Geoff Clarke, Managing Director, Business Transformation, Omnicom Media
Let’s imagine a business has invested millions in new technology platforms, their transformation team have attended multiple systems, software, technology summits and specialist consultants have been engaged and have delivered their recommendations. The strategic roadmap has been approved and while the timeline is aggressive, the leadership team is confident it’s achievable. Yet, six months in, the business transformation is haemorrhaging money, timelines are slipping, and the business’s best people are quietly updating their LinkedIn profiles.
The diagnosis to the above scenario is predictable and while resistance to change, change fatigue and on-going poor communication are all symptoms, they are not the disease. The real culprit is something far more sinister and is crippling business transformation across multiple sectors. It’s a concept known as ‘Capability Debt’¹.
Just as Technical Debt² in software development represents the accumulated cost of shortcuts and quick fixes that eventually slow everything to a crawl, capability debt is the compounding gap between what your people can actually do and what your transformation requires them to do.
Unfortunately, it accumulates silently, decision by decision, until the interest becomes unpayable. Sneaky, deceptive, menacing and dangerous, all adjectives that come to mind.
Here's an example of how capability debt accrues: a business decides to implement Robotic Process Automation (RPA) to streamline a portion of its end-to-end workflow. After many months of scoping, development and testing, RPA BOTs are launched, training is scheduled, but a crisis emerges, and sessions are postponed. That's the first deposit into the businesses capability debt account.
Three months later, the business finally runs a condensed version of the training, scheduled over days instead of months because leadership doesn’t want its people distracted from billable work. Another deposit. Six months in, the team is using the RPA system but are only leveraging about 30% of its functionality because they never received proper training. They've created workaround manual processes, shadow spreadsheets, informal systems that "just work better for us” and worst still the transformation is poorly viewed by the very people it is designed to help. The business is now paying compound interest on its capability debt, and the leadership team don't even realise it.
The cruel mathematics of capability debt is that it multiplies, and every workaround becomes embedded practice. Every delayed training decision makes the next transformation harder because teams are building new capabilities on a foundation that was never properly constructed.
There are many businesses who have invested heavily in new technologies in an attempt to improve output value, only to have their teams revert to previous manual processes within months because the capability debt was never addressed.
Essentially, the technology was ready, but the people were not.
Businesses struggling most with Technology Convergence aren't those lacking investment capital, they’re carrying capability debt. When a transformation is rushed without addressing a business’s skills gap, people are forced to create expensive workarounds that are often less efficient than the systems they replaced.
To bring this concept to life further consider a business that implements an AI-driven insights platform, but their teams lacks the data literacy to interpret the outputs effectively. The team end up having to manually validate every recommendation, effectively recreating the old analytical process alongside the shiny new system. Therefore, rather than delivering promised efficiency gains, the result is an increase in operational costs because the capability debt turned the solution into a problem.
So how do leaders quantify something that's invisible? They must conduct a capability debt audit, a systematic assessment of the gap between their current workforce skills and transformation requirements. This isn't a performance review. It's effectively an operations balance sheet. Starting with a skills inventory, carefully mapping the required capabilities against the businesses current capabilities for each role critical to the business transformation.
When completing this it’s important to be brutally honest, only then will leaders be able to confidently quantify the gap. How many people need to be upskilled? What's the current proficiency level? What's the required level? And importantly what's the investment needed to close it?
Eliminating capability debt requires the same discipline as paying down financial debt: a structured plan, protected resources, and leadership accountability.
After three decades in the engine room of businesses, I’ve learned transformation fails not because the technology isn't ready, but because the people aren't ready. A transformation doesn’t fail because people are resistant to change, it fails because leaders have asked their people to execute a transformation, they're not equipped to execute. That’s a leadership failure, not a workforce failure.
The good news? Unlike financial bankruptcy, capability bankruptcy is entirely reversible. But it requires acknowledging the debt, quantifying it, and committing to a systematic paydown plan.
Because the next transformation is always just around the corner, and if a business is still carrying the capability debt from a previous one, the business is already bankrupt before transformation has begun.
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Notes:
¹ Graves, T. (2020, September 9). The weight of the past. Tetradian. Retrieved from: https://weblog.tetradian.com/2020/09/09/the-weight-of-the-past/
¹Prior, H. (n.d.). The Real Transformation Bottleneck: Capability Debt. EGI. Retrieved from: https://www.egi.co.uk/expert-hub/henry-prior
²Wikipedia. (n.d.). Technical debt. Retrieved from: https://en.wikipedia.org/wiki/Technical_debt
²Fowler, M. (2019, May 21). Technical Debt. MartinFowler.com. Retrieved from: https://martinfowler.com/bliki/TechnicalDebt.html