Part 4: Making Transformation Real

In Part 3, we looked at how the enterprise architect’s expertise is valuable in shaping and driving technically related aspects of transformation planning and execution–from creating a pragmatic, achievable roadmap and digital delivery capability to building development and delivery teams and a case that justifies investment in technology assets, and more.

Building a Defensible Business Case 

To garner approval for investing capital and other resources that are the crux of a digital store transformation, it’s necessary to build a business case. However, since proving a watertight ROI is the most difficult aspect of a digital transformation program, a different approach to justification is required that focuses on showing quick value on key pain points to prove the value of the technology and strategy to senior leaders. Unlike previous technology cycles, today’s digitally driven world poses a danger in waiting until you can prove rock-solid full-program ROI. Slowing or delaying the start of meaningful change  allows competitors to get a head start, forcing your organization into the laggard position, having to play catch-up and work doubly hard to win back customers.  

But committing funds without a good sense of likely outcomes and financial returns is equally problematic. Building a business case for transformation is the crucial element to bridge this gap. The creation of your business case will be part art and part science. And even with the full business case, to maintain momentum, senior executives and Board members will need to become comfortable in making decisions that align their in-depth industry experience with ‘gut feel’ about future opportunities. Changing the way technology is delivered by ensuring agility and rapid cycles of build, test, and learn is what enables the execution of business judgments versus relying only on fact- or data-based decisions. Judgment-based decision making is a common aspect of investing in digital transformation.  

While the evolving and fast-changing  nature of digital transformation journeys can make the initial decision difficult, the planned, incremental steps of the process allow for discrete investment decisions that can be made progressively with phased release of funding as a control mechanism. CFOs and risk managers welcome this approach, provided each phase delivers expected value, whether financial or intangible.  

Tranches of funding tied to milestones and achievements with defined outcomes and value provide a way to manage investment risk. This approach also helps manage and support the changes in direction and priorities that arise as learnings collected from transformation processes. 

In the new reality of the digital world, a business case is prepared at a point in time and signed off, then morphs into a living, dynamic management tool. A series of business cases will be prepared progressively to accommodate an unknown future.  

A successful business case also includes:  

• Vision and strategy 
• Senior leader advocacy  
• Roadmap with short and long-term actions and major milestones that support phased funding 
• Relevant value metrics  
• Adjust plans based on reality 

Vision and Strategy.  

A clear vision and strategy for digital transformation must precede submitting a business case. There is no point taking a business case to the Board if they have not already bought into the idea of digital disruption, the imperative for change, and a new vision for the business. It is typically the responsibility of the CEO to articulate the vision and present strategy to the Board for approval.  

Doing so typically requires multiple conversations with individual Board members. A well-articulated, formally presented strategy paves the way for these discussions, which provide  greater clarity and deeper examination of the transformation agenda, the proposed roadmap, and the business case arguments. Then, it will be the right time to ask for formal Board approval.  

Senior Leader Advocacy  

Winning backing for a digital transformation case takes time and requires support from most areas and multiple levels of the organization. It is a complex story, built with many fact-based assumptions rather than precise, set-in-stone steps, dates, outcomes, and value. Furthermore, every organization has a history of past projects, some of which introduced a new technology that didn't deliver promised outcomes. Past disappointing results can make some Board members wary of large change initiatives or skeptical of the value of technology.  

A strong and articulate senior advocate can be a powerful ally in recruiting support across the organization for the transformation case. In particular, a credible and trusted senior leader who has influence with Board members and can explain the plan, the benefits, and the risks in language they understand is instrumental in elevating the business case onto the Board’s formal decision agenda.

Pragmatic Roadmap  

Once the concept of transformation and the goals and broad strategy are accepted, the next step is developing a pragmatic roadmap that describes how the transformation will be achieved, setting out short- and long-term actions and providing major milestones during the journey. This is also the basis for creating workable project management plans for major initiatives.  

Importantly, it spells out when initiatives will start and are expected to finish and when business leaders can expect to see value delivered (see Value Metrics below). This information is central to the management of phased funding which, as discussed earlier, helps facilitate investment decisions and risk management. 

Short-term initiatives should be quite detailed around objectives, execution plans, resources, and expected outcomes while longer-term initiatives will be clearly framed but the details will, of course, be less defined. The key to longer term initiative planning is allowing, and gaining support for, flexibility in the roadmap that will enable adjustments based on findings and learnings from earlier projects.  

Value Metrics  

As previously discussed, proving a hard ROI up front is a very challenging aspect of a digital transformation project. While project costs are generally easier to estimate and measure, the quantum of proposed changes and the embedded agility of the journey make it difficult to accurately predict the future state and outcomes.  

It is important to identify relevant value metrics from the outset so that success or failure can be monitored and continually assessed. Some will be hard metrics (e.g. customer visits, orders, average basket size, abandoned shopping carts, revenue), while others will necessarily be soft indicators such as productivity, executive pulse, staff engagement, brand sentiment, and customer satisfaction.  

Establishing metrics is not always straightforward. For instance, some may not become effective until later stages of the transformation journey, and so the applicability of metrics also needs to be built into the plan. Also, consider metrics that don’t have an established baseline in the current business, such as mobile app downloads or customer NPS.  

Adjust Plans Based on Reality.  

In many cases, when retailers embark on a digital transformation journey they do not, and cannot, have full control of the environment in which their business is operating. Along the digital transformation journey, things change – some by design and some due to dynamic customer expectations and competitive marketplace. Accordingly, there is a need for continual monitoring and preparedness to learn and quickly adjust plans and development priorities.  

To do this, regular feedback is vital, along with continual assessment of progress and evaluation of outcomes (coming soon in PART 5 of our series). Particularly under a phased funding model, it is important to regularly report progress and achievements and flag potential misses, unexpected obstacles, and shortfalls as early as possible. This depends on a culture that embraces missteps and failure to get desired results as valuable learning opportunities (See PART 1).

Furthermore, metrics may prove either ineffective or reach a point where they are no longer relevant. In other cases, metrics may be appropriate but expected ROI is not realized. Either way, metrics must be constantly reviewed for relevance and effectiveness as the transformation journey progresses.  

Ongoing Communication.  

Transparency and clarity must balance uncertainty throughout the digital transformation journey. To achieve this balance, regular communication is vital for maintaining momentum, focus, and confidence as unexpected obstacles and other discoveries necessitate a change in direction and replanning.  

Communication must start as early as possible (well before the business case is presented) and continue throughout the journey, guided by a well thought out communication plan. All stakeholders should be updated regularly and proactively using a range of methods, media, and supporting documents to ensure that everyone continues to understand and support the program. With many different stakeholders to be engaged, the appointment of a comms professional is advisable.  

While the focus of communication in the early stages is to explain the plan and win support and initial investment approval, going forward, every opportunity should be taken to publicize progress, milestones and successes, while also sharing discoveries and changes in direction. Major events and achievements should be celebrated with staff as this helps build morale, energy, and confidence for the next stage of the journey.