Rachel's reflections from the forefront of innovation management & stakeholder engagement.
Very seldom do you find the informed and the empowered in the same room. Is this why less than 30 percent of digital transformations succeed?
The informed have the information that constitutes the lifeblood of your digital transformation. The empowered make the decisions that guide it. Without the informed, the empowered cannot lead effectively. Without the empowered, the informed lack authority and often decisiveness.
To succeed in digital transformation, the empowered must be informed and the informed must be empowered. They have to be brought together.
With more than 70 percent of digital transformations failing, there has to be some reason, some endemic underlying factor or factors, some silent killers of these initiatives. What happens when the informed and the empowered do not connect?
People inside leadership and their priorities matter. People outside of leadership and their needs matter. These groups, along with their priorities and needs, must be aligned to create results that matter to the organization – results that enable transformation. Without this alignment between people inside and outside of leadership, those within your organization will not share a common understanding of the transformation initiative: its mission, goals, and execution. This includes people who lead (the empowered) and those who provide the technical execution (the informed). This shared understanding is cultivated when you invest the time to create and obtain buy-in and proactively engage with people both inside and outside of leadership to drive transformational outcomes. You manage expectations and ensure that the priorities of leadership align with the aggregated needs of non-leaders. Only then can alignment grow and survive.
Hidden roadblocks to execution threaten and degrade digital transformations. When the empowered and the informed do not connect, we fail to uncover our blind spots and our unknown unknowns (i.e. things that we are neither aware of nor understand – things that have an outsized impact on initiatives and cannot be handled through a checklist). When you get the right people in the right room at the right time to discuss the right questions, create new value, and resolve issues, you can examine your assumptions, uncover blind spots, and prepare to take on your unknown unknowns.
We have to connect with each other, especially at key moments and with the right structure. During a digital transformation, adequate touchpoints of reference and correction mean we ensure that the aggregated and reconciled stakeholder needs discovered at the beginning of the transformation effort are satisfied. If we find that these needs have not been satisfied, we can course-correct before we veer too far off course and the intended results of the transformation fail to materialize.
That goes beyond just checking off requirements. Having adequate touchpoints means that we work to ensure the satisfaction of the underlying needs of an initiative’s stakeholders. These needs must be connected directly to the requirements. As business conditions change and needs shift, we need to understand which requirements are impacted. We can only do this if stakeholder needs can be traced to requirements and, ultimately, strategy. When this happens, we do not lose ourselves in the individual trees of the requirements. We prioritize the overall health of the forest of needs.
In a 2018 study, “Unlocking Success in Digital Transformations,” McKinsey set out to determine the 21 keys to success that best explain why organizations succeed in digital transformations. The list includes important considerations like getting executive support for the transformation, adding digital transformation SMEs to the project steering committee, and reminding executives to foster an environment that welcomes new ideas.
Not once do any of these three silent killers appear within those 21 keys to success.
For the study, McKinsey tested 83 practices and identified the 21 most important when achieving success in digital transformations. And they never chose alignment, roadblocks to execution, or touchpoints of reference or correction.
The word alignment does not even appear in the report.
Perhaps this is the real reason why digital transformation efforts have a success rate of less than 30 percent.
It is not just McKinsey. Other experts in strategy, technology, and project management miss it too. In software development, Agile prioritizes delivering tech solutions—not the creation of alignment inside and outside of leadership that is tangentially connected to the development effort. Agile does not directly take on the responsibility of uncovering and removing the hidden roadblocks to execution, including diffusing blind spots and ensuring the right people are in the right room at the right time to discuss the issue at hand.
The traditional Iron Triangle of project management, in use since the 1960s, posits that the components of project success lie in time, cost, and scope—and that “quality” results when these three legs of the triangle are achieved. How customer satisfaction (the only acceptable definition of quality) results from delivering projects on time, within budget and fulfilling requirements is not clear. No one takes responsibility for ensuring that the client’s needs are met through those requirements.
In digital transformations, alignment is critical and resolving roadblocks to execution goes hand-in-hand with that alignment. Having points of reference and correction throughout the initiative is critical too—or roadblocks will emerge and the empowered will not know of them until it is too late to save the initiative.
These three silent killers are interrelated and holistic—and they are often forgotten because no one has been directly assigned these responsibilities. When requirements are signed off, projects are marked as completed, and invoices get paid, it is the informed end-users and customers (internal or external) who are often left holding the bag. The empowered go on believing the dashboards and status reports, but they are rarely informed of the reality from the trenches: 84 percent of digital transformation participants report that their organizations’ digital transformations have failed to improve performance or equip them to navigate change in the future, according to McKinsey.
This is a stark reality to encounter after we have poured all that time, energy, and money into trying to do just that. McKinsey’s research extends into the abysmal success rates of individual industries too. In brick-and-mortar industries such as oil and gas, infrastructure, and automotive, transformation success rates rarely leave the single digits and range between 4 and 11 percent. Even among “digitally savvy” industries like telecoms and high tech, success rates do not exceed 26 percent, according to McKinsey.
When the empowered are not informed and the informed are not empowered, digital transformations fail, en masse, and we may not even know until something breaks down later, leaving us to wonder which of our initiatives did not truly succeed. This is why it is so critical to tackle the three silent killers of digital transformations as part of the planning and execution stages of any initiative.
Technology does not transform itself. For organizational and digital transformation initiatives to succeed, we have to communicate—and with the right people. That sounds simple; so, where do we go wrong in the workplace? We learn to communicate when we’re young, often soon after birth, through gestures and facial expressions. Most of us say our first words around twelve months of age.
Why do we still struggle to effectively communicate years, and even decades, into our careers?
An entire body of research exists in the non-governmental organization (NGO) space. It says that NGO initiatives live and die based on whether their leaders get buy-in from low-power, high-interest local communities—who literally often speak a different language than the people who “come to help them.”
This results-oriented communications and engagement research rarely stems from technology initiatives because we know that nearly two-thirds of IT projects are unsuccessful. That does not suggest that we have mastered communication in corporate circles. Indeed, we have a long road to travel before we get there.
Communication flows both ways. It is a two-way street. It is localized, meaning it is relevant among parties to the conversation. When we communicate effectively, we localize what we say to reflect appropriate timeframes and content. We use words that respect departments, organizations, and industries. We speak the same language.
Both sides can exchange views and information. Each person practices active listening. They feel that their concerns can be addressed. Each person feels heard, which drives them to contribute and enables them to add new value.
In researching innovation culture at Fortune 1000 companies, Drs. Dobni and Nelson surveyed over 1,100 executives and found that the biggest barrier to innovation was not creativity, but empowerment. Missed opportunities, they concluded, result from the gap between creating knowledge for innovation and the ability to communicate it.
For its 2017 “Global State of Innovation Survey,” a research team led by InnovationOne CEO Victor Assad spoke with over 400 companies, finding that “high innovators use culture management to promote internal collaborative cultures.” They go on to say that those highly innovative companies outperform their competitors by a margin approaching 2 to 1.
People spend their careers learning how to communicate with executives. But, how do you communicate with other people who are affected by your initiatives? Who are the stakeholders most likely to be left behind?
Stakeholders with lower power are often forgotten in the rush to deliver on projects and communicate our successes. They are the end users, the tangential people, the secondary and tertiary stakeholders, often front-line individual contributors who rely on collaboration with others to perform their job duties. These uniquely informed individuals are almost never in the same room with the organization’s empowered decision makers.
These low-power, high-interest stakeholders get swallowed in the ripple effect of poor communication. The outcome of the project may deeply affect them. They have high interest. But, they most often do not feel seen, heard, or listened to. That oversight contributes to the high failure rate of transformational initiatives in our companies.
We cannot have effective communication if we have not identified all an initiative’s stakeholders. That requires emotional intelligence (EQ) and a knowledge of an organization, its members, and how they interact and interrelate.
The Discovery Process that identifies those stakeholders is often the most critical step in an initiative—and, just as often, improperly executed. This has a negative domino effect on the entire initiative’s ability to have the right people in the right room at the right time to discuss the right questions, create new value, and resolve issues. Identifying these stakeholders accurately and completely takes communication skills coupled with emotional intelligence to understand your organization and its inner workings.
Stakeholder discovery is not a directive, command-and-control exercise. Rather, it requires action that aligns with servant leadership and eschews an “our people will use whatever we give them and make it work” mentality, which has never been attributed to driving new value.
Before we can pledge to improve communication, we must identify all the recipients of that communication—and that takes emotional intelligence. Only then will we get the alignment that allows a culture of consistent innovation, which is the lifeblood of our organizations.
It seems like obvious logic: If you want to stay relevant, you must transform and innovate. To do this consistently, you must have a robust Capability to Innovate (CTI). Technology does not transform itself—CTI requires people. Those people must be actively supported, which is the practice of engaging through emotional intelligence (EQ) and a leadership style that focuses on removing roadblocks while enabling people to be heard and add value (servant leadership being a prime example).
But, if the logic is so obvious: to expand your CTI, you must develop your EQ and adopt a leadership style that aligns with servant leadership, why will half of today’s S&P 500 firms drop from the index over the next decade?
Maybe companies are failing to stay relevant (or even alive) because when leaders come together to build Capability to Innovate (CTI) and transform their organizations, they are not speaking the same language as their peers, customers, and stakeholders—they aren’t meeting people where they are.
Even well-regarded management consultants get it wrong. Recently, I was reading an exchange between two senior-level business leaders about servant leadership—what it is and why it is important. The first provided a definition that was a glancing blow at best—bringing the right values and character to leadership and leaving self-importance behind.
The second executive agreed and complimented the first for defining servant leadership so well. Except they did not. The definition completely missed the mark.
How can today’s organizations build the CTI they need to survive if senior leaders and consultants cannot even define the leadership style they need to get there?
Servant leadership is a leadership style that asks, ‘how can I help you thrive? how can I help you succeed?’ Servant leadership is an action. It is not a collection of values. It is definitely not being the magnanimous leader standing on high and saying, ‘you matter too’.
As leaders, we should care about servant leadership because it develops and increases our CTI consistently. When we innovate, we create new value. When we create new value, we survive.
To innovate and not be one of the many companies that will die and fade into irrelevance, managers exist to support and expand a firm’s CTI. In their paper, Strategy shift: Integrating strategy and the firm’s capability to innovate, researchers from the Edwards School of Business at the University of Saskatchewan and the Munich University of Applied Sciences lay out the prescriptive actions leaders need to take to generate their organization’s CTI and embrace servant leadership. Among them are:
When leaders embrace the servant leadership style of management and eschew command-and-control tactics, this generates cultural change and even disruption. The strategic benefits far outweigh the transitional costs.
Transformative change comes when leaders spend less time directing people and more time supporting them. Companies build CTI and thrive when they build a culture that supports all voices at the table and the innovation they create.
Leadership courses tiptoe around opining on the different leadership styles. No one seems to want to say that if you are using command-and-control leadership, this is ill-advised for you and your organization.
If you want to be relevant, you need to innovate and increase your organization’s CTI. To do that, your employees must be active stakeholders in your long-term plan. They need to understand the value they bring to your strategy so they know how to distinguish projects and tasks that generate innovation and value from those that do not.
They cannot get there if they are commanded and controlled. Employees generate innovation when leaders leverage servant-leadership.
In their 2020 CHAOS report, the Standish Group calls servant leadership “a move from a top-down command-and-control mode of operation to one that is more about empowering smaller self-directed teams that create solutions through collective consensus.”
Servant leadership means taking a risk as a leader and putting the needs and success of your employees ahead of your own individual interests. It’s moving away from the zero-sum game of command-and-control leadership to embrace the idea that we all sink or swim together.
Servant leadership requires emotional intelligence (EQ). EQ means we recognize and leverage emotion when we communicate with people around us and make decisions, that our emotions help us conquer challenges and not create them.
As leaders, we need to understand where each one of us ends and someone else begins. We cannot grow CTI alone; we need the help of those around us. To better engage our peers and employees, we need to embrace a leadership style that aligns with servant leadership.
To embrace servant leadership, we need emotional intelligence. Only then will we create and grow CTI and actually innovate consistently. And, remember, only the companies that can innovate and transform consistently will survive.
Look up from your phone. How much of your tech was with you ten years ago, even five? The average consumer in the US replaced their mobile phone every 24.7 months in 2018, according to Kantar Worldpanel data reported by CNBC. What isn’t innovative gets left behind. Who else here has a drawer of forgotten ancient cell phones at home?
This extends to Corporate America. In a 2016 executive briefing, innovation consulting firm Innosight reported that the average tenure of corporations in the S&P 500 Index had dropped from 33 years in 1965 to 20 by 1990. Innosight went on to predict that this tenure would shrink to just 14 years by 2026.
With a churn rate like that, some 50 percent of today’s S&P 500 firms will drop from the index over the next decade as we come upon “a period of heightened volatility for leading companies across a range of industries, with the next ten years shaping up to be the most potentially turbulent in modern history,” according to Innosight.
Change comes increasingly faster as we progress deeper into the 21st century. Companies, like living things, get left behind when they fail to evolve and adapt to market and societal changes—in this case, the push to execute the right changes—and to stay innovative.
Everyone today says they’re disruptive, or they’re bringing change and revolution to their vertical or industry. What the S&P data shows is that more important than innovation is the path to innovation you choose. BlackBerry innovated. But, they’re clearly not winning the mobile phone wars today. America Online, Blockbuster Video, Borders—they’re the names of companies that once commanded the attention of markets, academic researchers, and investors. Today, innovators and investors chase IoT, machine learning, natural language generation, and computer vision. Many will bring change to the digital transformation landscape, but only a fraction will deliver innovation and lasting value.
Attempts at sustained innovation fail without a culture of innovation that consistently creates new value.
Here’s something that may surprise you: the innovation that works isn’t the innovation that’s linked to your company’s strategy.
When you align your innovation with your stakeholders, you get the change that matters.
Think about it. When you align an initiative solely around a corporate strategy without considering the needs of your internal and external stakeholders, you remove those people from your strategy. The change you’re creating is not the innovation you need. It’s not innovation if it does not create new value. Your strategy—and all the initiatives tied to it—fails without proper alignment.
Aligning around strategy means aligning around executives, their strategic direction, and an exceedingly small component of your organization’s collective intelligence. This results in blind spots if you’re not considering other strategies, points of view, and the needs of your stakeholders, both internal and external. Leaders at the forefront of innovative companies consider their organization’s culture.
“Culture eats strategy for breakfast.” These words, from management consultant Peter Drucker, do not mean strategy isn’t important. Rather, they mean that both culture and strategy are important. To pursue one and not the other means you probably won’t succeed.
When business models can be replicated—as McKinsey notes in an April 2021 article—culture emerges as the competitive advantage that separates those who do really well from that just do well enough.
When you align around your culture, your customers, and people inside and outside of leadership, you enable a greater execution of your mission. This fosters the flexibility you need to navigate toward the right strategy, the one that allows innovation that delivers value and enables continued corporate survival … at least for the next decade.
By setting your initiatives to coalesce around innovation, strategy, customers, and people inside and outside of leadership, you get alignment that brings innovative power together and not silos that break it apart. You harness the knowledge and experience of all of your stakeholders, including your low-power, high-interest, high-impact people. You get ideas that engage, reflect your company’s values, and innovate with the true energy of your workforce and not the halfhearted climb toward an arbitrary metric to hit a milestone or target.
Aligning the priorities of people inside leadership with the needs of people outside leadership converts the force of your culture into a tailwind that propels the implementation of projects, initiatives, and innovation. It gives you innovative alignment.
Innovative alignment: You enrich your culture. You empower your stakeholders and customers. You succeed in your initiatives and deliver innovation that works, innovation that creates new value. That’s important if you want your company to exist in 10 years.
Here is a stat that raises some eyebrows: According to Gallup, in the US we waste $140 billion on failed technology projects—every year. Many Leaders intuitively recognize this lack of success in their professional spheres, especially in legacy organizations, but they fail to grasp its sheer scope. What causes this frightening statistic in organizations across industries year after year?
The last two decades have ushered in massive digital transformation efforts across the entire spectrum of businesses and government entities and prompted unprecedented innovation. The last twenty years have also ushered in enhanced processes and updated certifications surrounding projects and development efforts: Agile, Scrum, PMP, etc.—the list is vast.
Despite this explosion of value-driven innovation and project standards development, the percentage of successful projects has hovered between 30 percent to 39 percent over the years within the last two decades. Most recently, according to The Standish Group’s 2020 CHAOS Report, only 31 percent of projects are successful, and only 32 percent of projects deliver a higher return on value to the organization and a satisfactory result to the project’s internal & external customers. After twenty years of innovation, low project success is still the primary locus where the needle has not moved.
Why even proceed with an initiative that is not set up to deliver value to the organization and satisfy its stakeholders? How do these efforts continue to go awry, seemingly forever, despite all our advancements in technology? As initiatives focused on IOT, AI, Machine Learning, Cyber Security, and other advancements rely on increasingly complex technologies and large-scale organizational change, it is even more important to ensure a proper foundation for success to de-risk these efforts as much as possible from the ground up.
When surveyed by The Standish Group as to why projects did not succeed, the majority of IT executives cited issues related to inadequate requirements definitions as the primary culprit for project failure, while issues related to technology ranked far lower, at the bottom of the list. Simply put, project failure is not a technology problem, it is a requirements problem.
Better requirements lead to better outcomes: If you do not set up the dominoes properly in the beginning, the dominoes down the line will not fall as desired. What creates better requirements? Since the requirements problem is the tip of a significant iceberg, let us mix our metaphors and briefly look below the waterline.
If strategic execution is an iceberg, the quality of requirements is visible just above the waterline. Beneath the surface lies the unseen strategic execution connected to it.
To develop better requirements that lead to better outcomes, requirements must consistently satisfy the needs of the initiative’s Stakeholders while also addressing the strategic priorities of Leadership. Therefore, the first layer of the iceberg under the waterline is definitively ensuring alignment between the strategic priorities of Leadership and the needs of the project’s Stakeholders. We must consider all stakeholder groups, not just the ones that Leadership assumes to be the stakeholders.
This alignment between the strategic priorities of Leadership and the needs of the project’s Stakeholders can then drive the right projects and better requirements to create innovation. This in turn de-risks initiatives, delivers a higher return on value to the organization, and meets the needs of each stakeholder group. The initiative creates new value by reaching better outcomes that serve the organization and its customers.
Ensuring better strategic execution throughout an initiative is a complex and multi-faceted process, which warrants a deep dive and new methodologies that many organizations have either missed entirely or struggled to put into practice. As we dive deeper into this topic, we will discuss the strategies, applied research, and tactics that organizations can adopt to ensure better strategic execution throughout the lifecycle of their initiatives.