Once the digital strategy and the roadmap to become a digital enterprise have been defined, putting this plan into action is the next step. Each potential digital project needs to be specified based on common criteria (cost to realise, time to market, expected benefit, necessary resources, constraints, interdependencies, risks, etc.) as a first step in order to assess its suitability in comparison with all other activities. It can then be placed in order of priority. The process is normally described as project portfolio management and is a formal approach that an organisation can use to align, prioritise and execute projects.
Traditionally, the main criteria for comparing projects are usually the risk – reward ratio, the available resources, the duration and the expected result. When defining the project portfolio today, digitalisation becomes an additional criterion for allocating scarce resources and setting priorities. However, with digitalisation’s cross-functional impact on all business areas of the enterprise, classic approaches, such as allocation along lines of business, will not work. A group of decision makers within an organisation, ideally under the lead of the CDO, evaluates the returns, benefits and priority of each project to determine the best way to invest the organisation’s capital and resources. To further advance the approach, it is advisable to involve business architecture (if such a function exists within the enterprise), IT architecture and the procurement function in the project portfolio process too. Business and IT architecture will ensure the alignment of the projects with the way the digitalised business structure and IT landscape is intended to be. The participation of procurement will allow this function to identify available sourcing opportunities early and let the company benefit from supplier innovation, speeding up time to market to become digital.
Besides the main digitalisation projects driven by the CDO (where he or she is responsible for delivery), the other projects will also be influenced to a greater or lesser degree by the digital wave. But first the enterprise needs to allocate the necessary budget for its digital strategy.
One-third of companies implementing digital technologies report that insufficient budget holds them back.[1]
Therefore, a digital strategy should ideally already contain a high-level budget projection for its implementation so as to secure the necessary funding within the strategic business plan.
To be successful, it is crucial that the CDO has a dedicated budget for executing the roadmap to become a digital enterprise.
The CDO cannot discuss with all business lines the number of projects within their business portfolio or the investments that are required to execute the digitalisation roadmap. Business line targets will typically overrule the CDO – maybe not during the initial allocation, but throughout the year when budget changes need to be made. To prevent this, therefore, the CEO and the CFO need to make sure that sufficient funding is available and the CDO is empowered to execute the digital strategy.
With sufficient budget, the CDO can start prioritising the projects within his or her responsibility. The digitalisation project portfolio needs to reflect the impact and relevance of each project for achieving the target of a digital enterprise, but classic criteria such as return on investment, time to market, project duration or ease of implementation also need to be well balanced and included. These criteria for the evaluation of the different projects should be developed as part of the digital strategy (based on principles laid out in this book series and adapted to the company-specific requirements). Especially at the start, it is advisable to give smaller, quicker and easier-to-implement projects a higher priority as this will show results in a limited period of time and give initial hands-on experience with digitalisation that is beneficial for the projects that follow.
For other areas, the budget allocation can be done in the way that has been previously established, although it will become more challenging for the remaining projects. As they are driven out of the old world, they are usually defined on the basis of the existing business framework.
The restrictions imposed by the legacy systems are one of the greatest obstacles the organisation faces for the integration of digital technologies.[2]
But, regardless of the business rationale for the projects – whether regulatory changes, product or service innovation, efficiency gains, life-cycle projects – they can all have ‘digitalisation potential’. To identify this and to make sure that all the projects ft into the overall digital enterprise strategy, the CDO becomes the major stakeholder in the overall project portfolio review process. This way, he or she can also unlock the digital potential of these projects by ensuring the ft with the digital enterprise architecture.
Conversely, the CDO also needs to be cautious, as ‘digital’ is likely to become the ‘honey pot’ to fund projects for which no business budget is available.
In order to prevent this from happening, the CDO will need to define clear criteria in respect of the digital project portfolio and the governance of projects outside this portfolio but with digital impact. Again, criteria need to be developed based on the principles laid out in this book series, adapted to the specific business environment.
Otherwise, all projects will suddenly be declared as digital to secure an alternative funding source outside the business line budget.
To ensure the alignment of all projects relevant to the overarching digitalisation of the enterprise, the CDO ultimately needs to control the full project portfolio. That way he or she can ensure that a holistic view is taken of all digitalisation efforts and that sufficient funds and resources are allocated towards digitalisation, regardless of the business line in which the project is located.
The right allocation of resources is critical for success, especially in the area of analytics where the supply of sufficient talent for implementation is scarce and can become a bottleneck on the way to achieving the transformation.
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[1] Giacomelli, G.: ‘Putting digital to work – the Lean Digital way’, Genpact Research Institute, p. 30, 2016.
[2] Giacomelli: p. 30
