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By Scott B. Meyer, Glenview James

Due diligence today requires a deep understanding of digital transformation. In this series, so far we’ve looked at the impact of buzzwords; claims of immunity; and the digital transformation conundrum.

In this final installment we’ll examine the importance of a company’s actual process for digital product development.

Changing a business to accommodate digital technology is complex, taking time, new procedures and sometimes new models. In due diligence, look out for any flags that indicate the company is more focused on the process of digital transformation than it is on the results of digital transformation.

You’ve probably heard about so-called agile software development. In a nutshell, this is an engineering framework that enables rapid product deployment. But Agile isn’t like accounting, where there’s a right and wrong way. And it certainly isn’t the same for every company: It must be adapted to each company’s business and culture.

In diligence, ensure that the company leadership understands which parts of Agile work for their business and which don’t. Some companies need a lot of process; for others, too much process can get in the way of getting anything done. If adopted in too orthodox a way, digital efforts can grind to a halt. Those companies can fall victim to the Process Over Results dynamic.

In addition, watch for companies that are not getting a return out of a heavy investment in Agile. If they’ve added expensive teams of product managers and built a project-management office to prioritize projects, make sure the financial results back this up.

To identify this in diligence, ask the management team:

• What is your digital product pipeline and how often are you releasing new products?
• How do you judge success?
• Who decides the priorities for digital investments?

Going back to my first piece, the management team’s answers should indicate they are on the same page. Watch out for answers like these:

• “We just moved to an Agile methodology and need to focus on the important changes to our process that will set us up well for the future.”
• “We’re in the middle of a multiyear project and there’s a bottleneck in new projects until that’s done. Our PMO says we can’t go any faster and they really know what’s going on.”
• “There’s so much technical debt to fix; we need millions of dollars and more people to deliver results.”

For most companies, a combination of issues underlie these responses. The team may not have the experience or skills to do the work themselves. Information may be siloed with the CIO or PMO, confounding decision-making.

If the processes can’t tie directly to business results, you have too much process and must throttle back in favor of results.

Scott B. Meyer is owner and principal consultant at Glenview James LLC. His practice centers on digital due diligence and digital transformation work for sponsors and portfolio companies. Reach him at [email protected] and @scottmeyer.