Why the Current Innovation Model is Under Pressure: Part 2 - Change Management

Waterfalls in a Volatile World

When supply chain leaders reflect on why their transformation programmes struggle, the conversation often turns to the way change itself is managed. The dominant approach is still heavily influenced by the logic of waterfall: define the requirements, map the programme, lock in the budget, then deliver in stages over multiple years. On paper this looks reassuring. It creates certainty for boards and investors and offers the promise of a controlled path from A to B. In practice it often proves misaligned with the volatile reality that supply chains face.

In our discussions, directors have described how carefully crafted plans fell apart as soon as conditions shifted. One leader told me their company spent 18 months defining the scope of a planning system upgrade, only for Covid to hit before the first pilot went live. By the time they were ready to test, customer demand had shifted completely and the project scope no longer matched the business need. Another described how Brexit altered trade flows in ways that invalidated key assumptions built into their programme design. In both cases the waterfall model left them locked into a plan that was no longer relevant, with little flexibility to pivot.

The research supports what these leaders report. McKinsey has found that only about 30% of digital transformations meet their objectives¹. Their work also shows that organisations using agile methods are about one and a half times more likely to succeed². BCG has found similar patterns, emphasising that iterative change with clear feedback loops is more likely to deliver lasting results³. These findings align with what we hear directly: when transformation is treated as a linear process, the risk of misalignment with reality grows with each passing month.

It is not only external volatility that undermines waterfall approaches. Internal dynamics matter too. Large programmes depend on stable requirements, but supply chain leaders know that priorities shift constantly inside their organisations. New leadership, cost pressures, acquisitions, or regulatory changes can all rewrite the brief mid-stream. In a waterfall structure, making those adjustments is expensive and slow. Directors have shared stories of steering committees that spent months debating whether a programme should change scope, by which time the business had already moved on.

There is also the human dimension. Change fatigue is a common refrain in our sessions. People on the ground often feel overwhelmed by the number of initiatives layered on top of day-to-day operations. In a waterfall model, benefits are usually backloaded. Staff are asked to endure disruption for years before they see improvements. By the time the programme delivers, many of the original champions have moved on and frontline teams are sceptical that the next wave will be any different. This erosion of confidence makes it harder to mobilise support for subsequent initiatives.

Some companies have tried to address this by borrowing agile methods. They break work into sprints, use cross-functional teams, and deliver incremental releases. But even here the cultural shift is difficult. A few directors have told me their organisations claimed to be running agile programmes, but in reality the underlying mindset remained waterfall. Sprints were still planned 18 months out, governance structures were rigid, and business engagement was minimal. As one leader put it, “We had the language of agile without the reality.”

The contrast between companies that embraced iterative change and those that stuck with waterfall was especially visible during Covid. Nike, for instance, had invested in digital channels and analytics before the pandemic. When stores closed they were able to pivot quickly to direct-to-consumer sales, reporting a 75% increase in digital commerce revenue in 2020⁴. Other companies found themselves with transformation programmes that had been scoped years earlier and were impossible to accelerate or redirect. Their systems simply were not ready for the new demands.

At the same time, we should not pretend agile is a panacea. McKinsey’s research into the twenty one practices that raise the odds of transformation success found that agile ways of working were only part of the picture². Leadership alignment, talent management, and clear measurement also mattered. In our discussions, directors have noted that agile requires a level of digital fluency across the leadership team that is still patchy. One described how their agile pilots stalled because business leaders did not know how to engage with product backlogs or user stories. Without that engagement, the pilots became IT projects in all but name.

Another dimension is investment timing. Boards like waterfall because it produces a clear budget and timeline. Agile feels open-ended and uncertain by comparison. CFOs I’ve spoken with often express discomfort at committing resources without knowing the full cost or outcome. They want predictability, even if it means committing to a path that may turn out to be the wrong one. This financial logic reinforces the persistence of waterfall even when leaders know it sits uneasily with the world around them.

The tension plays out in governance as well. Waterfall programmes typically have layers of steering committees and sign-offs, which can be useful for control but slow for decision making. Agile requires empowered teams able to act quickly. In practice many organisations try to straddle both, resulting in what directors describe as “agile theatre.” Teams use agile language but real decisions still require committee approval, undermining the very speed and flexibility the method was meant to deliver.

So what does all this add up to? From what I hear in peer discussions and what the research shows, the conclusion is clear. Waterfall persists because it gives the appearance of control and certainty. But in an environment defined by disruption, that certainty is an illusion. The reality is that waterfall approaches are poorly suited to conditions where requirements change faster than programmes can adapt. Agile offers a partial answer but only when it is embraced as more than a set of rituals. Without the right culture, skills, and governance, agile becomes just another label attached to programmes that still move too slowly.

This does not mean waterfall should be abandoned completely. There are situations where a tightly defined programme with stable requirements still makes sense, such as regulatory compliance or infrastructure upgrades. But treating waterfall as the default model for supply chain innovation is increasingly untenable. The stories shared by directors and the evidence from research point in the same direction: the current approach to change management is under strain. The methods we inherited from a more stable era are struggling to keep pace with the volatility we face today.

Sources:

1. McKinsey & Company, Unlocking success in digital transformations, 2018.
2. McKinsey & Company, How to beat the transformation odds, 2015.
3. Boston Consulting Group, Flipping the Odds of Digital Transformation Success, 2020.
4. Nike Inc., Q4 2020 Earnings Call Transcript, June 2020.