Impact of organizational fatigue on digital transformation initiatives

If you follow my blogs, you won’t be surprised that I’m passionate about helping organizations drive to success in business transformation and achieve breakthrough performance. As the demand for digital transformation accelerates, I find companies setting out on the required multiyear journey without understanding what lies ahead – and then failing. I’ve blogged about several pitfalls such as the need to determine and develop support up front for the strategic intent, issues around budgeting and funding the initiative, how to de-risk the transformation journey, and much more. In this blog post, I want to alert you about the risk of “organizational fatigue.”

The number of challenges that usually arise during a business transformation initiative is not a small number. But the challenge of organizational fatigue stands out as a common point where many initiatives hit a major roadblock. The phenomenon of organizational fatigue has three significant characteristics:

• It occurs after, and despite, having experienced success in several projects in the transformation initiative
• It always causes major delays and often causes the overall transformation initiative to fail
• It can be avoided by taking the right approach up front

Here are two examples. In the first, a global company achieved dramatic success in Phase 1 of its digital transformation:

• Complete transformation of IT as the first step in becoming a data-driven organization
• Multiyear project to implement ERP software as the foundation for Phase 2
• Significant cost savings
• Successful pilot demonstrating how to leverage their data to achieve greater value in Phase 2

Then came Phase 2, intended to drive a breakthrough performance. The company’s top leadership balked and didn’t want to move forward. It was clear at that point that the business model would need to change to achieve the desired outcome. They had already gone through a lot of disruption in Phase 1, and the leaders weren’t sure the reward in the transformation outcome would be worth more disruption.

The second company sought to expand its market with value creation enabled by digital technologies. However, they began the digital transformation with an ERP implementation that had already been planned before the transformation initiative. This company also achieved several goals during Phase 1 in its efforts to create new value for customers.

But they ran into problems trying to implement some enabling software. They proved that one software product would bring $50 million in additional revenue per year. So, the benefits were clear and it would not be complex to implement. But it took more than three years for the leaders to agree to implement it – the same years that the ERP implementation was causing widespread change and disruption. Unfortunately, the ERP implementation consumed too much time, too many people and millions of capital resources.

By the beginning of Phase 2, they were facing organizational fatigue, and there was little business value to show for the ERP implementation. There was not enough willingness to continue moving forward with more change and disruption.

Where they went wrong

What could these two companies have done differently to avoid organizational fatigue and failure? Let’s start with the approach. In talking with organizations facing digital transformation challenges, I find a common thread: a big gap between the vision goals and the leaders’ understanding of the depth of change necessary to achieve those goals. It’s necessary to spend time up front to make sure everyone understands the change – not only degree of change that will take place in a multiyear journey but also how the change is possible. Leaders must spend time at the beginning to build belief and long-term commitment to the strategic intent at all levels of the organization. I often refer to this principle as “go slow at first to go fast later.”

Often, a monstrous, expensive software implementation is at the heart of the fatigue problem. These runaway software implementation projects take forever and often deliver more expense than value. Often, these projects get off track. And, always, they disrupt a company. Add some merger/acquisition/divestiture activities, and you have a storm.

It’s a mistake to start a digital transformation initiative with a major ERP or heavyweight software implementation. The desire to secure the foundation before moving to the business value often is the driver for making this mistake. However, this leads to over-investment in foundational elements and organizational exhaustion before value is created.

To be clear, I am not saying that the foundation will not have to be put in place. But moving to deal with it before a clear understanding of how value will be delivered, and delaying business benefit while foundations are built, is a losing strategy.

It is far better to experiment with lightweight technologies that will eventually be replaced but deliver value quickly and allow the organization to understand and experience the value. As business value is expensed and the elements that create it are better understood, then a foundational system can be deployed and the lighter-weight systems discarded and replaced.

A digital transformation needs to start with understanding how the business will need to change rather than starting from implementing technology capabilities. Otherwise, it becomes a distraction, leads to resistance and delays delivering early on the new value created in transformation.

A technology implementation is just the tip of the iceberg. Digital transformation necessitates change in business processes to support the technology. Policies, procedures and often talent resources will need to change. And it requires a new business model.

The best way to de-risk the potential for failure due to organizational fatigue is to spend time at the outset to get everyone on board with the high degree of change. Aim to get employees making suggestions such as “here’s how we can do that” and coming up with ideas of how to get over the hurdles. Then focus on a smaller technology-enabled project that quickly delivers measurable value to customers. Thereafter, take an iterative approach and move on to the next value-adding project.

Looking for critical success factors in business transformation? Eliminate roadblocks up front and don’t let a massive technology implementation be the early focus in the journey.