These Little Things Lead to Digital Transformation And ERP Implementation Failures

Written By: Eric Kimberling
Date: March 31, 2023

When digital transformations fail, it's usually not because of one singular event or a catastrophic occurrence that ruins the entire project. Typically, it's a series of bad decisions and poor choices along the way, almost like death by a thousand paper cuts. What exactly are those small but significant mistakes that organizations make along the way?

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In our business of helping clients through their digital transformations, we have a subset of clients that hire us because they have already failed in their transformations. They ask us to either recover those projects, get them back on track, or serve as an expert witness if it comes to litigation. Through this experience, we have learned a lot about why projects fail and the decisions that add up and lead to digital transformation failure. Often, people want to know the one thing that causes transformations to fail, but typically it's not just one thing. Usually, it's a lot of different things. So, what I want to do today is talk about how digital transformation failure is a lot like death by a thousand paper cuts. More importantly, I want to talk about the 10 things that are most commonly likely to lead to digital transformation failure if you make these decisions or these mistakes in your transformation project.

Unrealistic Expectations

One of the first minor but really important things that organizations do wrong that often leads to digital transformation failure is that they have unrealistic expectations from the beginning. This is something that starts right at the beginning of the project when they are evaluating, selecting, and signing contracts for technology and implementation services. What ends up happening more often than not is that software vendors underestimate the amount of time and money required to be successful in a transformation, which leads to a lot of problems later on when the organization and the team are forced to cut back and make bad decisions because they were trying to force-fit a transformation into a timeline and plan that was never realistic to begin with. So, one of the first things you can do and one of the first paper cuts you can avoid in a quest to avoid failure is to make sure that you have realistic expectations up front and that you take proposals from system integrators and software vendors with a grain of salt.

One of the things organizations often do wrong that can lead to digital transformation failure is they choose the wrong technology. They pick software because it's well-established or a well-known brand, and they think that if the biggest enterprises in the world can deploy vendor A or B or C, then it must be good enough for them. It may sound realistic on paper, but if you don't have the right software that fits your needs in terms of what you're trying to achieve in the future, having the wrong technology is something that you can't really hide. If you're trying to deploy the wrong technology, you're likely going to fail on the project. On the other hand, if you have the right technology, it doesn't mean you're going to succeed, but it at least gives you the chance to succeed because you've chosen and are planning to deploy a technology that can handle the capabilities that you're looking for.

Beginning the Implementation Too Soon

Another common mistake we often see that leads to digital transformation failure is when organizations choose software and jump right into implementation without having a clear plan or vision of what their future state operational and organizational model should look like. The reason why having a clear plan and vision is so important is that if you don't have it, you're likely to spin your wheels and waste a lot of time and money, or end up paying expensive consultants while trying to figure out what you want to achieve. Many organizations underestimate the magnitude and volume of decisions that need to be made during digital transformation, which is why it's crucial to take as much time as you can upfront to define that future state and gain clarity on your overall direction for the transformation.

No Realistic Business Case

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Organizations that lack a clear and realistic business case are also less likely to succeed. Even if you have to go through your transformation, you still need a business case to guide you on where you expect to get business value and where you want to invest your time and resources. Without quantifying where you expect to get the business benefits, you simply won't realize the full potential of your transformation. This is a major failure point for many transformations, where they invest too much time and money without the expected business value to show for it. Therefore, it's essential to have a realistic business case that takes into account the total cost of ownership and the potential business benefits if you're successful in your transformation.

Underestimating Change Management

The next small thing, but really big thing, that organizations do wrong in transformations is that they underestimate the magnitude of change and the effort required to be successful in organizational change management efforts. We often hear organizations say that they don't need to invest in change management because their people are ready for change, they hate the old system, and they are embracing the idea of a digital transformation. However, they mistakenly assume that change is going to be easy, and the problem is that if they wait until they realize how difficult change is going to be, it's usually too late to get ahead of resistance to change. Therefore, having a solid and effective change strategy is crucial, and you should go into your digital transformation with the assumption that change is going to be a lot harder than you think.

Confusing Project Management for Program Management

Another common mistake organizations make in their digital transformations is that they confuse program management with project management, and vice versa. To be clear, when you are seeking bids and proposals from different software vendors, they will provide you with a project plan and a proposal for the overall project, which they do have. However, the project is typically only one subset of a broader transformation. The problem with this is that you are often led to believe that the project plan is the complete plan, but it's not. There are many things that need to happen outside the project plan that a software vendor is providing to ensure your success. Things like organizational change management, process improvement, data migration, and overall architecture are all critical factors that you must consider to ensure that you have factored in all the different activities, work streams, and resource requirements to guarantee the project's success. If you only focus on the project and neglect the overall program, what happens is that you may deploy technology, but it doesn't necessarily mean that you deploy it well or in a way that generates business value. It just means that you have successfully deployed technology that may or may not be used by your organization. Therefore, you must understand the difference between project management and overall program management and ensure that you manage and plan for the project accordingly.

The next issue that organizations often encounter with their digital transformations is incomplete test scenarios. When they test the software, either through technical testing or user acceptance testing, they lack complete scenarios that fully represent the business. As a result, they obtain a false sense of security that the software is functioning, and they have worked out all the bugs. However, they may have only tested 50% or 60% of their business processes, and the remaining 40% or 50% that they have not tested can be extremely disruptive at the time of go-live. Therefore, it is critical to ensure that an overwhelming majority of business processes have been captured and tested. To achieve this, you should create complete testing scenarios and have clearly defined sign-off and acceptance criteria for those testing scenarios.

Poor Data Management and Migration

Data management and migration are often treated as an afterthought during a digital transformation. We get so enamored by and focused on the new technology that we forget that we have all this data we need to bring over from our legacy systems. Bringing over that data from the legacy systems isn't as easy as just shifting it over. You have to clean it up and make sure you have accurate data to begin with, so you don't have a garbage in, garbage out scenario. And ultimately, you need to map those data fields in the old systems to the new one. Once you've done that, you need to figure out what your reporting structure looks like and how you're going to manage that data longer term. If we wait until a couple of weeks before go-live to really start thinking about data, that's going to be a big problem. It may be that you've deployed technology successfully, but now you've deployed technology with poor data and no data governance and controls in place. Therefore, you want to spend the time, effort, and resources on making sure that you have a clear and effective data management and data migration strategy, and you start those activities early on. If you don't, that's one of the paper cuts that often leads to digital transformation failure.

Failure to Recognize Go-Live Risks

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Another common paper cut that leads to digital transformation failure is the failure to recognize go-live risks. What I mean by this is organizations too often get myopically focused on implementing on time and on budget that they don't fully understand and quantify the risks and costs associated with failure or disrupted digital transformation.

Now, we have a lot of experience with clients that hire us to come in and help fix a failed implementation and other clients that hire us to be an expert witness in their digital transformation failure lawsuits. One of the things we've learned is that one of the reasons why these projects go to litigation or get to the failure point is because they didn't do a good job of identifying and mitigating risks and failure points of the transformation.

For example, if you're going through a digital transformation and you're trying to minimize the implementation time and cost, you might actually be increasing your cost longer term unknowingly. This is because you've created disruption to your business, rolled out inefficient business processes, and complete technologies that accomplish the mission of shortening the budget and the time duration of your implementation. However, you've shifted the cost over to post-go-live costs, which are usually exponentially more than the cost you spend on the implementation itself.

Therefore, you want to make sure that you have an independent and technology-agnostic third party help you identify what those risks are, anticipate what the risks are, and most importantly, help you mitigate those risks before they become a problem. One example would be our team at Third Stage Consulting. We're an independent, technology-agnostic company that helps clients manage program risks and manage overall transformations among other things. You can hire a company like Third Stage to help you through that process.

Failure to Optimize Business Benefits

One of the last things that organizations often do that leads to failure is that they don't measure business benefits, and they don't optimize business benefits. In other words, they can account for all the money they just spent, all the time they just spent, and the resource commitments they just made, but they oftentimes can't point to any meaningful tangible business value that they got out of the transformation. Now, this is a problem on a number of fronts. One is that you've just wasted a lot of time and money with nothing to show for it. Second of all, if you don't have a business case, and you don't know what your business benefits are meant to be, you're going to have trouble during the implementation because you don't have clear guidance and direction on how that transformation should look and where the business value is going to come from. That makes decision-making project governance a lot more random and arbitrary along the way.

So, one thing you want to do is make sure that you optimize business benefits and make sure you carve out time toward the end of each phase of your project to ensure that you have an optimization phase. Before you move on and just start going to the next phase of the project, you actually focus on getting the most business value you can get out of the implementation of the phase of the implementation you've just gone through. After all, you've spent all this time and money on this phase of the transformation. You might as well spend incrementally just a small piece of additional time and money to ensure that you maximize the business value.

These are just a few of the paper cuts that often lead to digital transformation failure. On the surface, they may sound fairly trivial or small, but in reality, these are big things. It's typically not any one of these things that causes failure. It's typically a combination of all the above or some combination of other factors as well. But what can you do to avoid some of these paper cuts? There are really three things that I'd leave you with as you think about that.

First, make sure that you have an independent program management support function within your overall program. So, ensure that you have someone who's not biased, who's not associated or affiliated with the software vendor system integrator, because their job is to promote their product and make sure they expand the footprint of that technology within your organization. What you need is someone that represents you, the implementing organization, that can help ensure that you have control and ownership of the project, and that you have program management in place to manage the overall vendors and players that are involved in the transformation.

Second, make sure you have a change impact assessment. Doing a change impact assessment will ensure that you have a clear understanding of where you are today, where you're headed in the future, and how it's going to affect different people within your organization. This will then ultimately drive and influence how you manage change throughout your digital transformation, and that will make you more likely to succeed in your change management efforts.

Lastly, and perhaps most importantly, I'll also leave you with this, which is when you're going through a digital transformation, even the 10 things I talked about here today that you want to avoid, you want to make sure you're not just going through a checklist and just answering the question of "did we or didn't we do this function" because typically it's more of a qualitative discussion of not just did or didn't we do it, but did we do each of the things we needed to do? Do we do those things well? That's the difference here. You want to make sure you have a good understanding of how well you did it and what the risks are with where you are in your overall journey.

If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Please contact me for more information eric.kimberling@thirdstage-consulting.com

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

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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.

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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