The reality is that as many as 70% of change programmes of this scale fail. Ensuring that there is a good IT governance structure and budgeting process in place can help mitigate some of the risks associated with this type of change. Importantly, that does not necessarily mean simply digitizing the existing processes that are in place. Rather, it means setting up operations in such a way that both governance and budgeting processes are aligned 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 and budgeting structures and processes is that business cycles are much faster than ever before. Organisations 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 simply will not work. The structure must be overhauled to deal with the speed of change. This is important to ensure that compliance and security can be delivered in good time, ready for the launch of new digital products and services.
Compliance with regulations is critical. There is a good deal of risk associated with non-compliance. Confidentiality has become a major issue for customers, worried 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 – it must only be used for the purpose it was given. 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 as a result of leaks or misuse of company data is very high indeed. 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 limited. Compliance is clearly 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 which 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 ensuring a product was just right before launching it to the public. However, now it is all about getting a minimum viable product out there in front of the customer and making changes iteratively instead. Customer feedback helps with improving the product to better meet with customer requirements. This requires a massive change of mindset from the past, when “right first time” was considered critical. Nonetheless, even with minimum viable products it is essential to ensure regulatory compliance. Therefore, appropriate governance is required.
Ways to Implement Digital Governance
Studies have shown that there are a variety of ways in which digital governance can be operationalized in organisations. 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 way also enables the organisation to develop the digital skills it needs faster, in turn enabling faster adaptation to digitization. Knowledge and learning can be shared within such a group, and innovation encouraged. There may sometimes be challenges with shared digital units in terms of how to organize the structure, but it is well worth trying to overcome these issues.
Committees at the firm level – having a committee at the firm level can help to ensure that digital transformation is governed effectively within the organisation. This can be helpful in making sure that resources are appropriately assigned across the most important digital projects. It is also useful in ensuring compliance is achieved. A digital committee at the firm level builds up the skills, experience and know-how so that 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 effective because it has oversight of all the digital projects – while the situation of small, local committees can be severely hampered in this regard.
New roles better suited to digital – sometimes organisations perform best with these new digital activities when they have leaders in place who are primed to lead and manage the digital transformation. Cap Gemini refers to these individuals as “Digital Tsars”. Creating a Chief Digital Officer or “Digital Tsar” role can be most beneficial in ensuring that the digital vision is delivered to, and that it is consistent 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 that have worked on digital transformation projects elsewhere and have value to add in terms of experience and know-how, to help the organisation adapt.
Once these types of adjustments have been made to governance for digital, it is also highly recommended that the organisation implements digital platforms. This is recommended 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 change at which digitization is occurring will mean that even by the time the annual budget has been approved, it will probably be out of date already. I have found that where organisations have been most successful with digital change, they have ensured they have an appropriate process in place for digital budgeting. This means that projects can get approved as and when needed, rather than waiting months – by which time, the opportunity may have been and gone. Time is of the essence, and decisions must be taken quickly.
As can be seen from the governance section, above, implementing new means of digital governance, such as a digital committee at the firm level can really make the difference here. 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, decision making is optimized and economies of scale can be achieved – 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 are also a range of pressures, such as the need to meet regulatory compliance requirements that require a certain level of expertise that companies may not be able to do without adaptation. All of this means that organisations need to adapt and develop new forms of governance and budgeting that are better suited to the current business environment faced. Some recommended approaches are having single shared digital units, having a digital committee at the firm level to make decisions on priorities and to ensure compliance, and introducing new digital roles to help facilitate change. All of these types of approaches will help the organisation 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 and know-how quickly when compared with a more scattered and less centralized approach that I have seen in some organisations.