June 22, 2018

Procuring Digital Transformation? Tread Carefully.

By Lee Bourke

Digital transformation of an organisation is a complex undertaking that involves a change in culture that is more profound than both the technical and process changes combined.

A significant number of organisations lack the skills internally to deliver a transformation process and generally will rely on external parties to assist. If you accept the notion that the cultural change required will be greater than the organisational process change, then it makes selection of the right transformation partner a critical choice as they will not only need to change your processes and implement technology, they will need to influence a significant change in your organisational culture.

Most larger organisations would use a traditional tender process as a means of selecting an external party to assist with the transformation. Many service providers will bid for the business process transformation work, however they will give little attention to their responsibilities as it relates to the cultural transformation. Executives need to be aware of this and consider if a tender process is the right choice for such a crucial decision.

Tender processes are a common part of a modern corporate landscape. Essentially tenders are a great way of assessing the offerings of one company against another. They are incredibly valuable when procuring commoditised items. A commoditised item is easy to specify, easy to evaluate and lends itself to the creation of price competition. If, however, you are looking to procure a complex digital solution then the humble tender process, as it commonly functions, may not be the best tool for the job.

Solution procurement requires the selection of a partner that will be able to deliver an outcome where the journey to that outcome may not be readily apparent. That outcome also needs to come at a cost that is deemed acceptable to justify the project. Whilst digital transformation projects are becoming more common and better understood, there still exists the problem that it is nearly impossible to accurately determine the cost when the journey is still not readily known. Tender respondents deal with this by loading up the response with ‘caveats’. These are conditions placed in the response that are purposefully designed to ring out responsibility for situations that the respondent believes are likely to occur.  Add to this the complication where, generally, the team writing the tender has very little subject matter expertise in delivering a digital solution like the one being procured. This effectively creates a situation where an organisation can get extremely poor and costly outcomes.

At the time of awarding the tender it is impossible for the procuring organisation to understand what will happen next.  There is a chance that the selected party will deliver a marvellous outcome.  It can, and does happen, however, this is generally good luck not good management.  What often happens is a situation transpires where the selected party assumes little to no responsibility for assisting with the cultural transformation of the organisation.

In my experience cultural transformation issues are the thing most likely to cause you a significant project failure and / or cost blowout.  Modern technologies allow us to solve most technical issues in a reasonable time-frame.  What can’t be easily solved is an organisational culture that will not adapt to change. The respondent will not be too troubled by this as they will have placed enough ‘caveats’ into the agreements so that they will be able to bill their way through this phase of the project with very little motivation to assist with remediating any of the roadblocks.

One option available to an organisation considering undertaking a digital transformation is to focus on procuring a great partner as the highest priority.  Procuring a great partner will ensure that your organisational objectives are much more likely to be met at a cost the organisation can afford. A great partner will assist you to select and implement a great solution.

One way to start the process of finding a great partner is to see how they can and do solve a single digital problem for you.  If they do it well and achieve a great outcome, then you give them another problem to solve.  Obviously you are able to control the selection and timing of the problems being passed to the partner and if you hit a major hurdle with that partner you are then able to try another without having to back out of a large enterprise wide contract.

Implementing a single digital transformation project will allow you to assess the technical, management, leadership and cultural qualities of your partner. Measurable aspects of these qualities can be written into the engagement as key success criteria for the implementation along with the technical aspects of the solution. If the chosen partner delivers a great outcome, then you are able to contract for the next phase building in these key criteria.  If the outcome is less than great you will not have wasted a significant amount of organisational resource [time and money] to determine that you need a different partner.

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