How to spot the early signs of a failing business transformation

There can be few organ­i­sa­tions embark­ing on a busi­ness trans­for­ma­tion that aren’t painful­ly aware that most will fail to meet their objec­tives.

The Inter­na­tion­al Data Cor­po­ra­tion has fore­cast that $2.8tn (£2.3tn) will be spent on dig­i­tal trans­for­ma­tions world­wide in 2025 – more than dou­ble the amount invest­ed in 2020 – which indi­cates that well over $1tn is like­ly to be wast­ed on such process­es this year.

Wait­ing until the end of the project with fin­gers crossed clear­ly isn’t a viable strat­e­gy for suc­cess. So how can a com­pa­ny spot the ear­ly sig­nals that a trans­for­ma­tion may be start­ing to go awry soon enough to cor­rect mat­ters?

“It goes on my wor­ry list when an organ­i­sa­tion says that a trans­for­ma­tion is eas­i­ly achiev­able. That prob­a­bly points to the fact that it hasn’t been ambi­tious enough and isn’t push­ing hard enough,” argues Karen Thomas-Bland, founder and direc­tor of the Sev­en Trans­for­ma­tion con­sul­tan­cy.

In such sit­u­a­tions, the project may be per­fect­ly suc­cess­ful on its own terms but fail to make any mean­ing­ful dif­fer­ence to the busi­ness, falling short of a trans­for­ma­tion. 

One ear­ly sign that this may end up being the case, she says, is if the process is not being led from the top of the organ­i­sa­tion.

“Right away, I want to know who the spon­sor is. If it’s not the CEO, I wor­ry how much a pri­or­i­ty the organ­i­sa­tion is mak­ing it, because a real trans­for­ma­tion touch­es every part of the busi­ness, from peo­ple to process­es to tech­nol­o­gy,” Thomas-Bland says. “So, if the project is CFO-spon­sored or HR-spon­sored, it prob­a­bly won’t be all-encom­pass­ing enough.”

Even worse, says Jaco Ver­meulen, chief tech­nol­o­gy offi­cer at con­sul­tan­cy BML Dig­i­tal, is when a project has no sin­gle leader and sim­ply com­pris­es a col­lec­tion of inde­pen­dent projects, usu­al­ly involv­ing tech imple­men­ta­tions.

“The clinch­er is that weeks – pos­si­bly even months – will pass before lead­ers of the var­i­ous teams meet each oth­er to dis­cuss the strate­gic pro­gramme and the met­rics they each report on, based sole­ly on the progress of imple­men­ta­tion rather than the changes realised,” he says.

Research by Fujit­su has found a lack of lead­er­ship to be one of the four biggest prob­lems at the plan­ning stage of a trans­for­ma­tion, along with a short­age of suf­fi­cient­ly skilled staff, a lack of funds and an unde­fined return on invest­ment. Oth­er stud­ies have placed even more impor­tance on lead­er­ship. For instance, two-thirds of respon­dents to a Glob­al­Da­ta sur­vey cov­er­ing the phar­ma sec­tor cit­ed it as the most impor­tant pre­req­ui­site for a suc­cess­ful dig­i­tal trans­for­ma­tion.

Ver­meulen reports that, in cas­es where there’s no sin­gle leader, it’s not unusu­al for him to see oth­er activ­i­ties in the busi­ness that are work­ing counter to the trans­for­ma­tion.

“The ear­ly warn­ing signs here will be poor inter­nal com­mu­ni­ca­tions and a lack of clear­ly defined out­comes for the trans­for­ma­tion. This leaves it wide open for com­pet­ing ini­tia­tives,” he says. “The clinch­er will be occa­sions where the pro­gramme is put on hold for some­thing else to be han­dled first.”

Anoth­er ear­ly red flag, says Mike Pot­ter, chief strat­e­gy offi­cer at dig­i­tal con­sul­tan­cy Teck­n­uo­vo, is an exces­sive focus on tech­nol­o­gy rather than the out­comes expect­ed from its imple­men­ta­tion. 

As an exam­ple, he cites the imple­men­ta­tion of a new organ-dona­tion sys­tem, in Wales, on which he worked while serv­ing as a direc­tor with NHS Blood and Trans­plant. When min­is­ters pushed for iPads to be sup­plied to GPs as part of the pro­gramme, he was forced to explain to them that this would not rep­re­sent good val­ue for mon­ey.  

“Gart­ner con­duct­ed a study that con­clud­ed that a project named after the tech­nol­o­gy it’s imple­ment­ing is twice as like­ly than aver­age to fail,” he says. “If peo­ple are buy­ing in tech­nol­o­gy as a prod­uct to solve their busi­ness prob­lems, they are prob­a­bly miss­ing some of the foun­da­tion­al steps – involv­ing process­es and peo­ple – that should be com­plet­ed before they get to that part.”

Indeed, it’s wide­ly agreed that one of the most sig­nif­i­cant ear­ly signs that a trans­for­ma­tion is doomed is a lack of sup­port from employ­ees. Research con­duct­ed last year by the Ever­est Group found that just over two-thirds of firms that had attempt­ed a dig­i­tal trans­for­ma­tion had failed to achieve their desired out­comes. Of these, 58% blamed inter­nal resis­tance to change as a major cause. 

And, although there are change man­age­ment prac­tices that can help to counter such resis­tance by help­ing employ­ees to cope with upheaval, these often aren’t applied until the trans­for­ma­tion is well under way. By that time, the rot may well have set in already.

Unfor­tu­nate­ly, resis­tance in the work­force isn’t always easy to spot in its ear­ly stages. Peo­ple often appear per­fect­ly sup­port­ive – or at least acqui­es­cent – in meet­ings, but rather less so when talk­ing infor­mal­ly with their col­leagues in pri­vate. Man­agers may there­fore need to stay alert, warns Gior­gia Presten­to, a behav­iour­al sci­en­tist and inde­pen­dent con­sul­tant spe­cial­is­ing in change man­age­ment. 

“The first signs that staff aren’t on board can be sum­marised as noise – the chat­ter by the cof­fee machine, the whis­pers in the cor­ri­dors or on the online chat groups,” she says. “The best way to learn about the mood of an organ­i­sa­tion is to hang around the com­mon areas of an office and observe people’s inter­ac­tions and body lan­guage. In a vir­tu­al envi­ron­ment, this is more chal­leng­ing, but signs of dis­en­gage­ment would be peo­ple stay­ing off cam­era dur­ing group video calls or a lack of ques­tions.”

Research by McK­in­sey indi­cates that two-way, face-to-face com­mu­ni­ca­tion is key to keep­ing peo­ple on board. In a sur­vey of organ­i­sa­tions whose trans­for­ma­tions were suc­cess­ful, 65% of respon­dents cit­ed line man­agers’ brief­in­gs as cru­cial in improv­ing engage­ment.

Thomas-Bland notes that it’s par­tic­u­lar­ly impor­tant for com­pa­nies to strike the right tone with their com­mu­ni­ca­tions from the very start. This was some­thing that one client she worked with failed to do. The firm focused on the finan­cial advan­tages of the trans­for­ma­tion rather than what it might mean for employ­ees.

“Real­ly good launch com­mu­ni­ca­tions talk about pur­pose. They would answer ques­tions such as what the trans­for­ma­tion would mean for front-line work­ers and why would it get them out of bed in the morn­ing,” she says. “To real­ly get peo­ple to buy into it and make that extra­or­di­nary effort you need from them, com­mu­ni­ca­tions have to be emo­tion­al as well as ratio­nal.”

Accord­ing to McK­in­sey, get­ting the ear­li­est stages of a trans­for­ma­tion right can make a big dif­fer­ence. Its research indi­cates that 22% of the val­ue lost by the aver­age failed trans­for­ma­tion occurs at the tar­get-set­ting stage and 23% occurs at the plan­ning stage. That’s near­ly half gone before any changes have got under way.

And, unfor­tu­nate­ly, the wide­ly quot­ed Gart­ner sta­tis­tic that two-thirds of trans­for­ma­tions fail still seems to hold true, with McK­in­sey com­ing up with much the same pro­por­tion.

Pot­ter says: “Some­one once asked me: ‘How is it that, if we get bet­ter at this all the time, we nev­er seem to reduce the num­ber of pro­grammes that fail?’ I don’t know whether that’s true, but I would argue that we tend to take up more com­plex chal­lenges as we become more com­pe­tent. It’s not nec­es­sar­i­ly a bad thing.”