Why Do Boards Let Major Digital Transformation Programmes Fail? The Role of Non-Executive Directors in Ensuring Success

"We were ostracised in Bridlington. We were abused in the streets. Our daughter was bullied. She was on the school bus and spat on by a young boy because [they thought] her father was a thief, and he'd take money from old people." – Lee Castleton, Former Postmaster on the impact of the Horizon IT scandal on his family's lives.

In my previous blog, I explored why so many digital transformation initiatives fall short, often veering drastically off course due to what Bent Flyvbjerg terms the "Black Swan" problem — extreme, unpredictable risks that lead to programme failure. As I continue to transition from executive to non-executive and advisory roles, this phenomenon prompts a crucial question: What role should boards, including both executive and non-executive directors (NEDs), play in steering these projects toward success?

The Reality of Board Oversight in Digital Transformation

Approximately 70% of digital transformation programmes fail to meet their objectives. These failures aren't just a matter of financial loss; they can devastate reputations, as seen in cases like the Post Office Horizon scandal, where the fallout extended beyond the business to affect the lives and livelihoods of those involved. So, why do boards allow this to happen?

1.???? Passive Involvement and Insufficient Oversight

Boards often fall into the trap of relying too heavily on management reports that reflect the ‘optimism bias’ of the delivery team, engaging actively in the early stages but becoming less involved as the project progresses. For example, according to a Deloitte survey, 95% of directors participate in the early phases of mergers and acquisitions, but only 23% stay engaged through the later stages as the transformation is being executed. This passivity makes identifying and addressing problems early difficult and, as in the case of the Horizon programme, lead to NEDs being insufficiently curious about the linkage between programme challenges and business impact.?

2.???? Over-reliance on Executive Management

Boards sometimes place too much trust in the executive team, assuming they have everything under control. This trust, while essential, can lead to missed early warning signs. Non-executive directors (NEDs), in particular, might hesitate to challenge assumptions, strategies, or decisions due to a lack of expertise or a desire to maintain harmony. However, this reluctance can be detrimental when a project starts to falter.

3.???? Lack of Digital Expertise

Digital transformation is inherently complex, and many boards must have the digital competence required to provide adequate oversight. Without this knowledge, it's challenging for NEDs and other board members to fully grasp the risks, complexities, or opportunities that such projects present. This lack of understanding often results in underestimating the resources, time, and attention needed for successful execution.?

That said, programme risks will often crystallise in mainstream business operations.? It is, therefore, imperative that all NEDs, whether they have a digital specialisation or not are fully engaged in the oversight and assurance of digital programmes.

4.???? Ineffective Risk Management

As Flyvbjerg's research shows, "Black Swan" risks—rare but high-impact events—are often underestimated in digital transformation initiatives. Many boards lack robust risk assessment frameworks to identify and prepare for these extreme outliers.

5.???? Misaligned Priorities and Short-Term Focus

Boards are frequently under pressure to deliver short-term financial and operational results, which can overshadow the need for long-term investment in transformation programmes. This short-termism can lead to underfunding or a lack of support for initiatives that require more time to demonstrate their value. This focus on day-to-day challenges can also distract the board from giving adequate scrutiny to emerging risks and issues in transformation programmes.

The Unique Role of Non-Executive Directors (NEDs)

As NEDs, we have a unique responsibility to provide independent oversight and ensure that transformation programmes remain aligned with strategic goals. We can help do this by:

1.???? Identifying Early Warning Signs

By drawing on our diverse experiences, NEDs can spot early indicators of project distress, such as scope creep, cost overruns, or resistance to change. Prompt intervention can often mean the difference between a project failing or getting back on track.

2.???? Establishing Robust Governance Structures

NEDs play a critical role in setting up governance frameworks that facilitate regular monitoring, transparent reporting, and effective risk management - tracking the right metrics and ensuring there is a transparent process for addressing emerging issues.

3.???? Encouraging Agility and Flexibility

Digital transformation requires adaptability, and NEDs can help foster a culture of agility within the organisation. We should advocate for the ability to pivot and respond to unexpected challenges or opportunities, ensuring that the transformation remains resilient in the face of uncertainty.

4.???? Fostering Collaboration and Innovation

Building strong working relationships with the executive team is crucial. NEDs should act as both supporters and challengers, encouraging open communication and collaboration. By promoting a culture of innovation and experimentation, we can help ensure that organisations are ready to respond positively to digital transformation initiatives.

Looking Ahead

Like many of us, I've seen firsthand the critical impact that board leadership can have on the success or failure of digital transformation programmes. The stakes are high, but with the right blend of support, scrutiny, and strategic direction, NEDs can play an invaluable role in steering these projects toward success.

As non-executive directors, how can we continue to build our expertise and enhance our contribution to these complex initiatives? I invite you to share your experiences and insights on this topic. Let's continue this conversation and work together to navigate the turbulent waters of digital change more effectively.

Given the increasing reliance on digital transformation to drive future growth and innovation, the role of the board—especially that of NEDs—is more critical than ever. Let's ensure our boards adequately equip our organisations to succeed.

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