Should Digital Projects Always Deliver Value?

2020 turned out to be the year with massive adoption of digital transformation. Some companies used AI and automation strategically to transform their business models, while others used bots and machine learning to deal with business disruption. Some companies had great tangible value creation as a result of their digital projects and others are not sure about the value.

How can we make sure that every digital project delivers measurable value?

Transcript

2020 turned out to be the year with massive adoption of digital transformation. Some companies used AI and automation strategically to transform their business models, while others used bots and machine learning to deal with business disruption. Some companies had great tangible value creation as a result of their digital projects and others are not sure about the value.

How can we make sure that every digital project delivers measurable value?

I have seen hundreds of digital projects start in the last 2 years. Most of them had compelling business cases and aspirational goals. In fact I've never seen a business case I didn't like. However, that is a world of difference between planning and execution. Every business analyst can fill out a business case template for a project. Very few consistently commit to delivering the targeted results. Research shows though that only 30% of the digital projects create measurable benefits. In cash-flow terms, in EBITDA and not in soft metrics. Value realization is a skill of execution and not analysis. It is fair to say that many digital transformations have an execution gap. The difference between aspirations and reality.

Experts often point to a lack of executive sponsors or a lack of digital skills as the causes of project problems. Or maybe unrealistic expectations from the technology. 

I think it is much simpler. When someone asks me how they can make sure they get value from digital transformation, I ask them to show me who their Chief Value Creation Officer is. Who is the executive whose success is on the line if the project does not deliver? Sometimes it is the CFO or can be the Chief Digital Officer or CTO. I always want to know if they are responsible for the P&L impact or just project go-live.

In my experience, the reason there are so many digital pilots and experiments with unclear value is that no-one there is accountable for delivering the measurable results. 

If you have a business case for the program, someone with a P&L role should commit to delivering it. It's that simple. A typical CEO or CRO commits to revenue targets with plenty of uncertainty in the market and then they deliver on the plan by assigning the necessary resources.

In the same way, a Digital Transformation program should set compelling targets, commit to them and deliver with the right resources. No one can convince me that there is more certainly to the success of a sales growth program than a digital program. Both face uncertainties, yet more companies deliver their sales goals than their digital goals. The ones that do treat all strategic business commitments equally important.

The Value Creation Officer, whatever their real title is, should be able to allocate the necessary resources to the success of the program. They should be able to make tradeoffs. Some business cases show 80% IRR in a business that delivers 20% IRR normally. A rational person would allocate resources from the core business to the higher return of the digital transformation. But that only works if they have the authority to make that allocation. Otherwise, new initiatives will be under-resourced and relegated to experimentations, and their value destined to be limited.

Once the Value Creation Chief is identified, there needs to be a consistent mechanism to measure the generated value. Unless they are in a lean or 6 sigma shop, most businesses have no consistent value creation governance. The value creation officer needs to have a value management office for the digital initiative that measures and reports progress towards benefit realization. The value realization discipline is nothing new, there are many vendors that provide tools to track project benefits. Most companies don't do it because they are funding digital programs out of regular budgets. Therefore they remain small, with limited impact and the lack of value cycle continues.

There seems to be a different plan that successful transformational projects follow:

1. They have an audacious value goal - the art of the possible that would excite the board, the employees, and the investors
2. They have a business executive who owns that value target the same way the CEO owns the revenue goals
3. They measure and manage progress towards value creation targets
4. They expedite resources to deliver the digital project the same way you would expedite an urgent customer order

Once the business treats digital transformation goals as important as its core business goals, results will follow.