January 5, 2017
Part 2 in our series on digital transformation and the importance of change management. Read The Executive's Guide to Managing Change with Digital Transformation for more.
The most critical component that dictates the success, or failure, of a large scale digital transformation is your ability to manage the change that follows. New technologies in eCommerce, back office enterprise resource planning or customer relationship management and marketing are only as effective as the underlying organizational structure, processes and plans to manage change after the decision is made to implement these new sets of tools.
Over 20 years ago it was found that only 30% of change programs succeeded. Unfortunately, the same success rate holds true today. In fact, $100 billion is wasted each year on digital and analytic business transformations that do not deliver what they promise. 1
According to Forrester, left untended, change management can quickly become the Achilles' heel of a digital program. If your organization is implementing a major digital overhaul such as a new eCommerce platform or a transition to a fully connected customer experience, it's critical that you consider how you will plan a change management strategy. When seeking to improve how you manage this change, you've got two options; internal capabilities, and external partnership.
Managing Change Internally
Tackling change management using internal resources is a decision to be made by organizations with the proper skill sets, functions and experienced executives who have completed a digitization initiative previously. In one recent study, change management was found to be one of the top five skill sets lacking from executives.2 In another, only 27% of companies said that their executives possess the skills necessary for digital transformation.3
Alternatively, the decision can be made to fund the acquisition of those resources and capabilities internally. Often, this option exceeds both the time, resource and risk threshold of many organizations. According to Forrester, “enlisting third-party solution providers to help navigate change and implement new strategies is often cheaper and faster than building those capabilities internally.”
Getting Help to Manage Change Externally
Even digitally mature organizations will realize new gaps in capabilities as technology continues to evolve. 45% of companies trust third-party vendors to support its digital transformation initiative to provide a better customer experience. 43% choose to do so to reduce burden on internal resources, and 40% do so to reduce liability and risk.4
Forrester conducted research to understand why firms engage third-parties for their expertise and resources and found that vendors offer a range of benefits in support of companies that choose to engage them (see Figure 7), including to reduce the burden on internal resources, to take advantage of their expertise and to save costs / speed up the implementation and ongoing success of the initiative.
What To Look For In A Digital Transformation Change Management Partner
The decision to partner with a firm for change management consulting and cross-functional managed services during and after the transformation project is a big decision, one that should not be made lightly. Find partners that:
- Understand your broader strategies and can deliver an approach with milestones and KPIs tied to business goals
- Have a proven track record managing both digital marketing and technology execution within digital transformation initiatives
- Have specific competencies in the functions and areas that your company lacks
- Offer comprehensive training and coaching services across various digital marketing and technology disciplines
At Verndale, we work with global, Fortune 500 organizations on digital transformation programs. The majority of these clients say that solving the operational challenge of managing the new, post-transformation solution is their toughest battle. From identifying the right roles to hire for or outsource, to building out new operational processes, the complexity of change management places substantial pressure on these business leaders.
However, when an organization does succeed in implementing a large-scale change program, it can unlock impressive improvements in performance. Successful change strengthens the overall health of the organization, defined by McKinsey & Company as “its ability to create alignment, drive execution and nurture renewal so as to sustain exceptional performance over time.”5; The proof is in the results: The ROI for large-scale industrial change projects was 143% of the expected return when paired with excellent change management programs, compared with only 35% when change management was poor or absent.6
For more information on how to position yourself for success with a digital transformation initiative, read The Executive's Guide to Managing Change with Digital Transformation. This free guide from the team at Verndale walks through the importance of change management, explores why many digital transformation initiatives fail and offers some practical ways to improve change management after digital initiatives are launched.
1Digital Transformation Predictions, IDC, 2015 https://www.idc.com/getdoc.jsp?containerId=prUS40553515
2Genpact study https://www.internetretailer.com/2013/12/31/why-omnichannel-strategy-matters
3Genpact study https://www.internetretailer.com/2013/12/31/why-omnichannel-strategy-matters
4Making the Change, Planning Executing and Measuring Successful Business Transformation, Forbes Insights, 2014
5Skills for Digital Transformation, SAP, 2015
6Culture’s role in enabling organizational change, PWC, 2013
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