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Why 72% of all Business Transformation Projects Fail

72% of transformation programs fail to deliver their actual targets due to organizational issues (1). Putting it into an economic impact worldwide at three trillion dollars, which corresponds to 4.7 percent of global GDP. And it’s a universal problem: setbacks span the public and private sectors, occur in all industries, and often result in substantial economic and productivity losses.

The survey point out that the transformation programs fail due to:

  1. Unclear view and misunderstanding of the business’s vision
  2. Vague understanding of the organizational structure
  3. Trying to apply the same transformation solutions to diverse business needs
  4. Simply reorganizing organizational resources rather than achieving true transformation
  5. Failure to understand existing process flows and their objectives
  6. Failure to prioritize the factors that need to be transformed
  7. Overestimating the goals of transformation in the excitement of making change
  8. Communication problems
  9. Failure to observe the necessary management discipline in different departments
  10. Failure to set specific, measurable, attainable, realistic, and timely goals for transformation

Although all of them are true, these are the symptoms and not the cause. The root-cause of why business transformation project fail, lies in the “way of thinking”. Einstein once defined insanity by “do the same thing over and over again and expect the result to be different”.

New Competitive Advantage paradigm shift

Over the past 15 years the main focus has been optimization and process redesign driven by technical teams, mainly based on the best practice definition of international standards. In today’s constant changing environment, it simple can’t deliver the required benefits or value. In order to stay competitive in today business, need to innovate and transform existing business models and their service model to design tomorrow’s enterprises. This is not small task and it requires the ability to design the Enterprise Architecture to be agile and align Strategic Business Objective with Critical Success Factors and eventually to Key Performance Indicators.

In order to Automate ones process’s companies would traditionally inventory and map their existing ‘As-Is’ processes supporting the current business model – as a starting point (baseline), then cross-reference and map these to IT Systems, and verify that nothing was missed for the IT enablement of the processes. This is usually a significant effort and would take a large organization at least nine months to complete.

However, as many projects today are about either innovation and or transformation of what and how an organization delivers their services, and most of their current processes are not very effective or efficient; mapping all these existing processes would be wasted effort and set the wrong baseline for process automation – for both the transformation and the enablement of high-level of automation in the new service model, leading to costly customized implementation, and not delivering the desired value.  The ERP vendors (Oracle, SAP, PeopleSoft, etc.) no longer only map functions to processes, actors and roles, as this inflexibility would cripple an organization’s ability to change and adjust their business to suit their environment – a lesson learned from past implementation initiatives.

Mappings are now IT solution (example: Application Services, Data Services, Platform Services, and/or Infrastructure) to business services and thereby their workflow and the service tasks, which remain more constant if an organization changes its activities, roles and/or functions. While organizations are trying to adapt and or completely change their Business and Service Model to adopt to changes of the markets. While markets are changing, new flexible and responsive business model with focused and robust service models are emerging at a rate never seen before. For many organizations, entirely new industries are forming as old are crumble.

Regardless of factors such as size, revenue, industry, region, business model or service model, the need to create and realize the needed value is the basis of growth and many cases survival. Therefore the decision to make large-scale investments in ones competitive and differentiating competencies, all depends on the ability to identify the right performance and value drivers and enable the organizational specific innovation and transformation potential. This makes performance and value enablement one of the most important driving force in developing ones organization!

In any innovation and or transformation project, strategies, critical success factors and key process changes need to be considered in order structure related business functions and activities designed to create results for the organization. This process changes of related activities can be mapped into process models. Relating these structures in a different sequence in order to optimize, re-engineer or innovate will create a new result for the organization.

  1. the Management Processes, which consists of processes that manage the business. Management process are all the process that set direction and thereby that are derived by the competencies that develop strategy, objectives, goals, plan, forecast, and controlling (monitor, measure and govern). Thereby the management process the performance or execution of any type of activity.
  2. the Main Processes, which consists of the delivery of your main business. Main Processes are the essentials processes of the business that create value for the external customer.  They are Business strategy, product delivery and customer support type of processes.
  3. the Supporting Processes, which consists of processes that support the business. Supporting Processes are all the processes that supply resources to the other processes and largely are non-value added to customers.  They generally are the Human Resources, Supply Management, and Information Technology, to name a few.

All of the above mentioned processes exist both on the strategic, tactical and operational level and interlink the business competencies and measurements. Example of how transformation could be applied to blueprinting:

  1. C-Level Strategy Mapping – define pain chain or goal chain
  2. Transformation Model Imperative – what needs to be more focused, responsive, flexible and or robust
  3. Business Level Performance
  4. Value Based Business Modelling
  5. Operational Performance & Value Management
  6. Value Based Application Modelling
  7. Measurements based transformation
  8. Service based transformation
  9. Process based transformation
  10. Value Based Costing
  11. Innovation Architecture
  12. Transformation Architecture

To succeed one must take a project based step-by-step pragmatic framework, method and approach to build competency in the organization that addressing many of the pitfalls such as cynicism and fear; lack of applied knowledge; lack of practiced skills and hidden conflicts that undermine your efforts. In our experience the key for transformation already exists in organizations, however it requires to build skills on several levels within departments and business units of an organization to align, design and build a Layered Enterprise Architecture Development (LEAD).

The battleground for today’s competitive advantage is fought at organizations ability to transformation and innovation. Each fight is decided and won on the flexibility and responsiveness of your service model’s ability to transform and innovate.

1. McKinsey & Company study “Beyond Performance” and Deloitte Global Survey 2008.

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