Introduction

As a business change expert, I am often confronted with the statistic that c.70% of business change projects do not deliver the value they set out to achieve.  At first glance this can be disheartening, especially for business leaders, CEOs, or founders who need to align their businesses behind a vision.  But before we decide that we just can’t afford that level of project failure, we need to look at why business change projects fail to deliver and then explore how we can create the highest IRR (Internal Rate of Return) for any investment in our businesses.

Why do business change projects fail?

Research by IBM, PWC, and change organisations like PROSCI suggest that business change projects fail to deliver the value they set out to achieve because the change is mismanaged.  This isn’t intentional mismanagement, but a feature of a belief that business change is just another project that can be planned and managed, much like swapping out a server, upgrading your phone, changing a workflow automation.

If this were true, then life would be very binary.  Thankfully life is full of creativity, messiness, and colour because to truly live involves engaging with fellow human beings.  But it isn’t as simple to say that business change projects fail to deliver their value because they involve humans.  As you might imagine it is more complex than that!

Business change projects fail because of systems.  Hundreds and thousands of systems, some of which we can see, some we can’t, some that are in the eye of the beholder, and some that are created as a response to the change proposed.

If change is so complex and multi-faceted, how can we achieve the value we set out to achieve and create the best IRR for the investment made by the business?

First, let’s be clear about IRR. IRR is the annual rate of growth that an investment is expected to generate. For example: If I invest £300k in a new business system, what is the annual rate of growth that this investment will generate?

From a business change perspective, we are looking at the annual rate of growth that a business change is expected to deliver for the organisation. e.g., If you are implementing a new ERP (Enterprise Resource Planning) solution, what is the growth in cash terms that this business change will deliver at the PV (Present Value).

Once we know the IRR and the project gets a green light, delivering on that IRR becomes an operational delivery issue.  Hence simply delivering an ERP system migration project to time, cost, and quality isn’t a sufficient metric, because if the ERP system reduces the cash inflows to the business the IRR is compromised, and the project will not be delivering the value it set out to achieve.

Delivering IRR is the value of the change management professional, their skills and qualities, and their ability to migrate the organisation from one way of working to another whilst managing dips in performance caused by new systems, training, mindsets, and behaviours.

Conclusion

In conclusion, it is easy to see the tangible difference a business project makes in terms of tasks completed, but the true value of a business change is in delivering IRR and other business metrics.  The calculation of these and the commercial understanding foster the insight that business change and the skill of delivering this across complex organisations whilst achieving the forecast IRR, allowing for the changing landscape of the market et al, is why the exchange of value for competent change practitioners is set at a premium.