Should companies exploring digital projects be budgeting for failure?

COMPANIES chasing digital transformation agendas know that failure is a possibility, and yet, they don’t seem to be budgeting for failure.

Back in 2016, it was said that digital transformation typically will take four years and 85 percent of companies would fail. Over time, success rates have improved, but a majority of companies still do fail.

Think tanks such as McKinsey and BCG have always cautioned companies against the practices that lead to digital transformation failure and set frameworks and models to guide businesses to succeed with technology.

However, there’s not much commentary about what organizations should do when they fail.

Gucci Head of Strategic Gamification and digital transformation consultant Anders Lange believes that the key to succeeding with digital transformation is to budget for failure.

In an interview with Econsultancy ahead of his keynote presentation at the Festival of Marketing, one of the things Lange shared is that more organizations need to start seeing failure as a learning process instead of being bogged down by it.

“We should do that no matter the size of the company, Lange emphasized. “If you look at the history of almost every brand, we still don’t focus on budgeting to fail.”

According to Lange, failure to accept failure perpetuates more failure.

“I think we should adopt a culture that says it’s okay to fail. We can learn a lot from other people, but those are not learning processes that are adapted to your culture, your set of KPIs, your management, your people. You can’t just copy others – you need to have your own learning process.

“Of course, you can go some way towards minimizing failure by learning from others, but there are limits to that. The unique lessons, you have to learn first-hand.”

Gucci is making progress on the digital front

Gucci, by the way, Lange proudly told Econsultancy, is a good example of a company that budgets for failure.

Kering, Gucci’s parent, seems to be quite focused on going digital — and doing it quite successfully as well.

In a press release last year announcing new developments in its digital strategy, the company said it was taking back control of its e-commerce operations (from longtime partner YNAP) and has created a data science team at the Group level to leverage data and improve its service.

“These exciting new initiatives have been designed to meet – and exceed – the needs of our Houses’ customers and to ensure we continue to offer them an exceptional experience across all channels in a fast-changing global market,” explained Kering Chief Client & Digital Officer Grégory Boutté.

One of the interesting innovations that Kering discussed was the suite of apps it has been developing in partnership with Apple for in-store staff.

The first of these apps is designed to help provide a better store experience by enabling sales associates in-store to access stock levels in real-time and providing customers with more personalized services.

Via the app, sales associates know instantly if a specific size or color is available in-store or if it can be ordered from other stores, and also helps them provide customers with customized styling recommendations.

For a company like Kering, with brands such as Gucci, Saint Laurent and Bottega Veneta under its umbrella, the journey to digital maturity is definitely tough, balancing customer expectations and experiences in a digital world with traditional, strongly-rooted brand ethos, culture, and values.

Given the progress, however, it seems like Gucci and parent Kering, are doing well with technology.

Budgeting for failure key to accelerating digital transformation?

Managers often talk about the value and importance of “fail fast, fail often” and “fail fast, learn fast”.

Although it’s conceptually similar to the agile method used by developers and IT teams, business or digital transformation teams seldom use it in practice.

Their biggest challenge with the concept is that failure is expensive, and hence, it’s better to spend time analyzing what can go wrong, evaluating the consequences, and then picking projects and digital journeys that are least likely to fail.

In other words, digital transformation teams currently tend to embrace the idiom “better safe than sorry”. Lange feels that’s not the right way forward.

“I believe that failure is just an engine for going forward. Failure is just a process of growth – you can’t have a company that has never failed in its entire history,” Lange told Econsultancy.

“I actually think we should focus on the negative stuff, as long as we combine it with learning.

“Just look at the number of companies that started at one thing and pivoted to another. Failure can be a good thing, as long as you move on from it,” Lange emphasized.

Lange seems to be convinced that failure isn’t a bad thing — and the approach seems to not only be reasonable but also help companies (like Gucci) produce results. Budgeting for failure, then, seems quite logical.

“We all know that when a powerful engine fails, we just switch it out for a new and better one, because we learned that that part didn’t work,” concluded Lange. Maybe that’s what organizations need to do too — budget for failure, learn from it, and carry on with their digital transformation journeys.

---

---

---

---