Ep. 80: Why digital transformations fail

[00:00:00] Peter Maddison: Hello, and welcome to another exciting episode of Definitely Maybe Agile with your hosts, Peter Madison and David Sharrock. How are you doing today, Dave?

[00:00:07] Dave Sharrock: Brilliant, Peter, how are you doing? A lot has changed since we last talked. The weather has all turned, conversations. Were in different locations, so a lot has changed in the last few days.

[00:00:17] Peter Maddison: It has, hasn't it? Has it been a successful change?

[00:00:20] Dave Sharrock: Definitely. The turning of the season is always fun. Things are looking up to the way they were a few weeks ago.

[00:00:24] Peter Maddison: And we're going to be talking today about digital transformation changes and why they fail.

[00:00:29] Dave Sharrock: What I find it's interesting is right now is that end of financial year. So it's that changeover. It's a great time for us to sit and look back and think about what worked, what didn't work, if you're in the organizations where that financial year is shifting right about now. It's that time when we claim success in order to be able to keep things moving forward. And yet in many cases, these big transformational changes, are right in that middle of "are things working, are things not" .How can we tell what's going on? Why did they fail? Why did they not succeed the way we hoped.

[00:01:02] Peter Maddison: I think the other thing that happens this time of year as well is the annual performance reviews. That's a topic for another day. The number of people I've spoken to in the last couple of weeks who've had their annual performance review. They're just sitting down to write what their targets are, so that they can fill in the responses to having met their targets.

[00:01:22] Dave Sharrock: We spend a lot of time working towards iterative and incremental changes. Small steps forward, reevaluate. Small steps forward, reevaluate. And of course what we're describing here when you talk about annual performance reviews: 12 months forward, reevaluate. Recency effect, and everything that comes with that. Finance, accounting and annual plans: big steps forward, reevaluate. We're in that process right now. I think this is a great segues into one of the biggest challenges we see with digital transformations. They're considered as these big changes. And yet everything that we are talking about is lightweight, small steps. Learn as you go. Iterate as you go forward. And maybe this is a good point for us to just sit down and say, why do we recommend these small steps forward, reevaluate: versus what we've done in many organizations for decades, which is plan 12 months at a time with an eye to three years out. Why does it not work?

[00:02:16] Peter Maddison: It's never worked, well. It sometimes works, but if it does ever work, it's because there's somebody there who's managed to steer it with a great amount of influence and a sufficient amount of respect and charisma to be able to keep it all together.

[00:02:32] That's very, very difficult to do, and very few individuals can ever make that happen, especially not across a much larger organization. It becomes very difficult to keep all of that together because it's so complex. There's so many people involved. There's so many different things that need to change. There's so many areas that you're just not going to be aware of everything that needs to happen. That's why you need to start with the smallest possible changes.

[00:02:56] This idea that when we go through change, we have to go into the depth. The bigger the change, the deeper the depth and the longer it's going to take to get out of it. So, we're far better off having a series of smaller incremental changes, that we can come out of faster and learn from, than we are going through these massive changes that not only may take a very long time, but we may never come out of. We may just go into the chaos and just remain there.

[00:03:22] Dave Sharrock: I want to take issue a little bit with when you started that saying, these big changes never worked. The reality it has worked for many decades because if I look at the NASDAQ or the FOOTSY 100 and you look at how companies have performed, they've performed using this annual model for many years. But I do think there's a significant change out in the wild.

[00:03:41] One of them is just complexity of change. Every now and again, you look at the economy or you look at what's going on. In the last 10, 15 years, we've had 2008, the financial crisis, and then the pandemic comes through. These are huge events. So the pace of change and the complexity of the environments we work in, is just chalk and cheese different to what it was 20 years ago. But the other thing that really comes to mind, and this touches on another element that I talk about when we look at why big changes struggle to get the results that they're looking for, is that the people in the equation. Last year we were talking about the great resignation. The reality is, with remote work, a lot of people all of a sudden have choices of where they work, who they work for. That they didn't have three or four or five years. I certainly find that I'm talking to a lot of people who are shrugging their shoulders. They're confident that if they're not working here, they could go find somewhere else to work. So, that whole issue of complex environment, plus employees that have more choices than perhaps they've had in the past, means that the unintended consequences of making big changes, very rapidly snowball and dominate any conversations that you have.

[00:04:53] Peter Maddison: Yeah, I'd agree. I think that's very fair. The world around us has changed, right? There is so much more complexity, not just in our organizations, but outside of them too, which is driving a lot of change. And the mobility of people, it's so much easier now to say, "Hey, I want to go work over here and I don't actually need to leave my home to do so". There's a lot of fields where that's not true.

[00:05:13] Dave Sharrock: If I summarize a couple of the things that we're looking, because there's two important messages. One is, the idea of big change with big plans, and rolling that out. The problem is that's like pushing a huge boulder into the smallish lagoon or lake that we're in. The consequences of the waves that go out, that wash over the shores, are much bigger. And they're amplify in a complex environment. The way of navigating that is making smaller disruptions to your organization, and learning from the unintended consequences that are generated. And then make another small change, and learn from the unintended consequences. That shift from big change, sitting in a room, come up with a plan, a change plan communicated out from 1st of April, this is what we're going to do, and trace that through, is not as easy to do today because of that complexity in the environment. It changes how we look at things. A much better way is this, smaller changes, watch for the unintended consequences. So you can manage the unexpected, rather than get caught out by an avalanche of unexpected events.

[00:06:18] Peter Maddison: We started this by talking about annual budgeting season for a lot of organizations. That's a particular example, which can also drive some of the problems because not only are you being asked to come up with what are your plans, but now we're segmenting the funds into buckets. And that drives certain sets of behaviors and can often prevent some of those smaller incremental changes if things aren't well thought out around funding the way that we change.

[00:06:42] Dave Sharrock: There's the emotional tie in, right? If I spend eight week pouring over a plan as to how I'm going to do the change, I'm emotionally tied to it. I struggle to adapt to change because I've invested so much of myself. There's that sort of element that comes in as well.

[00:06:57] And I think the other thing that we were touching on is the people centric. We've talked a lot around digital transformations really being big key differences. I think we're now seeing, in knowledge work, in certain fields, an area where that's really becoming very relevant. People can get up and leave. When people do get up and leave, we want them come to our organization because of the environment we support, because of what we do.

[00:07:21] There are some brilliant people out there who've had experience going through these transformations. When you're talking about, what Gary Hamel talks about, making companies fit for human beings. There are people who have crossed that divide, and spent time working with organizations that are challenging that status quo. Learn from them, listen to them. Try and figure out what is of value that you can take away. Opening up your ears to listen to what can sometimes feel uncomfortable, but to get the innovation flowing.

[00:07:58] Peter Maddison: Yeah. You can help make your transformation more successful by ensuring that you're listening to others. You're not looking to copy, we're looking to learn. When we are talking about those small incremental changes, this really ties into that. We can learn, see what others have tried. Try it here. See what works, what doesn't work. Learn and improve, and move forward that way.

[00:08:15] Dave Sharrock: With digital transformations and the things that can make them really struggle to achieve any real outcome is lack of alignment. Starting it off in one part of the organization without really getting buy-in or alignment across the organization. So it stutters, really without a chance to succeed.

[00:08:35] Peter Maddison: Yeah. And conflicting priorities. One person over here has this set of objectives ,and this group over here has this set of objectives. What's required means that they need to collaborate, but they've got different set of objectives. These two things are not going to get you to where you want to go because they're two different pieces that don't meld.

[00:08:51] Dave Sharrock: I think we're leaving a period when new initiatives and strategic priorities were additive. They were added on to the responsibilities and the direction that are going on in the organization already. Those changes can no longer be additive. We only have so much attention. One of the hardest things to address is, if you are going to take this step forward, what are you going to stop doing? That's a tough conversation.

[00:09:17] Peter Maddison: Yes. This is the focus conversation. And having that alignment to all be focused, until we've learned from that and we're ready to reassess where we're going. I like the idea of change as BAU. Which I think is where you are going with that. It can no longer be an additive to the operational work that we're currently doing. We need to constantly be changing. Constantly be adapting, and looking at how do we build this into our standard way of operating and standard way of delivering.

[00:09:42] Dave Sharrock: Yeah, and I'd also argue it's not as simple as freeing up capital to be able to invest in that big change. It's not something that you can do outside of your daily operations. That then becomes something where there has to be those conversations around priority and consequentially what opportunities are we not going to chase. And I think that conversation is something that is quite rare.

[00:10:04] Peter Maddison: I would agree. So how should we sum this up for our listeners today?

[00:10:07] Dave Sharrock: I think we started out recognize big change versus iterative and incremental. This is a theme, if ever there's a thread that goes through all of our conversations. I think it's that focus on iterative and incremental. Small steps, small unintended consequences. Big changes, big unintended consequence. You spend all your time swamped by things you never even thought were going to be a problem. I think that's a huge takeaway. That doesn't mean those changes can't have ambition and be large over time. And that speaks to making sure there's alignment, making sure priorities are discussed. And the reality being opportunities are actually left on the table by choice.

[00:10:46] What else would you add?

[00:10:47] Peter Maddison: Making sure that it's about the people. The people are who need to change. The technology and the process are the easier parts. The people come first, so start there. Work out how are your people going to need to change as you go through this transformation. And the other piece is, go outside, learn, look at different spaces, learn from different fields, learn from different areas, because it will spark ideas that you may not have thought of that may apply to what you're doing. And give you some more insight.

[00:11:14] Dave Sharrock: Great point. Peter, thank you very much again for a fantastic conversation.