Comparison of a Successful vs. Failed Digital Transformation [Two Digital Strategy Case Studies]

Written By: Eric Kimberling
Date: July 28, 2023

Digital transformation projects have always fascinated me. It is intriguing how one project can succeed while another, seemingly similar one on paper, may fail. Understanding the reasons behind such outcomes is the focus of our discussion today. We will explore the factors that contribute to the success or failure of these initiatives.

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One of the services we offer to clients is assisting them in defining their digital strategies. Our aim is to ensure that they are on the right path and adequately prepared for success in their digital transformations. Additionally, we support clients throughout their implementation processes and also provide help during their transformations. Furthermore, we extend our expertise to project recovery and expert witness work. This involves collaborating with failed implementations to help bring them back on track, or providing testimony in court regarding the reasons behind their failures.

Over the years, I have learned a valuable lesson – even when two digital transformations appear quite similar on paper, their outcomes can differ significantly. These differences arise from the key decisions, areas of focus, and approaches adopted during the project.

In this context, I would like to examine two case studies: one involving a successful client and the other concerning a failure we worked with. Despite both companies being similar in size, scope, complexity, and internal dynamics, they achieved vastly different results in their transformation journeys. My intention is to dissect and analyze the factors that led them to these distinct endpoints. As we delve into these case studies, we will gain valuable insights.

Overview of 2 Companies

Let's begin by discussing each of these two companies and their characteristics. Both are for-profit organizations, and at first glance, they may seem quite similar. However, as we delve into the details of their respective digital transformations, we'll discover that their execution approaches were quite distinct.

Let's start with the case study of the unsuccessful organization. This particular company is a $15 billion utility, which means it operates in a highly complex environment. They manage various field services, crews, inventory, and face numerous regulatory pressures, making their operations intricate. This organization has around 30 locations throughout North America, where they primarily achieved growth through organic means. Additionally, they employ approximately 20,000 individuals.

On the other hand, the successful case study involves a similar but slightly different company. This organization is a $20 billion manufacturing company, making it slightly larger than the previous one. Despite its greater complexity, it has achieved success in its transformation journey. They have roughly 40 business units scattered across North America, and their growth primarily stemmed from mergers and acquisitions (M&A). As a manufacturing company, they produce commodity products and raw materials for other manufacturers. This organization boasts approximately 25,000 employees.

Now, the critical question arises: how can two seemingly similar companies, with comparable size, scope, and complexity, yield such different results? Let's explore the reasons behind their contrasting outcomes.

Digital Strategy

Let's now delve into the differences between these two companies in the case studies, starting with their digital strategies. We will explore how their defined strategies varied and how they led to distinct outcomes.

Firstly, let's examine the digital strategy of the $15 billion utility, which experienced failure. Their approach involved adopting a single ERP system for the entire enterprise. They purchased a tier one ERP system without fully comprehending its gaps and weaknesses, especially considering the complexities of their utility business with multiple locations and organic growth. Their lack of due diligence in understanding these limitations became apparent later.

Furthermore, this organization lacked a clear vision for their digital transformation. Their primary focus was solely on implementing the ERP system without defining a comprehensive strategy. Essentially, their strategy became limited to the ERP implementation, which is a tactical approach rather than a robust strategy.

On the other hand, the successful case study organization took a different path. They strategically selected diverse technologies to meet specific needs across the organization, an approach we can call "strategic use of technology." Additionally, they possessed a clear understanding of their organization's strengths, weaknesses, and long-term objectives, resulting in a well-defined vision for their transformation journey.

These foundational differences between the two organizations played a pivotal role in one project's success and the other's failure. Now, let's explore some tactical aspects within their strategies that further set them apart.

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Executive Involvement

Let's now delve into how these two organizations differed in their execution of the digital strategy concerning executive involvement.

Starting with the failure case study, one notable aspect was that the organization fully delegated the project to the Program Management Office (PMO). While some delegation is necessary, they took a largely hands-off approach, lacking clear expectations and minimal involvement in significant decision-making related to the digital transformation. Moreover, the executives within this organization were highly political and misaligned. Their internal conflicts and lack of alignment hindered the transformation, causing significant challenges throughout the organization.

Now, shifting gears to the successful organization, the manufacturing company took a different approach to executive involvement. They had a high level of hands-on engagement, wherein the executives actively participated in crucial decision-making related to business improvements, scope changes, and organizational adjustments. Their proactive involvement ensured alignment before proceeding further with the digital transformation.

Additionally, this successful organization benefited from a strong culture and a shared sense of purpose among the executive team. Their alignment and cohesive direction provided tailwinds for the transformation process, in contrast to the headwinds experienced by the unsuccessful organization.

It's worth noting that the successful organization had a solid foundation in place before embarking on their digital transformation journey. In contrast, the unsuccessful organization faced challenges stemming from unresolved issues in this area. Therefore, it is crucial for organizations to prioritize executive alignment and cultural strength before undertaking a digital transformation, as these factors significantly impact the likelihood of success in other work streams during the process.

Business Process Management

Next, let's examine how each of these two organizations addressed their business processes as part of their digital transformation initiatives.

The failed implementation suffered from a lack of understanding regarding their current processes and the desired future state. There was minimal documentation regarding the current and future states of their business processes. Consequently, the focus on current and future state business processes was lacking.

In addition, this organization made the mistake of relying too much on technology to determine and guide their business processes. They deferred to the technology, hoping it would dictate their future state processes. This overdependence on technology resulted in a lack of clarity for the organization and the project team. It led to misalignment between the chosen technology configuration and the organization's actual needs.

Shifting our focus to the successful organization, they followed a different approach. While they didn't delve into super granular detail, they defined their desired future state business processes at a macro level. They identified areas where they aimed to improve their processes, providing a clear vision for their business processes.

Moreover, this organization allowed the business to drive the technological deployment, ensuring that the technology served the business needs rather than the other way around. While acknowledging technology's constraints, they prioritized the alignment of technology with the business goals. This approach resulted in a well-defined blueprint for their business processes and ensured the implementation was in line with their expectations, both in terms of process improvements and technology deployment.

As a result, the successful organization's approach not only provided clarity for the project team but also proved to be a more cost-effective and efficient solution compared to the failed implementation.

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Organizational Change Management

When considering the organizational change or people aspect of these transformations, two significantly different scenarios emerge for each organization.

In the case of the failed organization, they perceived training as the sole and exclusive work stream within organizational change management. This overemphasis on training led to a narrow and myopic view of change management, limiting it solely to training efforts. Furthermore, due to earlier problems and misalignments in the project, the change management team faced difficulties working with a moving target. Frequent changes in direction and lack of clarity in other work streams made it challenging for the change team to gain traction. The organizational change team struggled to understand the impacts and future state business processes, a situation shared by the overall project team. The misalignment observed at the executive level extended throughout the project team, creating a high degree of misalignment across the organization.

Conversely, the successful organization adopted a comprehensive approach to change management. They recognized that change management involved more than just training. Instead, they considered the entire organizational design, the evolution of the IT organization to support the transformation, and post-implementation impacts. Communication of changes started early on, and the organization incorporated change management into leadership roles. Rather than relying solely on a separate change team, they embedded change activities throughout the leadership, making the changes leadership-driven.

Another crucial factor in the success of the change management efforts was the high level of alignment within the organization. The successful organization boasted an aligned executive team, project team, and a strong culture. This alignment served as a fundamental backdrop for the change team and contributed significantly to their success.

In summary, the approach to change management differed drastically between the two organizations, with the successful one embracing a more holistic and integrated approach, while the failed organization limited its focus mainly to training and struggled with misalignments.

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Program and Vendor Management

One of the most significant contrasts between these two organizations lies in their approach to program and vendor management, specifically how they took ownership of the overall project and managed the vendors involved. These areas exhibited two distinct scenarios.

The failed organization adopted an outsourced mentality, allowing the vendors to drive the project for them. Consequently, there was a lack of internal ownership or control. Moreover, the program management primarily focused on one work stream, the technology work stream, neglecting other essential aspects like change management, business process management, executive alignment, and strategic alignment of various work streams in a digital transformation. In essence, they treated the project as a mere technology implementation rather than a comprehensive program.

On the other hand, the successful organization took a different approach to program and vendor management. They drove the project themselves, taking active ownership and effectively managing the vendors. They did leverage experts, including third-party experts and technology vendors, but they retained control over the project, ensuring that it did not spiral out of control or turn into an open checkbook for vendors' benefit. They demonstrated a clear understanding of how to manage these resources and experts, thereby avoiding undue influence and maintaining the project's focus on the client's goals.

As an illustration of their effective management, the successful organization made strategic decisions to slow down the project and extend the timeline when necessary. This decision was based on the recognition that their cultural and operational changes required more time than the technology itself. They communicated this decision to the vendors, despite it impacting the vendors' revenue, and prioritized what was best for their own organization's success.

To summarize, the successful organization exhibited active ownership in managing the vendors and the overall project, leading to a more focused and successful transformation compared to the failed organization's outsourced and myopic approach.

Now, the question remaining is how did these two projects evolve, and what were the outcomes of these distinct approaches? Let's explore that next.

Digital Transformation Results

I will present the outcomes of these two transformations, which operated differently - one being a failure and the other a success. It is important to note that the successful project faced its own challenges, with road bumps, pivots, and changing directions along the way. However, they managed to achieve a high Return on Investment (ROI) and exercised control over their project, effectively managing costs. As a result, they attained the desired business value and a digital transformation that aligned with their business objectives. Unlike many organizations that spend exorbitant amounts with little to show for it, this successful organization did not encounter such issues.

Conversely, the other organization ended up in litigation. Their plan was to complete the entire transformation within three years, but after three years, only one out of 30 locations went live on the system, resulting in a disastrous outcome. The project was halted, and the involved parties ended up in a lawsuit, where they sought the assistance of Third Stage Consulting as an expert witness.

Although both companies appeared similar on paper, with comparable size, scope, complexity, risk aversion, and resistance to change, their execution of digital strategies and transformations yielded vastly different results.

In conclusion, this analysis sheds light on the factors that define success and failure and illustrates how two seemingly similar companies can achieve dramatically different outcomes in their digital transformations.

I would enjoy brainstorming ideas with you if you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, so please feel free to contact me at eric.kimberling@thirdstage-consulting.com. I am happy to be a sounding board as you continue your digital transformation journey.

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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