Alec McCullie is a Partner and CTO at Vendigital. He recently shared his insights with Business Cloud.
Businesses choose to embark on digital transformation journeys for many reasons: in response to market conditions or shifts in customer demand, as a result of a strategic change of direction, or simply to address cost challenges and improve their bottom line.
At its core, digital transformation offers businesses the opportunity to achieve significantly more with less effort, for example by increasing efficiencies in many areas from operations to capacity planning or demand forecasting. As such, it has become increasingly popular within high-value manufacturing industries, some of which are currently facing challenges around cost increases, rate readiness and ongoing supply chain disruption.
The most successful digital transformation journeys occur when the business leadership is seeking a step-change in performance and recognises the importance of involving all stakeholders as early as possible. The most effective processes start by asking key strategic questions about what problems require solving and why; seeking a people-led solution that is underpinned by technology and data.
Introducing new technologies for their own sake without considering the human-machine interface and change management needs will often be less effective in the long term, which is why many large-scale Enterprise Resource Planning (ERP) implementations may fail to deliver the step change in performance that the business might have been hoping for.
Taking the time to perform sufficient due diligence before the transformation journey begins will not only save a business money in the long term and reduce the risk of lacklustre results; it will also ensure that the key barriers to a successful transformation are addressed right from the outset.
Research conducted by Vendigital and Cranfield University last year revealed that the main barriers to successful digital transformation are ‘funding’, ‘a lack of digital skills’, particularly analytical skills, and ‘resistance to change’. In fact, a lack of digital skills and resistance to change were identified as factors of equal importance.
Clearly, bringing people onboard is vital for success, and directors should address any worries that their employees may have about successful digital transformation in an open transparent way. For example, staff may be concerned that the changes will bring job losses, when in actual fact there are likely to be opportunities to develop skills and eradicate the most irksome of working practices.
Workforce anxieties often come as a result of a lack of transparency on what a digital transformation journey is for, and directors should take steps to explain their vision for a better business. A digital transformation journey is rarely about reducing headcount or letting machines take over, rather, it is about helping employees to use their time in the most efficient and effective way and driving productivity as a result. For example, if a person’s workload is reduced by 50% through improved process efficiencies, they can now be far more productive elsewhere.
A lack of clarity from directors about both the change process and potential return on investment can also lead to internal resistance which forms another key barrier to progress. However, the most successful digital transformation strategies are often those that recognise that ROI is often intangible and could come from unexpected areas down the line.
For example, better understanding of demand signal will enable benefits up and down the value chain as data insights become more readily available and pain points can be better understood. Often these insights simply cannot be planned for when putting together the initial business case for digital transformation.
As data maturity across the business increases, this always leads to further opportunities for cost savings and efficiency improvements.
In another example, a business might want to use its improved data maturity to improve understanding of its total spend in order to make cost savings. However, during the process they might find that average payment terms are far longer than expected which is creating a significant cash challenge. Through the insight gained from the management intelligence suite, the business can solve the issue quickly by re-negotiating contracts or appointing new suppliers as necessary.
This brings an additional benefit through improved cash flow, and the increased visibility allows for further data interrogation as the business continues to build data maturity and deliver on its cost-saving roadmap.
Increasing data maturity will create a positive ripple effect across the business as root problems are solved and new issues are uncovered, creating a continuous improvement cycle that often exceeds any initial planning. A successful digital transformation will always equip employees to make better decisions more quickly, while opening up opportunities to develop their skillset and ultimately progress their careers.
To assist them in communicating the digital transformation journey clearly to all internal stakeholders, directors should not only have a strategic vision of what they want to achieve, but a framework that breaks the phases down and shows how they will get there. This framework can be visualised as a virtuous cycle, separated into ‘current state’ and ‘future state’.
The ‘current state’ shows where the business is at the beginning of the journey, and sets the strategic goal. It identifies what technology or levers are already in place to reach that goal, and who or what will be affected by the step-change needed to achieve it. Once these points are understood, the ‘future state’ comes to the fore as the identified gaps can be filled with technology that delivers meaningful data back to the business, driving further operational insights. This leads to an optimisation process where the new data can be interrogated to discover further learnings and create a continuous cycle of improvement.
Digital transformation journeys seek to enrich the capabilities of a business and improve an employee’s ability to make better and faster decisions, based on accurate and reliable data. For a successful transformation, it is vital that directors communicate effectively with their employees that the technology is intended to work for them, rather than replace them, and that it will create opportunities for them as individuals, as well as for the business as a whole.