomorrow. Understand the technical and business change they will need to achieve — with a clear link to why the change is needed and how success will be measured. Reflect those movements in a current-state and a future-state solution view. Express it all in the form of a story. Make it as basic and easy to understand as possible. This will help all stakeholders understand how and why things will change.
- Key Risk: Program execution plans are not aligned with established policies and procedures and are not based on leading practice.
- Core Capabilities: Methods/tools/templates, estimating model, execution model, operations model, work plan (work breakdown structure)
- Considerations: The program plan, which includes but is more than just a WBS, should be based on leading practices. Consider applying the principles and tactics espoused in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) by the Project Management Institute. Apply enterprise tools that allow stakeholders to share and understand status and support the sustained measurement of cost and benefits that support ROI understanding. Leaders need to have the fortitude to sustain the use of these practices and tools.
- Key Risk: Resources and competencies needed for execution are not effectively identified or available when needed.
- Core Capabilities: Project management/executive status, executive management, resource capacity planning, IT competencies, architecture, infrastructure, data, security, performance
- Considerations: Executive management should maintain reliable and proven competencies to oversee the full program lifecycle. Be honest about what your own people can do. Be realistic and practical when you apply employees to programs who also have full-time day jobs running your business. Resource capacity planning should be routinely performed and used to identify resources available and resources needed. Consideration should include human, technical and information assets. Business and technology competencies should be sufficient and available to support the following roles typically involved in business/technology-related transformation programs:
- Business Process
- User needs (voice of the customer)
- Project management
Resources should be competent to identify risks, proactively plan to mitigate risks and respond to risk realization.
Leaders who focus on shoring up these capabilities and addressing their inherent risk to transformation programs will dramatically improve program success potential. Consider these as critical success factors to improve the value to your organization and its ability to change. Use the framework below as a readiness snapshot. Ultimately, consider engaging a transformation readiness professional to assess your organizations readiness before you spend another million that is 70% likely to evaporate before your eyes…