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Six Risks to Avoid When Leading a Digital Transformation

Note: This article was written by Troy MacFarlane in collaboration with the CSPS Digital Academy. Separately, in 2023, the Academy conducted interviews with 33 leaders in digital transformation within the Government of Canada. This research identified a set of crucial success factors. While MacFarlane’s framework for success differs from what we found, the advice and findings are still well aligned. They include: clarity of purpose, measurable and time-bound progress, and sustainability through engagement with organizational leadership, priorities, and policy and governance.  

– Digital Academy team

The audit report Modernizing Information Technology Systems of the Office of the Auditor General of Canada in 2023 pointed to leadership and a concrete action plan as two necessary elements of successful IT modernization in the Government of Canada (GC). IT modernization—more generally described as access to quality data and technology that is secure, reliable and cost effective—is important to supporting digital transformation. Digital transformation is a commitment to the ongoing process of developing organizational and technology-based capabilities aimed at continually improving the user experience, the products and services, and the operations of an organization through innovation, data and digital technologies. 

The GC Key Leadership Competencies encourage leaders to support intelligent risk-taking and emphasize the need to learn from setbacks and mistakes. Considering that over 70% of digital transformation efforts have failed, it's crucial for leaders in the GC to think about not only which risks to take but, more importantly, which risks to anticipate and which to avoid before developing a digital transformation action plan. The lack of an approach to transformation is the central theme of each of the six common risks to a digital transformation initiative. 

The six common risks for GC leaders to anticipate and mitigate or avoid when they are accountable for a digital transformation initiative are the following:

Descriptive text The image displays a diagram made up of six interlocking smaller hexagons arranged around a central hexagon labeled “Six common risks to digital transformation.” Each surrounding hexagon features a number from one to six and names a common risk associated with digital transformation. Starting from the top and moving clockwise, they are: 1. A green hexagon labeled “01” with the text “Lack of clear transformation goals.” 2. A yellow hexagon labeled “02” with the text “Lack of leadership commitment.” 3. An orange hexagon labeled “03” with the text “Lack of access to talent.” 4. A purple hexagon labeled “04” with the text “Lack of sustaining change.” 5. A red hexagon labeled “05” with the text “Lack of measurable progress.” 6. A blue hexagon labeled “06” with the text “Lack of modern IT.”

Risk 1: Lack of clear transformational goals 

A digital transformation project begins with a business strategy and an understanding of why an organization wants to change. The strategic planning phase is an opportunity to share the goals of the transformation across the organization. If an organization is unsure how to define these goals, the following four key scopes of transformation, as influenced by Porter's Generic Strategies, can be a helpful starting point.  

  1. First, an organization must look outward towards its target users (customers or clients). It should ask how the organization can make use of data and insights to personalize the user experience, empower the users with self-service, provide services through a variety of interactions, and build trusted relationships. 
  2. Second, the organization should ask how it can develop opportunities for new services to be identified and existing services improved. This means providing the means for research and innovation and applying agile delivery of digital products and services.   
  3. Third, an organization must look internally and consider how the experience of internal users can be improved by enabling a mobile workforce working in a hybrid workplace, and using automation to free employees from repetitive and manual tasks, so that more time is spent on value-added activities and collaboration.   
  4. Fourth, the organization should ask what changes are necessary for it to offer more reliable and secure operations. 
Descriptive text The image features a Venn diagram with four overlapping circles on a white background.

At the top, there is a question in bold: “Where do we set our focus?” Starting at the top and moving clockwise, the first circle is green and labeled “Client experiences,” with an arrow pointing to a text that reads “Use data and insight to personalize the user experience, provide self-service delivery multiple options to access services and build trusted relationships.”

The second circle is blue and labeled “Digital products,” with an arrow pointing to a text that reads “Provide the means for research and innovation, and agile delivery of improved digital products and services.”

The third circle is yellow and labeled “Employee experience,” with an arrow pointing to a text that reads “Enable a mobile and hybrid workforce to focus on value-added activities and collaboration.”

The fourth circle is orange and labeled “Operational experience,” with an arrow pointing to a text that reads “Stable operations through data-driven decision-making and data-driven operations.”

The areas where the circle overlaps are labeled to indicate the focus areas: “Internal focus” at the intersection of orange and yellow, and “External focus” at the intersection of green and blue. 

It is advisable for an organization to begin by focusing on just one, or possibly two, scopes of transformation. This approach helps mitigate the risk of not fully aligning the organization’s culture, business process, workforce skills, and enabling management systems with the required changes. Considering four scopes of transformation is an excellent way to summarize what is plausible for change when engaging decision-makers, thereby supporting the executive team in defining their digital aspirations and strategic goals more concretely.    

Risk 2: Lack of leadership commitment 

Introducing digital transformation-associated changes, let alone sustaining them, requires an organization's leadership to be engaged and aligned with the effort. If the transformation effort is organization-wide, it must have executive-level support to ensure that accountable senior management are clear on the competing demands for investments and resources. The corollary is that the goals of the digital transformation have to align with and support the organization’s overall priorities. 

Leadership’s commitment to the transformation also includes the middle management layer that will be responsible for its delivery. If middle management is resistant to change because they perceive the change as a threat, lack the necessary skills, or lack interest in and comfort with the new behaviours, then the commitment to the transformational goals must be understood as a responsibility. A change management strategy must consider middle management as one of the key stakeholder groups that may require different communication and engagement tactics to be applied. 

Risk 3: Lack of access to talent 

A common challenge for digital transformation initiatives is access to talent. An organization’s talent management strategy should include a blend of upskilling employees within their existing fields of expertise, reskilling employees to learn new competencies in a new field, and complementing the workforce through professional services, consultants or short-term temporary and contractual employees. 

Change leadership can support the organization by adopting a champions approach to digital transformation. Champions are a force multiplier for employee engagement, which is critical to the success of both scaling and sustaining digital transformation skills. Champions are employee power-users, business advocates, or internal change agents that help to promote and encourage change. Acting as champions, employees at various levels of the organizational hierarchy can build an understanding of digital transformation concepts, build awareness of digital transformation efforts, grow enthusiasm for transformation by partnering with employee networks, and be on the front line of addressing cultural resistance to change.  

Descriptive text

The image displays a table with a header that reads “Change management using the network effect.” The table is divided into five columns labeled: Structure (Organization), Perspective, Responsibility, Typical size, and Decision-Making. There are three rows under these headings, each describing a different role within an organization:

1. The first row pertains to a Formal role (assigned) with the following attributes:

- Perspective: Specific

- Responsibility: Direct (Accountable to ensure the specific change is delivered)

- Typical size: Few employees in the role

- Decision-making: High

2. The second row refers to a Less formal role (assigned and participatory)” with the following attributes:

- Perspective: Specific and Broad

- Responsibility: Direct and indirect (advocate, enabler, innovator, and influencer)

- Typical size: Several employees in the role

- Decision-making: Medium

3. The third row refers to a “Informal role (participatory)” with the following attributes:

- Perspective: Broad

- Responsibility: Indirect (learner, promoter, and collaborator)

- Typical size: All employees

- Decision-making: Low

Risk 4: Lack of sustaining change 

A digital transformation initiative goes beyond changes to data and digital technologies. Deep-rooted changes to organizational culture, mindset, structure and practices will also occur. The changes will only persist if the change has been accepted as a new normal and accountability is set to support transformation. This requires engagement with the policy and governance levels of the organization, not just the digital and technology layer. 

Many digital transformation projects face setbacks in sustaining the implemented changes when the vision is not well understood, the scope lacks clarity, or there is a lack of confidence in the ability to deliver. A general formula for successful change typically involves three elements: 

  1. A clear understanding of the problem 
  2. A desirable future vision resulting from the proposed solution 
  3. A change is perceived as realistic and achievable 

A multi-year digital transformation effort should foresee a period of reduced excitement and a questioning of the purpose of the change. But if the preceding three elements are greater than the measure of resistance to change, then the changes resulting from the digital transformation are more likely to endure.

Risk 5: Lack of measurable progress 

The adage “You can’t manage what you can’t measure,” attributed to management guru Peter Drucker, is relevant to digital transformation. Measuring progress against the transformational goals is critical to do throughout the transformation journey. Applying outcome management practices is one step in ensuring that the transformation activities continue to align with and contribute to the business strategy. Regardless, the clear goals established to address Risk 1 need to have measurable markers of attainment. This will in turn enable the broad buy-in and specific credibility to shape the organizational context required to manage Risk 4. 

An optional strategy is to use a digital maturity assessment to measure where the organization stands at the start of the digital transformation initiative. Additional assessments should be conducted at intervals throughout the delivery of projects or changes arising from the digital transformation initiative. The Business Development Bank of Canada offers a digital maturity assessment that measures maturity levels ranging from initial stages of digitalization and automation within siloed functional units to more advanced levels reflecting a digital culture emphasizing experimentation and continuous improvement. Additionally, the World Bank's Digital Government Readiness Assessment is another valuable resource for assessing digital maturity.  

Not all journeys will be the same across all organizations. However, a maturity assessment can provide an immediate reference checklist to ensure that the necessary conditions for success are being put in place. Knowing what organizational changes to prioritize as part of the digital transformation can help manage risk in a predictable and disciplined manner. 

Risk 6: Lack of modern IT 

The benefits of a digital transformation are not gained by simply adding new technologies such as artificial intelligence, machine learning, robotic process automation, cloud services, or APIs to the architecture. A balanced approach is vital to enabling experimentation with digital-use cases for the future and providing secure and reliable operations for today, as the IT modernization architecture changes to prioritize the digital transformation goals. The GC Service and Digital Target Enterprise Architecture reinforces the notion that access to modern, flexible and responsive architecture is a target technology goal for any digital transformation.   

An external-focused transformation scope may prioritize architectural changes that support reusable data and services, integration of services, automation of workflows, and virtualization of scalable infrastructure to facilitate rapid innovation of new products and services. An internal-focused transformation scope may prioritize architectural changes for a stable operational core that automates repetitive business processes, provides a single-source of truth for business records, and offers visibility into end-to-end transactions. The workforce will require synchronous technologies that provide features such as real time video collaboration, chat, and screen sharing to promote collaborative interaction between people and teams. 

Conclusion

Advance planning of how to respond to common risks associated with digital transformation initiatives will help in mobilizing the organization to mitigate individual risks, while reinforcing the key message that a digital transformation is enabled by technology, not led by technology. 

In summary, the key actions to take when leading a digital transformation are as follows: 

  1. Set clear transformational goals aligned to the organization’s business strategy. 
  2. Seek out an executive sponsor but also an alignment with middle management responsible for delivering the change. 
  3. Encourage formal and informal learning opportunities for the workforce to develop new experiences and digital skills. 
  4. Make changes stick by clearly outlining the problem to be solved, communicate a desirable future, and set realistic and achievable changes. 
  5. Measure the current digital maturity of the organization and identify the desired level of maturity before making significant investments. 
  6. Anticipate making IT investments to provide secure and reliable operations as a stable foundation on which to build future digital investments. 

Resources

Troy MacFarlane

Troy MacFarlane

I am motivated to learn about and share lessons learned in applying technology. Je suis motivé pour apprendre et partager les leçons apprises dans l'application de la technologie.

Ottawa, Ontario

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