Why some Digital Transformation efforts face budget pressures? How may it be better?

With the current surge in quality and quantity of requirements, Digital Transformation projects have become an immediate reaction for many organizations as they strive to meet the need. This is attributed to the immense potential of improvements that the Digital Transformations promise to deliver.

Digital Transformation in lucid terms can be defined as changes to existing business models that deliver value to internal and/or external stakeholders and are enabled through change in process, technology and culture.

While such transformations have worked in the favor of many, there are a significant number of cases where this has not quite shaped up as per expectation. Forbes has listed 13 reasons perspectives detailing Reasons Companies Fail At Digital Transformation.

There is one more inherent trait of such large scale Digital Transformation programs. They are time and cost intensive programs and more often than not, span across many years depending on scope of the program and scale of the enterprise. In this article, I want to focus on few reasons why some organizations struggle to thrive through the long journey of such transformations. I have been part of and led multiple Digital transformation programs of varying scale and contexts. In my view, here are the top 3 reasons why Digital Transformation projects/programs face budget pressure from time to time: ?

1. Change in program budget due to changed market conditions – Business priorities are proactive or reactive responses to macro economic forces and are hence subject to frequent refinements. The new priority can be different from the vision of the Digital Transformation that was initially set out. Under such conditions, Organizations often struggle to secure and maintain a dedicated budget to fund the complete journey of such transformations.
2. Low upfront returns – There are several areas where Digital Transformation programs do not yield immediate returns. For example in Product Development, a Digital Transformation program will take a significant amount of time before the results from design accuracy, enhanced product quality or improved time to market start to show through. Hence justifying the business case for such transformation efforts is often challenging and when weighed against other emerging and immediate business priorities, can often fall short of requisite rationale.
3. Program timeline outpaced by speed of digital forces – Pace of Technology Development can greatly supersede the time to deliver and adopt. By the time a Digital Transformation?program matures in an organization (and in this, consider the time taken for Organization Change Management, Stabilization etc.), a newer technology can become available in the market and this can lead to iterations and lost efforts. ?

That said, there can be some ways in which I think an ongoing commitment to Digital Transformation initiatives can be secured. They are as follows:

1. Focusing on Long Term Vision – Digital Transformations are to be perceived as The Key Enabler for long term sustained business excellence and not a lever for short term operational excellence. Setting this expectation up front can eradicate many unwanted questions down the line. Consider this effort to be a mandate (obviously internal) and the penalty as the Opportunity cost attributed to missing out on future growth and business excellence.
2. Driving Digital Transformation as a top down (leadership driven) focus – A clear, defined and concise vision can help secure a consistent priority for Digital initiatives. The pace of the program needs to be adjusted as per the resources secured and the minimum viable products need to be defined in alignment with the pace. ?
3. Defined framework for quantification of incremental returns / benefits accrued: There are some domains (once again, like Product Development) where the returns may not immediately be as tangible as in some others (like Warranty or Service) where a digital transformation can start delivering immediate revenue returns. For such cases, quantification of incremental and initially non-tangible returns or benefits need to be defined from the start. Even qualitative metrics may be identified in these cases (leading indicators) to drive towards future benefits that can be measured with defined performance metrics (lagging indicators)
4. Having defined KPIs that track and monitor the health of the Digital Transformation: Only What can be measured, can be improved. There needs to be a constant evaluation of the program health with real KPIs. Being large scale programs, they are prone to scope creep, cost overrun etc. The sooner such deviations are noted, the sooner they can be controlled.

Digital Transformation programs empower organizations to address future needs, to seize future potential opportunities and to hedge future risks. In most cases, the opportunity costs for not starting on time are exponential and the possibilities of future gains are tremendous. And while the upfront justification of cost can sometimes be challenging, the bigger picture and long term goal should prevail at all times to fuel such journeys.?

This is a short list of points and is certainly not exhaustive. If you have more to add to this list, either in the cause or resolve section, please feel free to use the comments section. Looking forward to learning from your experience as well. Thanks for reading.