Business Transformation Gone Wrong

In 2007, our CEO believed the business of transporting students was becoming commoditized, resulting in the inability to charge a premium for our services and lower profit margins. He announced a project to enable us to differentiate ourselves from the competition by transforming our business through centralization of functions such as customer service, routing and scheduling, and dispatching and by creating “smart buses” by adding technology to the school bus. He believed the project would revolutionize the student transportation industry and give us a competitive advantage for years to come. The project would take 12 to 18 months and would cost 60 million dollars and would be run by the newly established Project Management Office (PMO). He had a specific vision, set clear goals, and provided resources to get the job done. When he was fired three years later, the project was 18 months overdue, had yet to deliver a smart bus or centralized services, and had cost 120 million.  There were failures in both the technical and social cultural aspects of the project which lead to the disastrous results.

The project suffered from scope creep; everything seemed more complicated than first thought which lead to cost overruns and missed deadlines.  Baseline budgets were established at best case scenario levels and could not accommodate for changes.

We hired external project managers and technical experts, but internal resources were pulled from operations, which led to customer service issues as service delivery suffered. Pulling resources also led to poor morale as staff was assigned without any consideration of the impact on the ground.

Senior management was never able to get the organization behind the project, which resulted in a division between business transformation and the rest of the business. While our PMO focused on managing schedules, providing status reports, and allocating resources they were unable to provide the leadership and create a sense of teamwork to overcome the lack of organizational support. Similar to the reaction of sales representatives at Avon in the following article, our management teams were not supportive of the project which resulted in significant turnover and ultimately contributed to the failure of the project.

The single biggest problem related to the reaction of customers to business transformation. Simply put, customers did not want what the project was aiming to deliver. Customers wanted local support and resisted centralization of dispatch, routing and customer service. Our leadership rationalized decisions by believing the customers simply did not understand the benefits of our project and once the project delivered, customers would be so impressed with the results they would be won over.

While we are well on our way to recovery, the effects of the failed project are still felt today. Customers still reference it and the talent we lost during the exodus that occurred during the project still impact the business.

2 thoughts on “Business Transformation Gone Wrong

  1. Ouch. That is a lot of time and energy inputed with little results obtained. I would not call it a waste as your team did grow and develop from it. At least in the regard on what not do to. It sound to me like this CEO wanted to have has sacred cow succeed even at the cost of his reputation and company. How is your company recovering from this? Were there any benefits? Very interesting post, thanks for doing it.

  2. Its interesting that senior management never got behind the project for support. I remember in an IT class, we talked about the importance of executive sponsors who push the project along and ensure that the full organization understands and believe in the project to ensure its success. Also, sounds like such a large project, maybe starting on smaller projects would be helpful to create small wins to establish buy in and support. It would be interesting to hear how your company recovers and if the mentality around projects in the future will be tarnished because of this.

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