Why a big bang approach to digital transformation is the scenic route to failure
Time and again digital transformation initiatives fail. Research by McKinsey shows that 70 percent of complex, large-scale change programs don’t reach their stated goals. Some companies are now frightened to go down the route of digital transformation after their expensive ‘big bang approach’ didn’t work, despite a long and laborious process. But it doesn’t have to be that way.
Why a big bang approach to digital transformation doesn’t work
A big bang approach takes a long-term view in terms of deliverables but provides no discernible tangible business outcomes in the short to medium term. Not only does such an approach fail to produce any short or mid-term deliverables, it also doesn’t tune itself to the ever-changing needs of the market. The business has to wait until it’s fait accompli before it sees any value in the work and investment — by which time, the industry environment would have changed, and the project arrives at its destination too late.
An all-or-nothing method increases risk
Any approach which takes a very long time to deliver is a huge risk, as a lot of unknowns start to creep in. These unknowns increase the risk to the intended outcomes of digital transformation projects. Many a Big-Bang transformation begins its journey with a particular outcome in mind, but by the time it gets near completion, either the outcome has become irrelevant to the industry or business, or the world has moved on and priorities have completely changed. It’s no good waiting years to reach an outcome, because user experience changes so fast that anything that comes in too far down the line risks being irrelevant.
The road to rigidity
A big bang approach offers no agility. All the project would be doing is taking an outcome that needs to be delivered sometime down the line and barrelling blindly towards it. There’s no opportunity to iterate, revalidate the approach, assess the desirability of the outcomes and evaluate need for course correction.
Long-term projects also have the employee and stakeholder engagement to think about. The longer the project, the more likely it is that fatigue sets in. Long-term programmes typically always start with enthusiasm, but this can quickly wane.
Why a bite-sized approach is better
A bite-sized approach towards digital enablement is preferable to big bang.
Here’s how to achieve it:
It is important for businesses to take a step back. Look at the business model and the problem that the business is trying to solve right now. Think about what needs to be achieved from an operational key result standpoint and work backwards from there.
For example, if increase in revenue in a particular segment of business is the objective, the first thing to do is consider the business’s current process for generating revenue in that segment. Then, consider what needs to simplified or eliminated to improve the experience for the customer. When experience is improved, demand and revenue will increase.
TIP: what not to do is take a solution and think: “what problem is this going to solve?” The problem must always come first. The solution will be found by working backwards.
After defining the business objective, there is a need to investigate the component parts within that objective. For example, if the business wants to understand customer churn, it needs to be able to answer questions, such as: do we have a single customer view? Do we know what our customers are buying from us and why? Such an incremental querying would lead the businesses to address how to position their services so prospects can see the value in buying them.
Why a bite-sized approach to digital transformation is more effective
A bite-sized chunks approach is especially effective for fintech and payments industries, due to:
1. Rapid evolution of technology
New payment methods come onto the market at a staggering rate, making it difficult for companies to keep up with innovations. Taking a big bang approach will mean organisations will miss a lot of generations of trends, and will probably land in a place where someone’s already been. An incremental approach enables fintechs and payment companies to adapt their systems and processes gradually, ensuring they can keep in tune with the latest trends. At any given point in their transformation journey, they can take a pitstop to check on the latest trends and move along with them.
2. Regulatory compliance
The fintech and payment industries are heavily regulated and the regulatory environment and ecosystem is also constantly changing. This makes it very challenging to implement large-scale changes in one go. Smaller, incremental steps are easier to tie in with changing regulations, and businesses can make changes when needed, ensuring compliance at every stage. Organisations should avoid putting themselves in a position where they make a huge change, then start figuring out compliance later.
3. User experience
Payment is not just a back-end job. People interact with payment systems day in and day out. An incremental approach allows companies to test new features fast and address matters, such as: how is someone interacting with a particular payment system; how can that payment system have less friction; how can it be more interactive for users?
Incrementally test the user experience and release it into the market so that organisations get there sooner. If one makes users wait too long, they’ll experience better ways of working with other platforms, and businesses will lose out to competitors.
4. Risk management
The fintech and payment industries are characterised by significant risks, such as payment frauds. An incremental approach allows companies to make changes in a gradual manner, and assess the risk that’s involved in that change. For instance, whether the change opens windows to fraud or cybersecurity issues. Implement the change, assess the change, then move on to the next one. This gradual approach gives businesses a much better handle on their risk.
Timescales for an incremental approach
How often should businesses bring in incremental changes? I would suggest at least monthly, if not more often.
Amazon sets the benchmark here. They make daily releases — sometimes several per day. That’s a whole different level, of course, but they do this for a reason: cutting their business problems down to such small chunks means they can continuously innovate and remain compliant.
Concerns around disruption
Many stakeholders are fearful that digital transformation will lead to upheaval and loss of productivity. How businesses articulate digital transformation to their stakeholders will determine their level of acceptance of change. If businesses go lock, stock and barrel into a project, disruption is inevitable, and people will end up concerned and confused. Avoid these misgivings by forming the narrative around:
Increased efficiency: explain how the changes will mean employees can perform their day jobs much easier. They’ll be able to be more efficient, due to the elimination of redundant processes.
Better customer experience: Any digital transformation that a business embarks on should be about their end users and improving their ability to interact with their system’s processes. Explain how this transformation is going to improve the customer experience, and therefore be beneficial to the company.
Improved agility: Anything that’s not iterative is not agile. Anything that’s not revalidating itself on a regular basis is not agile. Anything that’s not agile becomes monolithic and is difficult to scale.
It’s like running a marathon. If you set out thinking you’ve got 26 miles ahead of you, it feels like an unachievable undertaking, but if you only ever think of the next 100 metres, it feels doable. And at every break, you can recalibrate before continuing.
Value for money: Start talking about a big bang digital transformation approach with a hefty price tag, and stakeholders will be concerned. Talk about incremental, lower cost changes, where each one achieves a faster and visible return on investment, and then it’s easier for stakeholders to accept.
Not getting left behind: There should definitely be a fear of losing out. If a business doesn’t move on, other companies will, and the laggards will be left in their dust. No business can afford that.
Fintechs which fail to prioritise digital transformation take on a multitude of risk. This risk comes in many forms — in making operations rigid, relying too heavily on human intervention and being too slow to react to shifting trends. Those who remind themselves often that digital transformation is about the end user are the ones who will appreciate the bite-sized approach and, as a result, come to see that it’s not solely the end user who benefits.
The original article can be found at : https://www.finextra.com/blogposting/23853/why-a-big-bang-approach-to-digital-transformation-is-the-scenic-route-to-failure