Organizations struggle to complete transformational work due to immature operating models and management systems, with just 8% of organizations able to successfully operationalize digital transformation plans.
These were among the results of a recent Planview study of 326 respondents from 253 companies and data aggregated from more than 3,600 value streams across 34 organizations.
The survey also revealed that 40% of digital innovation work from IT and engineering teams is wasted due to shifting priorities at the C-level.
"Without alignment at the top, the disconnect trickles down and the whole organization suffers," Razat Gaurav, CEO of Planview, said.
Overall, the vast majority — 92% — are still in the early stages of the organizational shifts required to support and accelerate digital innovation and have yet to realize the expected ROI from their efforts.
What's Hindering Digital Innovation?
Most organizations are at risk of not completing the transformational work required to meet the strategic objectives set by their C-suite and board, according to Gaurav.
"They will therefore be unable to achieve desired improvements in speed-to-market, predictability, or delivery efficiency of the project to product shift," he said. "This is largely rooted in the fact that they still operate with weak product management disciplines and a lack of customer-centricity."
Gaurav calls those the two most significant factors that can impede progress toward a product operating model.
Nearly 65% of respondents reported that project management philosophies still dominate their backlog management and prioritization.
"With a weak product management discipline, a primary business stakeholder dictates desired features, and portfolio managers commit teams to the work," Gaurav said. "Product managers are merely liaisons between business and engineering teams and are not empowered to lead long-term product vision and roadmap."
As a result, technical debt is neglected in favor of features, leading to software that is prohibitively difficult and expensive to maintain.
Meanwhile, a lack of customer-centricity undermines the organization's ability to expand the shift beyond initial experimentation.
More than half (52%) of respondents do not apply the principles of customer-centricity across both internal and external product lines, and only 11% have universal, programmatic mechanisms for collecting timely customer feedback.
"When IT teams struggle to identify their customers or can only do so for external-facing products, they lack adequate programmatic mechanisms to gather and respond to feedback that can make or break product performance," Gaurav said.
Since most of the technology portfolio serves internal customers, delaying the treatment of these critical IT assets as products inhibits overall progress and impact.
Leadership Must Keep the End in Mind
Boards and executive leadership are responsible for creating the conditions for faster completion of the shift to a product model, Gaurav said.
"However, installing a new operating model is not about experimenting endlessly for two or three years," he said. "It's about understanding how you get to that finish state because that finish state is what enables innovation."
Leadership must develop a concrete, stepwise roadmap that starts with the end in mind and adopt a data-driven approach to measuring, monitoring, and keeping the operating model transformation on track.
The survey also revealed a disconnect between what business leaders think IT and software development teams can produce and their actual capabilities.
The disconnect stems from a lack of visibility into the technology organization's "black box" and the right set of business metrics for in-house and outsourced software delivery, Gaurav said.
"Business leaders over-plan by 10 times actual capacity while widespread inefficiencies are diverting software development teams from strategic initiatives," he said. "They cannot prioritize unblocking bottlenecks and mitigating dependencies."
Without a scaled product operating model, the problems are exacerbated — setting the stage for unrealized revenue targets and missed customer and boardroom commitments.
Gaurav cautioned that limited IT talent coupled with an economic downturn means the margin for digital transformation error is exceedingly slim.
"A disconnected workforce could compound into siloes of knowledge and data that drive inefficiency across every level of the organization," he said.
For example, only 8% of what's planned by IT and software development teams ends up getting delivered — a disconnect that cannot be overlooked considering the market volatility that lies ahead.
"There is not enough talent available or cushion in company operating expenses to afford this much inefficiency," Gaurav said.
About the author
Nathan Eddy is a freelance writer for ITPro Today. He has written for Popular Mechanics, Sales & Marketing Management Magazine, FierceMarkets, and CRN, among others. In 2012 he made his first documentary film, The Absent Column. He currently lives in Berlin.
