Maximising value from transformations

Contributors: Maria Aunsholt Storgaard, Maya Kousholt Schmitt, and Annie Gisslen

Transformation is a critical enterprise capability for organisations to be able to navigate in their respective industries. In previous articles, the importance of taking a business-led approach to digital transformation and aligning on a clear transformation vision and ambition was highlighted. Further, it was discussed how to apply the capability model as a decision management tool, the criticality of thinking end-to-end, and the benefits of having a Transformation Office and an efficient governance structure. This is the sixth and final article in the miniseries that goes through the key topics to ensure a lasting, positive impact when pursuing a business-led digital transformation. This article discusses the importance of focusing on benefit realisation before, during, and after the transformation initiative.

Contributors: Maria Aunsholt Storgaard, Maya Kousholt Schmitt, and Annie Gisslen

Transformation is a critical enterprise capability for organisations to be able to navigate in their respective industries. In previous articles, the importance of taking a business-led approach to digital transformation and aligning on a clear transformation vision and ambition was highlighted. Further, it was discussed how to apply the capability model as a decision management tool, the criticality of thinking end-to-end, and the benefits of having a Transformation Office and an efficient governance structure. This is the sixth and final article in the miniseries that goes through the key topics to ensure a lasting, positive impact when pursuing a business-led digital transformation. This article discusses the importance of focusing on benefit realisation before, during, and after the transformation initiative.

KEY TAKEAWAYS 

• Prior to initiating the digital transformation, a benefit case should be created for the transformation to set the benchmark from which value realisation will be tracked and followed up on if gaps start to form
• During the transformation clear ownership and accountabilities for value realisation must be assigned, change management must be invested in to support the embedding of change in the organisation, and operational excellence capabilities must be developed which can drive continuous improvements over the long run
• To maximise value beyond individual transformation initiatives, organisations must embrace a change-adaptive culture allowing for continuous change and new ways of working to be successfully embedded in the organisation to unlock value

VALUE REALISATION IS NOT ONLY ABOUT TIME AND BUDGET
In our experience, significant time and effort are spent following up on if transformation initiatives are delivered on-time and on-budget. This, however, does not allow organisations to measure the actual success of a project and whether real business value has been delivered. Therefore, effort should be shifted to measuring if concrete business outcomes are reached from the transformation initiative. Many leaders recognise this need, however, in practice, our experiences show that organisations are struggling to measure anything beyond the high-level business value. Our proposal is to measure value realisation by considering business outcomes as the result of maximising performance, value, and alignment:

• Performance: Realising stakeholders’ expectations through reliable, cost-effective delivery of project milestones and solutions
• Value: Attaining a quantitative and qualitative return on an organisation’s project investment
• Alignment: Demonstrating how the investment, and the resulting product or service, support the strategy and capabilities required for the enterprise to operate and thrive

As business outcomes consist of all three parameters, the value created cannot be considered as a constant but instead is determined by the result of how it is created and matured throughout the transformation lifecycle. Hence, realising the business outcomes and the full value of the transformation is a practice that occurs both prior to the transformation, during the transformation, and beyond the end of the transformation.

As an example, several years back a client implemented a new operating model as part of their transformation with the purpose of shifting from a decentralised organisation grown from acquisitions to a global, integrated organisation. Prior to the initiative, they established cost-cutting targets as well as the timeline for implementation. They managed to implement the operating model significantly ahead of time, within budget, and were able to realise the cost-cutting targets. However, when assessing the success of the operating model implementation several years later with a focus on how ‘centralised’, ‘global’ and ‘integrated’ the organisation had really become, it was clear that this part of the ambition for the transformation had not been delivered on. A primary reason for this was that the key measures tracked were focused primarily on cost-cutting targets and not measuring the Alignment parameter. This parameter, if measured, would have helped highlight the need for change management to support employees with adopting the new changes coming with the new global operating model.

DEVELOPING A BENEFIT CASE SHOULD BE A PRIORITY PRIOR TO ANY TRANSFORMATION
It is common practice in most organisations to build a “business case” prior to initiating any project. To maximise the value of a business-led digital transformation, we have seen a significant improvement when organisations instead focus on building a “benefit case” which not only outlines the direct and indirect benefits but also articulates the links to the business strategy.

A benefit is defined as an outcome of change that is perceived positively by a stakeholder. Direct benefits are ones that can be directly quantified and attributable to the transformation and the fulfillment of the business strategy whilst indirect benefits are not necessarily quantifiable, such as “improved user satisfaction”. Altogether, the benefit case documents all direct and indirect benefits across the organisation for a given transformation, and should include the following:

Benefit catalogue that maps all the benefit profiles

• Benefit classification 
• Leadership perspective
• Overall benefit analysis 
• Link to business strategy

The best approach to building a benefit case is by working backward from the transformation vision and ambition objective to derive and map the routes to reach the agreed destination. This is done by first setting and defining end benefits and later identifying and documenting the whole network of intermediate benefits to ultimately illustrate the complete network of benefits.

Building a benefit case can be summarised in five steps. These five steps aim to ensure each quantifiable business benefit is described based on multiple perspectives such as FTE savings, procurement savings, net working capital savings, tax savings, cost avoidance, revenue enhancement, etc., and to map both direct and indirect benefits.

1. Initiation
2. Benefit discovery
3. Benefit analysis
4. Benefit qualification
5. Document benefit analysis

Once final, the benefit case is integrated into the transformation roadmap and linked to a set of intermediate milestones to reach the final business outcomes. The intermediate milestones can be a mix of enablers, change activities, and any intermediate benefit realisations identified in the benefit case. The intermediate milestones are excellent measures to use during the transformation journey, through a transparent set of connected deliverables.

KEY FACTORS CAN DETERMINE THE SUCCESS OF VALUE REALISATION FROM THE TRANSFORMATION
Besides measuring and tracking the benefit realisation of the digital transformation, additional program and project management and governance structures ought to be in place for any transformation to be successful in realising its intended value. Our previous articles touch upon many of the relevant factors, but based on our experiences, three key areas are vital to establish during the transformation journey to ensure value is realised during and beyond the transformation initiative(s).

1. Accountabilities for value realisation

Benefit cases of high quality are rigorously built and owned by individuals, who can remove the impediments for realisation, eradicate doubts from key stakeholders, and ensure organisation-wide alignment. The ownership across IT and Business functions should be organised with the transformation vision in mind, such that required business change will be identified, owned, and facilitated with the focus on benefits not being lost on the way. This includes clearly defined mechanisms for engaging stakeholders, managing the necessary business change, and mobilising a team with clear roles, responsibilities, and the associated mandate. In article 5, we underscored the criticality of having a Transformation Office as the one central setup that can follow up on and monitor benefit realisation.

2. Organisation change management

Change management capabilities are vital for any transformation, as the value will not be unlocked if transformations are not embedded in the organisation. For a digital transformation, delivery teams must work to translate the digital solution into a business context, with a focus on what the benefits and changes will be for business end users. Ensuring users truly adopt and buy into new ways of working and utilise the new solutions, is key to unlocking value from transformation. It is our recommendation that change management capabilities reside within the Transformation Office to promote a coordinated change approach across the full transformation and organisation, rather than on an individual project or initiative basis. Furthermore, to maximise value in the longer term, it is critical that organisations build capabilities allowing them to efficiently adopt changes on an ongoing basis and not just for individual transformation initiatives. During and following a transformation imitative, changes to tools, processes, and ways of working occur rapidly and the organisation must ensure that these changes are able to be absorbed in the organisation, as this is key to unlocking the value potential. One must always remember - the overall transformation is a journey, not a destination.

3. Operational excellence to drive continuous improvements

Organisations that derive maximum value from business-led, digital transformations will have operational excellence capabilities established to be able to continuously drive improvements and unlock value beyond the initial deployment of a digital solution. Operational excellence capabilities can be established in many ways. We have seen such capabilities successfully being integrated into digital cross-disciplinary product teams, process organisations, and/or in other dedicated teams responsible for driving continuous improvements across the organisation.

Operational excellence capabilities also ensure that realisation of the benefit case is not only monitored and reported on, but appropriate actions to compensate for shortfalls in target business outcomes are also initiated. This is through continuously identifying and managing improvement initiatives to ensure further value can be unlocked from new digital capabilities. As progress towards the vision is assessed, the tracking and measuring of benefits should begin as soon as the measures are identified. The transformation map should therefore not be seen as a fixed measure of progress against time, but instead as progress against the business outcomes. This will allow for flexibility to make necessary improvements throughout the transformation lifecycle, when relevant to continuously realise value.

VALUE BEYOND THE BUSINESS-LED DIGITAL TRANSFORMATION JOURNEY
Realising the value of a transformation does not end with the closing of an initiative and the implementation of a digital solution. Rather, the real value emerges over time as the change endures, expands, and becomes sustainable. Therefore, besides putting the right capabilities and competencies in place, as discussed in previous articles, it is also important to embed a change-adaptive culture to sustain and grow the value of transformation over the longer run. Fostering a change-adoptive organisation that embraces new ways of delivering value is done by:

• Maintaining an effective talent pool - maintain an appropriate talent pool with the right skills and capacity to deliver the digital vision and agenda across IT and Business and who continue to evolve as new market opportunities arise
• Rewarding new leadership behaviour - engage and empower other leaders within the organisation to model and reward disruptive behaviours. Leaders should seek to connect with peers and thought leaders to challenge their own thinking and anticipate future disruption that they turn into a competitive advantage
• Leveraging partnerships - strategically leverage partners to foster closer interactions with partners and vendors that can lead to joint value creation
• Considering the need for flexibility – focus on taking out complexity to support lean processes, however only to the extent that the organisation can remain flexible and autonomous in the uncertain and changing markets
   

“Sustaining the value post transformation is not about a faith in technology, but it is a faith in people”
 

CONCLUDING REMARKS | FOCUS NOT JUST ON DOING THE RIGHT THING BUT DOING THE RIGHT THINGS THE RIGHT WAY

In Article 1 we highlighted the increasing maturity of IT departments and their ability to deliver digital solutions to the business at speed. However, we also stated that the wider organisation often struggles to keep pace and consequently, the business-led agenda gets lost in IT implementations. The result being that organisations end up with a graveyard of different digital solutions that do not necessarily deliver on business needs and which the wider business has been unable to adopt. Through this series of articles, we have provided a view on how organisations can bring back the Business agenda in IT implementations and thereby increase the value realised from digital transformation.

In conclusion, as the disciplines of technology and business have become more closely interconnected, each has profited from the practices and priorities of the other. It is no longer important just to master new technologies, organisations must also master the ways of working and interacting with the technologies across the organisation.

This is the last article in our miniseries about business-led digital transformation, but it is not the last word on the topic. In the six articles we have introduced key concepts and provided guiding questions, frameworks, and lessons learned, but how they are interpreted and adopted is - and should be - very different for each organisation.

The key takeaway from all the articles and which is the same for all organisations is to ensure that you have balanced ownership and complete alignment across business and technology in all stages of your transformation. Failing to have this, is what causes most digital transformations to not realise the intended purpose and maximise business value.

Read the remaining articles in our series on business-led digital transformation:

• Article 1: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/a-business-led-approach-to-maximize-value-of-digital-transformations.html
• Article 2: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Setting-the-direction-for-a-business-led-digital-transformation.html
• Article 3: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Configuring-the-transformation-roadmap-using-the-capability-model.html
• Article 4: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Designing-end-to-end-solutions-that-are-fit-for-purpose.html
• Article 5: https://www2.deloitte.com/dk/da/pages/strategy-operations/articles/Orchestrating-complex-transformations.html