Year in, year out big analysts and consultancies keep predicting that the lion’s share of digital transformation initiatives around the world will eventually fail to deliver growth and profitability to businesses. IDC, McKinsey, KPMG and others assess the risk of failure in digital transformation to be around 70% or even higher.
Yet, organizations still embark on this journey. Even knowing that the chances of not reaching goals are pretty high, 90% of businesses have pursued at least one large-scale digital transformation in the past two years, according to McKinsey’s 2022 global survey. The reason is simple: you can’t compete if you don’t implement digital innovations and don’t adapt your business to the ever-changing reality.
But does it really have to be so risky? Does your business need to put up with dissatisfaction, wasted budgets and time, lost opportunities and other consequences of the failure in digital transformation? In the end of the day, there are circa 30% of organizations that managed to succeed. What was their secret?
We at Axellect think that the way to success starts with the right planning, namely with the project management approach that suits the essence and the process of digital transformation best.
Waterfall versus Agile
We’ve been doing IT consulting and software implementation for over 30 years, and we’ve seen it all. Digital transformation is always a long-lasting and extremely expensive process that generally takes a year or two, as well as millions of dollars. With such a solid investment, businesses expect the outcome to be tremendous. And in our practice, we’ve witnessed numerous successes. The crucial thing here is to manage the process efficiently.
Proper IT project management (and digital transformation is definitely one of such) starts with picking the right approach. Currently, the whole world chooses between two philosophies: Waterfall and Agile. They both have their benefits and pitfalls, and before we move on I suggest contemplating them in close-up.
The waterfall project management approach is based on a precise sequence of stages that are to be fulfilled gradually. Within such an approach, the process moves forward only if the previous stage gets final approval. The completion of the whole project takes months or even years. That is why the waterfall is usually preferable for large-scale initiatives. It’s structural and hierarchical and provides a helicopter view over the project since its inception.
However, it’s the rigidity of the waterfall approach that poses risks to the success of IT project realization. Taking into consideration that modern businesses require certain agility in implementing digital solutions (because of constantly changing circumstances and rapid technology development), this is a serious disadvantage of the waterfall approach.
The lack of flexibility in the waterfall leads to a number of obstacles in fulfilling the project. To name a few:
- it’s generally impossible to reconsider phases that were defined at the initial stage of the project
- all the changes that are to be introduced in the middle of the process require tons of investment both in money and time
- first results can be obtained and assessed only when the project is accomplished, i.e., in 1.5-2 years in accordance with a standard waterfall project management.
Predominantly because of this long-lasting nature of the waterfall approach, businesses often see significant discrepancies between the initially planned result and the actual one. In two years, the world might have completely changed, and your IT product is already outdated.
On the contrary, the agile project management approach is all about flexibility and iteration. It’s not strictly linear, it allows deviations and changes, it relies on newly discovered requirements and changing circumstances, it encompasses feedback from stakeholders and customers. In other words, it’s adaptable.
Agile may seem to be a no-brainer for those organizations that struggle to keep up with global changes within their digital transformation projects. But it has its pitfalls, too.
The agile approach works well for small- or medium-size organizations with custom software development. It is also efficient when a company is satisfied with an MVP (Minimal Viable Product), for example when a bank introduces its mobile application with basic functionality and later polishes it by adding new features.
However, the agile approach is not an option for large corporations with global projects and tight timeframes. For instance, when a pharmaceutical company intends to hit the market with a new medicine, it needs the project to be fully accomplished by a certain date, otherwise, the competition might be lost. With agile, it’s nearly impossible to follow the set timeframe, as it’s not in the nature of this approach.
Waterfall plus Agile
As it often happens, the truth is somewhere in the middle. Our experience proves that the right combination of both approaches is the best possible choice for IT project management. By encompassing the opportunities that waterfall and agile offer, businesses can tune them in order to meet their requirements in the most relevant way.
The successful digital transformation projects that Axellect’s team has realized over the years have led us to work out an approach that leverages the adaptiveness of the agile and the deadline orientation of the waterfall. This helps to fulfill a project within the set timeframe while making necessary changes during its execution.
By choosing agile principles at the build stage, organizations can take advantage of the flexibility that allows them to adjust and improve resources and investments put into the project. Namely, businesses can benefit from:
- the visibility of the process
- fast system adaptation
- prompt customer expectation management
- quick time to market and ROI (Return on Investment)
- business goals achievement
- IT team satisfaction and encouragement.
By using this exact approach, based on the right combination of the waterfall and agile capabilities, Axellect helped a fast-growing pharmaceutical company to build a scalable planning platform to manage and optimize their demand, supply, sales & operations and inventory. Before implementing this platform in the company’s IT infrastructure, Axellect made a quick prototyping on customer’s data and it highlighted critical business processes which should be considered in the first priority. When it came to the realization stage, the project was fulfilled with the help of a sprint approach, i.e. by creating a logical set of activities grouped together, like forecasting models and results analysis, heuristics parameters and results validation, forecast enrichments, etc. It gave the customer a clear visibility whether the whole process was being executed in accordance with the initial goals. The project was divided into 4 modules in heterogeneous IT landscape and included additional configuration to best practices. In the end, it was completed in 12 months, including the run phase, which was three weeks earlier than had been planned. And thanks to such a fast realization, the company saved 7% of its allocated budget.
The combination of the waterfall and agile is especially crucial for large-scale digital transformations or highly competitive industries. But in general, this is a universal and holistic approach that helped us to successfully implement all kinds of digital solutions, including SAP ERP, IBP, S/4HANA, cloud technologies and others.
Digital transformation never ends
Gartner forecasts that worldwide IT spending will grow by 4.3% in 2023 (in comparison with 2022) and will reach $4.7 trillion. In its turn, IDC predicts that in the MEA (the Middle East and Africa, including Israel) region, this annual growth will be even higher, 5.0%, and the overall spending on IT and business services will top $30.3 billion in 2023.
So, digital transformation is a never-ending story. Currently, the main driver of this process is the migration to the cloud, and businesses in the Middle East and Africa are rapidly expanding their cloud usage.
But whatever scenario or technology organizations choose, cloud, on-premises or hybrid, they all need proper planning and project management approaches. This first step is truly fundamental as it influences everything: budget spending, obtaining an efficient solution for better business management, trust in the IT team, improved business processes and so on.
Axellect managed more than 3,000 projects, and this experience allowed us to develop our own approach to executing digital transformations. We can guarantee that:
- the project will be fulfilled quickly
- you will be able to see and assess interim results
- you will have the tools and possibilities to make the required adjustments
- you will control the timeframe
- you will stay within the initial budget
- and you will be sure that the final product will be released.