The demise of Thomas Cook amid fierce online competition shows how crucial it is to achieve a successful digital transformation strategy

Digital transformation3

Digital transformation is all the rage for business leaders right now – but making it successful is easier said than done. David Jordan, global head of consulting and services integration at IT firm Tata Consultancy Services, explains. 

 

In business, the age-old saying of “failure isn’t an option” is naive. Failure is certainly an option.

In fact, in today’s age of constant disruption and continuous innovation, risk-taking should be encouraged across the enterprise, backed by a truly agile mindset.

When a company is considering a new digital transformation project, a prerequisite for any successful business this century, it is important to ensure it is not a “moonshot” approach.

This means a project that is overly ambitious and tends to show little noticeable benefit until it’s entirely complete.

A project like that, often known as a “big T” – a massive, unwieldy transformation project and an all-or-nothing endeavour – is fraught with risk because its projected return on investment (ROI) doesn’t account for the extent of change the organisation can absorb or for the constantly evolving business landscape.

 

What Thomas Cook’s demise can teach us about successful digital transformation

Being an agile organisation is more than just having the ability to develop software quickly.

It’s a complete model for organising and running a business, and now a transformation project.

And done correctly, this model can give an organisation a new edge with a high degree of speed and flexibility.

Thomas Cook collapse impact on tourism industry
UK tour operator Thomas Cook ceased trading on 23 September after the business collapsed (Credit: Wikipedia Commons/Russell Lee)

By capitalising on a constant state of change and adaptation, a company can better respond to the ever-evolving needs of the market.

If you look at the recent demise of Thomas Cook, the UK holiday firm with a 178-year history, the writing was on the wall for a number of years due to its failure to modernise and adapt to the digital revolution.

 

MVPs are important to successful digital transformation

Instead of taking a “moonshot” approach to transformation, established organisations can take the risk out of big capital expenditure programmes by taking a cue from new competitors – digital natives and nimble start-ups that aren’t encumbered by decades of legacy infrastructure, processes and systems – and breaking transformation programmes down into what we call minimally viable products (MVPs).

MVPs take a new product or service from concept to real-world application much faster and then learn how to improve it based on the market’s reaction.

Or, abandoning the project if it is clearly not delivering on the objectives or expected benefits.

The MVP approach has been applied extensively to new products or services with success.

Tata Consultancy Services Dave Jordan, successful digital transformation
David Jordan, global head of consulting and services integration at Tata Consultancy Services

Enterprises now have the opportunity to apply the same approach to large transformation programmes – leveraging the MVP approach to delivering transformative capabilities to the enterprise in increments, constantly evaluating performance against plans and altering the course of large-scale, investment intensive programmes when the first signs of failure are seen.

Put another way, MVPs are about de-risking the beast.

 

The utility company that suffered from a poor digital transformation strategy

A number of years ago, an international utility company with millions of customers reliant on it in North America fell foul of this “moonshot” approach.

The company’s transformation programme was expensive, complicated and, as it turned out, fraught with risks throughout.

The goal was to move beyond simple tasks like paying electric bills online to begin offering customers countless new ways to manage their accounts, adjust their energy use, and sign up for new products and services.

And that, of course, would require any number of changes at the utility’s back offices.

It would mean the ability to monitor customers’ energy use in real time.

It would require providing installation and repair crews with complete and constant transparency into the grid’s operations and each end user’s quality of service. The “to do” list went on and on.

However, the consulting firm overseeing the job took a moonshot approach to the project.

The consultant worked up a $250m budget and brought in hundreds of people for a five-year digital overhaul — and a road map that would show little noticeable benefit until the entire project was complete.

A couple of years into the effort, the utility realised it was burning up a lot of time and money, and hadn’t recognised any value yet.

The organisation leadership therefore recognised it had to start over and the current investment went down the drain.

 

Role of CFOs in successful digital transformation

It is apparent that failure to instill a clear strategic focus throughout a business with manageable and achievable goals will almost undoubtedly cause significant issues for any business.

Instead of thinking of digital transformation as a “one and done”, bet-the-company proposition, it’s better to think of it as a continual process – a “perpetual transformation” approach or closed-loop cycle.

It’s an idea that tends to resonate with chief financial officers, who more often are serving the role of chief change agents for their business.

CFOs, as the executives responsible for managing financial and strategic risk, have increasingly become the risk managers and executive sponsors for digital transformation.

According to our own research, more than 85% of senior finance executives feel equipped to drive digital transformation – and certainly the finance leaders I spoke with at our recent TCS North America and Europe Summits echoed these sentiments.

If the business needs to constantly prove the ROI of transformation, it pays off for the CFO to partner closely with the CIO to champion an MVP approach.

This cyclical approach to transformation effectively bridges the risk-reward challenges.

It breaks large-scale enterprise transformations into MVPs and subsequently mitigates the risk, while saving money and ultimately accelerating the entire process.

The CFO is able to take a more holistic approach, see what aspects of a project aren’t succeeding and rather than continuing to invest in that, taking the decision to stop losing money and dedicating resources to another, successful part.

Above everything, it’s important for organisations to no longer see transformation projects as having a due date.

When it comes to transformation, there is no finish line.

Once an organisation can master the perpetual transformation model and make it its own, it can continually refine its digital journey with lots of small and manageable failures along the way.

The organisation that goes to market, learns from what works – and what doesn’t – and enjoys a constant cycle of greater innovations with lower risk will win, time and time again.