Vertical culture and skills development for deeper transformation

Date of recording: 19.12.2022.

In this podcast episode, we talked to Brigitta Popovicsné Koncsos, Managing Director of E.ON Digital Technology Hungary Kft. and Sándor Mester about a culture and skills development.

Participants

Sándor Mester - Moderator Mester Sándor
Brigitta Popovicsné Koncsos - E.ON Digital Technology Hungary Kft. managing director Agárdi Györgyi
András Tresch - Quattrosoft managing director Tresch András

Note that the podcast is in Hungarian.

Summary

In the podcast, Sándor Mester talked with Brigitta Popovicsné Koncsos, CEO of E.ON Digital Technology Hungary, and myself, András Tresch, CEO of Quattrosoft about the challenges and success secrets of digitalization projects.

The Failure of Digital Transformation Projects

Sándor started the conversation by citing a McKinsey study showing that 70% of digitalization projects fail, with only 30% considered successful. According to Brigitta, the failure often stems from launching these projects in isolation without clearly defined business objectives, whereas "digital transformation is not a sequence of individual projects, but a continuous process that must have a business purpose."

I mentioned the Pareto principle, suggesting that 20% of a system solves 80% of the problems. I also noted that clients often attach ideology to projects, declaring unsuccessful projects successful from certain perspectives because admitting failure is difficult.

Sándor pointed out that professionally initiated projects define required metrics and results from the beginning. Brigitta added that a transformation project shouldn't be solely about technology - this can be a main cause of failure. Success requires clear understanding of business needs, established goals and KPIs, which all stakeholders must know.

Change Management and Communication

The conversation highlighted that digital transformation involves fundamental change, which can be challenging. Brigitta explained that E.ON is experiencing a "tsunami of change," and that a CIO's key role today is change management. She emphasized the importance of communication - it's not enough to share technological information; users need to understand how the new system will benefit them and what they need to do differently.

I highlighted the significance of the status quo (current state). From my experience, nearly 50% of project initiatives die because many prefer to maintain the current state rather than embrace change. This is particularly true in recent years when people's stress tolerance is stretched to the limit, making it difficult to get them to accept additional changes.

Learning from Mistakes

We also discussed the importance of learning from projects. Brigitta explained that learning begins with the ability to "look in the mirror" and evaluate completed work. Organizational learning requires creating a safe environment where project managers can openly share their experiences without it being "embarrassing."

I emphasized the importance of stable leadership structure because if management changes every 1-2 years, the learning process always restarts. At E.ON, the people working on our topics are stable, enabling continuous feedback and learning. At Quattrosoft, we underwent a culture change after 2020 - today, people are much more willing to express their opinions and don't try to explain why a mistake was unavoidable; instead, we work on reducing the chance of errors in the future.

The Secret to Successful Digital Transformation

Brigitta compared digital transformation to building a house: you need strong foundations and a clear vision of what you want to build. It's important to have technological (infrastructural) foundations in place and to assess where the company stands in a given area. The business area must be fully involved, and we must understand the real problem we're seeking to solve. The IT leader should support this process not by following conventions but by selecting the appropriate technology.

I advised against launching a single gigantic digital transformation project, recommending instead to proceed with smaller projects (in the 10-50 million range), at a pace suited to the organization's adaptive capacity. This way, we can fine-tune our direction at each stage, like a torpedo that corrects its path in progress.

I emphasized that tools should be chosen for tasks, not vice versa. Interestingly, many clients request document management systems when they actually need a process control system that, similar to BürOffice, manages all metadata and digital content in one place alongside the process.

IT's Role in Transformation

We discussed what role IT should play in a successful transformation. Brigitta explained that at E.ON, they define themselves as "Business IT," meaning they don't simply play an IT supplier role but have an integrating function, understanding how changing one component affects the whole.

She also mentioned that while they used to base changes on business processes, today they need to choose technologies that are easily replaceable when the company needs to make decisions. This "technology-driven process development" approach is particularly important in today's rapidly changing economic environment.

I highlighted two aspects of process organization: first, organizing and possibly changing corporate processes (not necessarily an IT task), and second, aligning IT operations and support with the new operating model (which is purely an IT task). It varies by organization where process regulation is placed, but it's definitely an IT borderland.

Partner Selection and Partnership

Brigitta discussed how partner selection works at E.ON. She emphasized that they consider the companies they work with as partners, not suppliers. E.ON has both international and local partners. Global agreements involve large companies (SAP, Microsoft, and service providers like Wipro, Infosys, HCL, Accenture) through which they use certain services at a group level.

For local applications where they work with business users, they contract with many local partners. In selection, they define capability sets (Lots) they need and look around the market, considering previous experiences, benchmark data, and a set of criteria (financial, economic situation, company size, etc.). Framework contracts are signed for 3-5 years, securing certain capacity capabilities.

I confirmed that we also consider the companies we work with as partners. We have a small number of partners with very sophisticated needs; we focus on professional service and partnership, which is possible with a finite number of companies.

I shared our experiences with tender procedures, where evaluation is often based on too many criteria (up to 300-500), and problems can arise if suppliers don't respond realistically. I miss reference visits where they go to see how a given supplier actually performed at another, similarly sized organization.

Future Challenges

At the end of the conversation, we discussed future challenges. Brigitta said that E.ON's biggest challenge will be integrating ELMŰ, which means unifying four Transdanubian distribution networks with ELMŰ's distribution network. They plan to go down to the user level and will focus heavily on change management to ensure that even their last colleagues can embrace the change.

Speaking about Quattrosoft's future, I mentioned that for more than a year, we've been rethinking how we view our activities. We want to make our standard systems customizable with comfort and little investment, and further develop our integration capabilities. Our goal is to have a toolset that enables flexible integration with different systems, ensuring that our clients, like E.ON, have future-proof solutions.

Overall, we shared many valuable tips about key factors for successful digital transformation, such as precisely defining business goals, the importance of change management, selecting appropriate technology, cooperation between IT and business, and the significance of partner relationships.

Note that the podcast is in Hungarian.