Blog post
Large enterprises and digital transformation
Less than 5% of the Fortune 500 companies were established in this century and more than 70% are older than 40 years. Members of this prestigious group are characterized by their top revenues and stability in the market, which, combined with their aforementioned maturity, brings us to the fact that most of them are highly complex, well structured, have a strict hierarchical structure and are “process heavy”.
At the same time, the importance of digital transformation and building new digital channels between businesses and their customers is continuing to grow, without any sign of slowing down. This is especially relevant for those older and traditional large enterprises that have no other choice but to fully dive into digital transformation, in order to keep up with emerging customer demands and therefore potentially survive in the next 5-10 years.
The challenges
So, what are the typical challenges these enterprises face when they decide to start with a digital transformation? Challenges start with their inadequate (in the context of the requirements of the digital transformation) organizational structure, their capacity to efficiently execute the transformation itself and finally the ability to update their internal operational processes, both within their specific internal sectors like Finance, Sales, Production, IT, R&D and in the area of the cooperation and interaction of these sectors with each other.
One of the good examples of such a gap between the organizational readiness and their need to transform can be observed at the moment when a traditional enterprise decides to implement a new core software solution, or to build a new digital channel with the market. This is the moment when they usually start following their internal process that worked for them in the past, such as specifying the project request, budgeting, approving, procuring, monitoring fixed price, scope and timeline delivery, and finally accepting the project at the end.
We can also add a classical maintenance as the next phase, to complete the picture.
Internal processes slowing down the transformation
However, in the attempt of their implementation and integration within the large traditional enterprise, digital projects of such scale and complexity can seriously challenge existing internal processes and create a huge stress on the organization. We’ll walk quickly through the steps, together with the associated challenges and doubts.
- Specifying the project request: Does the organization have the knowledge and the needed resources to do this? Can they freeze the requirements at one moment, knowing that the market around is changing rapidly?
- Budgeting and approving the project: Is it possible to fix the budget for the project which is not fully defined?
- Procuring: Can the organization build and send a clear and precise project request to potential vendors? Can the estimates from the vendors, based upon defined requirements, be competently analyzed, and, if needed, challenged? Which are the key criteria for selecting the right partner for the project? Price, capability to deliver, or the level of their commitment to the project’s success?
- Monitoring the execution of the fixed price/scope/timeline project: Is it possible to deliver a 6-12 months digital project without adjusting or fine tuning the original idea along the way, in order to adapt to the constantly emerging and changing needs of their customers? It gets even more difficult in case the organization is driving more than one digital project at the same time, which is very often a realistic situation.
- Accepting the project: Would the market permit long development times typical for waterfall scenarios typically preferred by the large enterprises? Are the internal processes mature enough to implement a phased delivery, or, ideally rapid, incremental and agile delivery, acceptance and integration cycles? Can the organization pivot mid-project easily and quickly, if the market dictates such an action?
Impact on business priorities
I have listed just a few of the obvious challenges and potential blockers that traditional enterprises can face while trying to implement a digital project, which should help them to be more efficient, more automated, more competitive in the market, or to have more satisfied and loyal customers. All of these top business priorities are at risk if these challenges are not addressed properly and on time.
Budgeting processes can produce inaccurate results, potentially under-budgeting the project and thus jeopardizing its execution, or over-budgeting it and thus potentially preventing it from being internally approved.
Procurement process can take longer than expected, because vendors are not sure about the requirements, so the received offers are highly different and inconsistent. This can potentially lead to selecting not the best, or even an inadequate vendor for the project, which can then lead to the project execution disaster.
Last, monitoring and managing the execution of the project, with the intention to have it completed within the fixed agreed upon price, scope and the timeline, spanning over 6-12 months, or more, which touches or involves multiple organizations’ business units and which potentially needs to integrate with various internal and external systems, this is a gigantic task that most of traditional enterprises are simply not able to pull through to the end by themselves.
The solution
I have listed just a few of the obvious challenges and potential blockers that traditional enterprises can face while trying to implement a digital project, which should help them to be more efficient, more automated, more competitive in the market, or to have more satisfied and loyal customers. All of these top business priorities are at risk if these challenges are not addressed properly and on time.
So, the question is, is there a way how large traditional enterprises can keep all the characteristics which make them large, structured and stable and at the same time digitally transform themselves, by implementing strategic, comprehensive digital projects?
Is there a way they can quickly launch successful solutions and apps that make them more competitive in the market, like so many small agile startups are doing every day?
The way I see it, the solution lies in executing two main streams of strategic directions and actions that a traditional large enterprise should undertake:
- First, bringing the agility in their existing processes;
- Second, surrounding themselves with a network of reliable, highly skilled, agile partners.
I will give more detail about both streams of strategic directions and actions by going through the same process traditional enterprises follow after deciding to implement a new core software solution, or e.g. to build a new digital channel with the market.
- Specifying the project request: Bringing agility in this phase means that not 100% of the project requirements needs to be fully defined in this phase. The focus should be on the big picture, key business goals that need to get achieved and on the key project requirements. Top priorities can be planned in the first phase of the project and these can be specified in more detail. The rest can be split into different project phases, also allowing different organizations’ business units and sectors to plan their involvement. Involving a skilled external partner in this phase can also significantly improve the process, because the partner will use his relevant planning knowledge from other projects and his technical knowledge as well, and will improve the overall efficiency and accuracy of this phase. The result? A more realistic project scope, with higher chances for the successful implementation. Moreover, system analysis, requirements discovery and capture processes require very specific set of skills and expertise, which, if absent, can (and often does) produce requirements that are incomplete, inconsistent with the existing IT environment or even partially unimplementable - sometimes making the situation even worse than if there were no documented requirements at all.
- Budgeting and approving the project: As the project requirements will not be fully specified, bringing agility into this phase means that the budgeting process should adapt to such new reality as well. Project budgets should be planned with more precision only for the first phase of the project, while more flexibility should be applied for the later phases. However, this doesn’t mean that the budget can’t be planned precisely for these remaining phases, not at all. What it means is that the organization can fix the precise budget for the whole project already at the beginning, but should be ready to accept a flexibility in the scope of software functionalities that will be delivered within that budget, as well as in their prioritisation. A partner with strong experience in planning and estimating complex projects will bring a tangible value to this phase, helping the organization to identify which project priorities can be fulfilled within the assumed budget, how are the expected software features distributed in regards to their complexity and cost, what are the potential deviations from the initial estimations and at the end, what is the potential impact on the planned budget. The result? A more realistic budget, increasing the chances of project success.
- Procuring: Bringing agility into this phase means that potential partners should be evaluated from more different angles, shifting the biggest focus from the price of their offer to other areas, like: the project approach they are suggesting, their ability to deliver, transparency in challenging the project requirements, or in communicating potential project risks, offered project delivery and risk mitigation methodology and to the stability and maturity of their team. Also, besides all these important evaluation factors, one of the key results of the procurement phase should be a solid understanding about which of the vendors can be trusted to deliver the project and which can’t and why. The role of the partner in this phase is to be transparent about his offered services and anticipated risks and to make sure that there is a high level of understanding with the organization, without hesitation. Such an attitude will result in creating trust, which is probably the most important ingredient in executing complex and demanding projects. The result? Efficient project delivery with clear mutual expectations and trust between the organization and the partner.
- Monitoring the execution of the fixed price/scope/timeline of the project: If all the previous steps of specifying the requirements, planning, budgeting and procuring are transformed to a more agile way and if the right partner is selected, then the responsibility of the organization is not anymore to watch out that the predefined project milestones are delivered exactly as expected and when expected, but rather to take care that the key goals of the project are consistently achieved and that the velocity of the project is at the expected level. Budgets are, in this case, more related to the size of the partner’s team and to the duration of the project, and not to the predefined fixed scope, which sets the key task of the organization - to consistently work on the prioritization of the project features and to make sure that they are delivered in smaller chunks of work, or sprints, launched as quickly as possible. The role of the trusted partner in this phase is on one hand to support the agreed project delivery model with its professional services and capabilities, and on the other hand to constantly coach the organization on improving the project delivery processes and methodologies, cooperation between teams, technical decisions on the project and the project overall effectiveness. The result? Maximum number of top project priorities delivered in the first phases of the project, enabling the organization to test them early. While having full control over the budget, the organization has the necessary flexibility in shifting priorities, changing tasks and project requirements, depending on the current business situation or market demands.
- Accepting the project at the end: There is no more need for a “big bang” project acceptance at the end, which the whole organization has waited for for so long . In the meantime, nobody had the real chance to witness what the project is going to deliver - or even if the implemented solution is being developed in tune with ever changing market requirements, that is, until the last moment - the monumental acceptance event, when, unfortunately, any significant change in the project features (or realization that some features worked on paper but not “on screen”) becomes prohibitively expensive. In contrast, in the case of organizations that applied a more agile approach, they are at that moment rather having just another project milestone, where they can decide if the project is now at the satisfactory level of delivered functionality, or it needs to continue going for a while, or permanently, depending on the business priorities and available budgets.
The conclusion
Despite the fact that the enormous growth of new technologies and software applications was, and still is, strongly adapted by small, innovative, creative and agile startups, large traditional enterprises need to digitally transform their internal and external operations as well, and build new digital channels with their customers in order to stay competitive, or, dare we say, to survive.
We have also found out that such large IT projects, and their peculiarities with which the typical organization is, at least to a certain degree, unfamiliar, can, and often do, become a huge stress on the organization itself as whole.
In order to avoid those risks, or to increase their chances of succeeding, they need to strategically change their internal processes and start partnering with experienced, agile partners, who can support them along the way.
