Organizations have been investing heavily in business transformation projects in the hope of improving operations, increasing efficiency, and driving success. But the current trend suggests that these projects are failing at an alarming rate, with the benefits realization success rate often below 15%. This raises a series of provocative questions about why these initiatives are struggling to meet their objectives.
The data shows that business transformation initiatives have a lower success rate compared to process optimization initiatives[1][2][3][4][5]. Only 15% of business transformations achieve the desired benefits, while only 10% are performed within budget and only 15% are completed on schedule. On the other hand, process optimization initiatives seem to have a higher success rate, with 50% of them realizing their benefits, 70% being performed within budget, and 65% being completed on schedule.
What is causing this disparity? To determine the underlying causes of the success rates in business transformation and the reasons for the huge performance variance relative to process optimization initiatives, a more in-depth analysis is needed.
We need to understand the types of business transformations and process optimizations being performed, and their specific challenges, to provide more context and help determine the root causes. By looking for patterns and common themes among successful and unsuccessful initiatives, we have identified five fundamental building blocks as underlying factors that impact investments performance. These building blocks are complexity, proximity, pace of change, fragility, and uncertainty of demand and production. Understanding these building blocks can help organizations better prepare for and execute successful business transformation projects.
As organizations continue to invest heavily in business transformation projects, it’s becoming increasingly clear that these projects are failing at an alarming rate. In order to understand why and to improve outcomes in the future, three provocative questions are posed:
- Are we ignoring the key fundamental blocks in the planning and execution of business transformation projects? Are we underestimating the impact of the fundamental blocks?
- Are we focusing on the wrong metrics in business transformation and process optimization investments?
- Are we stuck in outdated methods of managing investments?
We’ll explore these further in upcoming blogs.
[1] Hammer, Michael; Champy, James. Reengineering the Corporation, HarperCollins, 2009
[2] Joseph L. Bower, Clark G. Gilbert, from resource allocation to strategy, oxford university press, 2005
[3] Harry Robinson, Mckinsey @Company, 2019
[4] Blake Morgan, Companies That Failed At Digital Transformation And What We Can Learn From Them, Forbes, 2019
[5] Hung LeHong, Graham Waller, Digital Business Ambition: Transform or Optimize? Gartner, 2018
