The reality is that as many as 70% of change programs of this scale fail. Ensuring a good IT governance structure and budgeting process in place helps mitigate some of the risks associated with this type of change. Notably, that does not necessarily mean merely digitizing the existing processes that are in place. Instead, it means setting up operations in such a way that aligns both governance and budgeting processes. This is to effectively handle the scale of IT change that is occurring.
Why Are Changes Needed to Governance And Budgeting For Digital Change?
The primary reason for changes to governance, budgeting structures, and processes is that business cycles are much faster than before. Organizations must act quickly, or there is a very high chance that they will miss the boat. In this fast-paced environment, waiting for archaic and disparate committees and bureaucracies to make decisions will not work. The overhauling structure helps deal with the speed of change. This is important to ensure that compliance and security can be delivered in good time.
Compliance with regulations is critical. There is a good deal of risk associate with non-compliance. Confidentiality has become a significant issue for customers. Some worry about how their data is being used and shared and governments are stepping up and acting. For example, in May 2018, the European Union introduced new regulations known as “GDPR.” This limits the extent to which customer data can be used because it must only be used for its purpose. It also limits the ability of companies to share customer data. Companies that do not comply face hefty fines.
Other countries’ governments have also put in place regulations to limit the use of customer data. This aside, the damage that can be done to a company’s brand due to leaks or misuse of company data is very high. What’s more, in the age of social media, negative opinions can spread about a company very quickly online, and the company’s level of control over this is very insufficient. Compliance is critical, and good governance can avoid running into these issues.
Getting the governance in place and right is essential to effecting digital change successfully. Indeed, Cap Gemini has performed research that shows that “governance is a key determinant of success in managing digital transformation.”
Decision-makers in governance for digital IT projects need to have a clear understanding and appreciation of the drivers of change. They also need to be able to act and make decisions quickly. In the past, many hours may have been spent toiling over. To ensure a product was just right before launching it to the public. However, it is all about getting a minimum viable product out there for the customers and making changes iteratively now. Customer feedback helps with improving the product to meet customer requirements better. This requires a massive shift in mindset from the past when considering “right first time” as critical. Nonetheless, even with minimum viable products, it is essential to ensure regulatory compliance. Therefore, it is important to require appropriate governance.
Ways to Implement Digital Governance
Studies have shown that there are various ways in which digital governance can be operationalized in organizations. I have personally seen that three of these are more effective than the rest, and they are: shared digital units; committees at the firm level; and new roles better suited to digital. In greater detail, these are:
Shared digital units — instead of having isolated local units trying to address digital challenges. It is logical to bring people together under shared, collaborative digital units. This saves time and money, as the one shared digital unit can make decisions and learn together, rather than several isolated units trying to do this independently. Specializing in this also enables the organization to develop the digital skills it needs, enabling faster adaptation to digitization. To share knowledge and learning within such a group and encouraging innovation. There may sometimes be challenges with shared digital units in terms of how to organize the structure. But, it is worth trying to overcome these issues.
Committees at the firm level — having a committee at the firm level can ensure that digital transformation is governed effectively. This can help make sure that there is appropriate assigning of resources across the most important digital projects. It is also useful in ensuring the compliance.
A digital committee at the firm level builds up the skills, experience, and know-how. It can offer effective governance for these types of projects. Such a committee can work to prioritize projects, ensure that policies get approved, and make sure that decisions are made regarding the decision to work on a project centrally or locally. This type of committee is useful because it has oversight of all the digital projects. Meanwhile, the situation of small, local committees can be severely hampered in this regard.
New roles better suited to digital — sometimes organizations perform best with these new digital activities when they have leaders in place. Cap Gemini refers to these individuals as “Digital Tsars.” Creating a Chief Digital Officer or “Digital Tsar” role can help ensure the consistent delivery of digital vision across different platforms and media. Staff can also be hired that can liaise between different groups within the business.
To help them identify areas for adaptation in the new digital world. These would typically be individuals who have worked on digital transformation projects elsewhere and have value in terms of experience and know-how to help the organization adapt.Once these types of adjustments have been made it is now good to recommend the organization implements digital platforms. They are recommending this in terms of gaining an overall, single and consistent view of customers.
The annual budgeting process simply will not work for digital transformation projects. The speed at which digitization occurs means that even by the time the annual budget has been approved, it will probably be still out of date. I have found that where organizations have been most successful with digital change, they have ensured to have an appropriate process in place for digital budgeting. This means that projects can get approved when there is a need, rather than waiting months. When this time arrives, the opportunity may have been and gone. Time is of the essence, and decisions must be taken quickly.
From the governance section above, implementing new means of digital governance such as a digital committee at the firm level can make a difference. With one committee deciding how investments and funds should be allocated, prioritization between different digital initiatives can be much more effective than if different small local units are trying to do this in an isolated fashion. With one entity overseeing things, optimizing decision-making and achieving economies of scale — which is also important to keep the costs of digital initiatives down.
The old forms of governance and budgeting are very unlikely to work effectively in a digital world. These ways of working are typically not able to move sufficiently quickly to ensure that opportunities can be snapped up. There is also a range of pressures, such as the need to meet regulatory compliance requirements that require a certain level of expertise. Companies may not do this requirement without adaptation. Organizations need to adapt and develop new forms of governance and budgeting that better suits to the current business environment.
Some recommended approaches have single shared digital units, a digital committee at the firm level to make decisions on priorities, ensure compliance, and introduce new digital roles to help facilitate change. All of these types of approaches will help the organization to save money in its digital transformation, particularly through benefiting from economies of scale. These methods also help companies develop a certain level of expertise. Also, know-how quickly when compared with a more scattered and less centralized approach that I have seen in some organizations.
Until next time, you are up to date.
Originally published at https://www.projecttimes.com.