How The Pyramid Of Change Can Stop Your Next Digital Transformation Failing

How many times did you fall in love with an exciting new piece of technology and in the end it didn’t deliver what you thought possible..?

A very common mistake many business leaders make is to believe that going Digital means, buying and implementing a lot of cool new technology, whether it is some great new CRM software or employing a bunch of data scientists to write AI/ML algorithms. More often than not the investments made in these new technologies outweigh the eventual benefits accrued from them.

Why is that happening and how do you prevent this?

Let me try to explain this by using what I call the Pyramid of Change, which I believe is a something that can be quite useful for many leaders driving change and transformation in their company.

This approach is based on my own experience in leading many (digital) transformations, where I failed in plenty, but where I also learned to appreciate that there is a natural order on how change takes hold inside a company.

Whenever you embark on a change you’ll have to ask yourself a few key sequential and interconnected questions, which I call the Pyramid of Change:

1. Why do you want this change, what is the business objective you try to achieve?
2. What important business principles or company policies need to be true or need to exist for me to be successful
3. Are there organizational consequences as a result of this change? Do people’s job change, and/or do roles disappear?
4. Will there be a change in the business process? Do you take steps out of the process, or do you actually ad some more control points?
5. Do you have a clear and clean enough set of data which will support the change?
6. What is the best piece of technology which will align with the new business process, be supported by the right data and hence help deliver the change.

Let me try to illustrate this by an example in the procurement space, by describing the case of an organization who wants to become better at managing tail spend. They aim to do this by implementing a piece of technology which will make the tail spend better visible for the procurement team, so that they can place the right purchasing interventions. Historically tail spend was ignored by the procurement team and left to the discretion of individual cost center managers.

This in itself sounds easy enough, but let me walk you through the above 6 questions to illustrate that you will have to answer each one of them, in order, so that you get to a well prepared and most likely successful change.

1. The Why of this change is the desire to drive efficiency and hence improve operating margin. This is what I call the “political will” behind this change. Without clear political will a change of this magnitude will struggle down the road.
2. For this change to be impactful though it’s typically not enough to provide spend visibility to the procurement team, but also to give the procurement team the authority that they are responsible for supplier negotiations and corresponding vendor consolidation. This is typically codified in a procurement policy. Without this policy the risk exists that the organization will ignore the role of procurement and will continue how they used to operate.
3. There probably will be organizational consequences as there might not be enough procurement staff to focus on the tail spend, hence roles will need to change and maybe a few more roles need to be created.
4. The Source to Pay process will have to change as now tail spend purchasing orders will no longer be send to the vendor by the individual cost center manager, but will have to be managed by the procurement team.
5. For this change in business process to work there need to be clear vendor master- and material data, so that the right item is procured from the right vendor. When embarking on a change like this there will most likely be quite some duplicate vendor record clean up to be done. Really important as otherwise vendor consolidation will be very tricky.
6. Once the new policy is defined, the organizational roles are clear, the business process defined and the cleaning of master data is underway, than it makes sense to pick the supporting technology, which in this case will probably be some sort of buying platform / market place.

Would the organization have jumped to implementing a buying platform without first considering the rest of the Pyramid of Change, it will probably suffer from a low adoption rate and consequently a poor return on investment.

Believe me, I’ve tried it and have had to learn the hard way that there is more to digital transformation than just implementing new tech…