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How to implement a successful IT transformation

Stephen PhillipsStephen Phillips, head of Bain & Company’s Europe, Middle East and Africa IT practice, speaks about IT transformation, how to make effective investments in IT, and IT programme management.

Please tell us a bit about yourself and your work with Bain & Company.
I am currently a Partner in Bain’s London office, and also lead Bain’s Europe, Middle East and Africa IT practice. I have around 20 years consulting experience principally in the banking, insurance and information technology industries.

I am regularly involved in advising private equity clients as they test investment theses in the European software, ‘fintech’, IT services and BPO industries. Some of my recent assignments include launching a technology-enabled self service transformation for a leading UK retail bank, directing a group-wide ‘digital’ strategy for a large European retail financial services business, establishing the transaction banking IT strategy for a fast growing emerging market-focused corporate bank, among others.

What are the main reasons behind companies failing to achieve success after making huge investments in IT projects?
Every year, companies invest hundreds of billions of dollars in large IT projects to enable strategic initiatives or to upgrade ageing systems, but fail to reap their promised benefits. Sometimes those projects suffer because they aren’t adequately planned or correctly scoped. In other cases, it’s because senior executives don’t realise that IT transformations are as much about the organisation and its operations as they are about the technology.

They may lose sight of the project’s business goals or fail to put in program leaders who are senior enough to motivate change. In some instances, a poor choice of vendors or inefficient vendor management exacerbates the problems.

Could you summarise what you think are the keys to IT programme success?
Given that the pace of change in information technology is rapidly increasing, it’s never been more important to understand how to make these transformations succeed. Companies can’t afford to waste time and effort on projects that don’t deliver. Our work with leaders across industries and regions has allowed us to identify five key steps to success— ensuring proper set up; designing, building and testing effectively; managing change actively; realising the benefits; and managing the programme efficiently.

Could you give some advice on how to create the right set up before undertaking the IT transformation process?
The first step in any transformation is to make sure that managers and teams—whether they are from the business, IT or operations side—understand the investment rationale and the business goals they are pursuing. Goals should be quantifiable in the form of top-line growth, cost savings or mitigating the risks associated with running obsolete systems. Before committing to the project, it’s important to have consensus that investing in IT is the best way to reach these goals. Sometimes organisations look to technology to solve problems that are actually more about process, organisation, talent or even business models. Comparing the cost of an IT investment with other solutions, such as process changes or outsourcing, can give company leaders a clear understanding of the trade-offs. And sometimes, it directs them to try other solutions that are less expensive or risky.

Another key to proper setup is getting the right people on the team—especially the right program leaders— from both the business and technology sides. Over investing in talent at the beginning can save time, money and effort in later phases of the project. Unlike some other large investments in infrastructure—new manufacturing facilities, for example—IT projects often struggle to find a business sponsor, even though they may cost several times as much as more visible projects. Investing in the best available technical talent—system architects, analysts and software developers—also pays off with systems that are more robust, user-friendly and adaptable to future needs. Equally important is choosing the right vendors and ensuring they are properly managed. IT projects often falter because vendors fail to meet their commitments, either because they don’t have the right capabilities or won’t commit the resources they had promised when they won the bid. IT program managers have a responsibility to vet the vendor thoroughly and to create the ongoing conditions for success through active communication and efficient coordination.

How important is determining and finalising the scope of an IT project?
No complex project can deliver on its goals unless the internal team and outside contractors communicate effectively, track their progress with agreed-upon metrics and are held accountable for delivering results. Since high-profile IT projects are particularly prone to drifting off course, managers need to be vigilant against scope creep, which can cause projects to bog down or deviate from their original goals. However, expansion in scope to a certain extent may be justifiable.

A common mistake is investing in customisation when off-the-shelf solutions would accomplish most of the project’s goals at a lower cost. Programme leaders must have the authority to resist demands for customisation that adds little value. Users who lobby to add customised features during the design phase tend to over-estimate their value, while underestimating the costs to build and support them over the project’s lifetime.

How can companies ensure a smooth transition process?
Successful change management has as much to do with the work that teams do six to nine months before rollout as with efforts put forth at the time of launch. As in the planning process, company leaders should articulate and reinforce the project’s business goals long before the actual transformation, but at this point, their audience should be expanded to include all of the employees who will use the system. Some companies plant the seeds of change well in advance of the phased rollout of its new IT systems by creating an entire department to prepare business areas for each new system rollout, as well as to capture its benefits and measure the uptake after rollout. They also provide user teams with detailed plans describing how daily operations would change, as well as how, where and when it would pilot each new system. In many cases, system business owners and programme “evangelists” will also be trained in the new processes so that they would be ready to coach others, and help-desk staff may be prepared to support the transition. This will enable frontline employees to easily support the organisational transformation when the new systems arrive.

How important is it to train users about a new system?
Without proper training and motivation, people tend to under-utilise new tools, whether they are a consumer’s new digital camera or a corporation’s advanced enterprise resource planning (ERP) system. Also, without proper training, positive reinforcement and incentives, people would become frustrated and fail to adopt the system.

When new IT projects are rolled out, old habits and processes can sabotage the realisation of the benefits the project was meant to deliver. Employees may continue to do things as they have been doing them, often manually or on spreadsheets, until they are trained in and fully embrace the new system.

What are the crucial factors for managing an IT programme efficiently?
The key that unlocks success across a transformative IT project is the work of a rigorous, disciplined and smooth-running programme management organisation (PMO). While project leaders guide the progress of the actual implementation, the PMO works at a level above to ensure that critical milestones are met. If the program begins to miss its goals or threatens to veer off track, the PMO flags these risks and has the authority to make decisive changes to restore progress.

An effective PMO needs senior management’s visible sponsorship and active support to resolve conflicts. The PMO works with project leaders to clearly define the project’s goals and keep the program’s business requirements in sight, making sure that the business side continues to own the project. In cases where the IT side begins to dominate a project, it may try to make decisions that it lacks the authority to make. Programme managers can arbitrate in these situations, tilting control back in favour of the business side. Programme managers can also help project leaders set realistic deadlines. Without their assistance, a can-do culture sometimes leads project managers to agree to deadlines they can’t meet. They then struggle to make a heroic effort and deliver projects that meet only two thirds of the requirements.

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