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Why business transformation projects fail

Author: ICAEW Insights

Published: 09 Mar 2022

Even with the most experienced leaders at the helm, businesses without a clear strategy, robust processes and a core personnel that is willing to change will face pitfalls in their transformation.

Business transformation is not new. Companies have had to learn to evolve and adapt to internal and external factors since the concept of commerce existed. Indeed, most of the world’s biggest companies today did not even exist two decades ago. And those that were at the top 20 years ago have either been subsumed into an entirely different organisation or have fallen by the wayside. With this plethora of historic examples of success and failure in business transformation, why do business leaders still sometimes get it wrong?

Arguably, the bigger the organisation the more complex the change can be. Typically, larger organisations have dozens of executives with decades of business experience in myriad industries and multiple resources available, and yet leaders in these organisations often face opprobrium for magnificent failures to turn around struggling companies or transform a certain section of the business.

Usually, the primary reason for failure is that the strategy and the overall vision was not clear from the outset.

Nadim Ahmad, former CFO and CEO and founder of transformation specialists Clyde Moray, says: “Your strategy and vision ultimately define what success will look like. But if you fail to set out your vision as a leader, that puts the business on a slippery slope, because lots of other things hang off the strategy and vision.”

This is also the finding in a new study, The 2021 Digital Transformation Report by Third Stage Consulting, which found that finance leaders who spent more time defining clear business processes prior to or early in their transformations were less likely to experience disruption or failure. 

Inertia is another reason for botched change projects. Apathy within the wider businesses and an inability to want to change, and core personnel who do not have the will to change or did not buy into the vision that was being laid out, will ultimately cause problems further down the line.

“I’ve seen that in organisations where key protagonists, who are absolutely critical to the overall functioning of the team or the business, have never bought into the vision and then tend to be a barrier and act as a real failure point in the transformation,” Ahmad says.

Despite most business transformations focusing on new systems, processes and technology, leaders often forget about their people. But it is the staff on the ground who will be the ones who enact and live those changes. Failure to ensure staff buy-in or early communication can also scupper transformation goals.

Ahmad says sometimes leaders forget to consult with the very department that is facing change, which can often lead to complications and delays further down the transformation journey.

PwC says businesses should focus on building processes and implementing tech in a way that empowers employees. The firm recommends rethinking traditional corporate hierarchies for communication, to “identify influencers throughout the organisation who can advocate the change and encourage them to spread the word to their peers”.

Nowadays, with the power of social media, the Big Four firm says that taking a less traditional communication approach internally, using blogs, social media, video and even 3D virtual-reality visualisations, will illustrate how the transformed organisation will operate.

Once a finance leader has built the business case, and secured the executive team’s buy-in and the funding, it is ultimately down to the leadership team to oversee the project. But often at this stage leaders take a step back and hand down responsibility to someone less senior and perhaps less capable of project-managing the transformation.

Experts say that at this point you really need an executive with project management experience who can check on deliverables at key stages and oversee governance reviews to ensure that the project is on track. 

“The magnitude of change triggered by 2020 has forced more transformation projects around the globe, putting a premium on effective project management,” according to Third Stage Consulting’s research.

Expertise, both internally and externally, is another hotspot for transformation success or failure. Key to avoiding failure is carefully blending external skills and capabilities with internal ones, bringing together a team of in-house and external expertise that can deliver a successful transformation. The pitfalls of managing a team then becomes even more challenging for the CFO because of the variety of external personalities, dynamics and conflicting incentives.

“You have to be an honest broker as the CFO, and understand, ‘Do I actually have the capability within my organisation to undertake a transformation?’ A transformation is not something that you do often and therefore it’s not a prerequisite that you’ll have the talent and the skills within your own organisation,” Ahmad says.

Having robust controls and processes in place at every stage will help CFOs and finance leaders overseeing transformation projects to overcome the obvious pitfalls and also the difficult moments in change projects, because as history shows and experts emphasise, all transformation projects will have precarious moments. The difference between success and failure is about whether the team has the right control and governance framework in place to meet the strategy and vision of change.

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