Crucial Digital Transformation Decisions In An Effective Digital Strategy

Written By: Eric Kimberling
Date: November 28, 2022

Successful digital transformations require a number of key decisions that need to be made throughout the process but what are the most important decisions that you need to make to guarantee success?  

When going through a digital transformation, there's many different, highly important decisions that need to be made. This may not sound like rocket science on the surface but so many organizations don't understand what those decisions are and worse yet they either don't make the proper decisions or they delay those decisions to the point where it delays the project. What we want to do today is talk about some of those key decisions that need to be made in the digital transformation process. 

These decisions are a way to create alignment and to create speed in your digital transformation. The sooner that you can arrive at these conclusions, decisions and get consensus as a team, the faster your digital transformation is going to go and the less headwinds you're going to face.

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Operational and Tech Strategy

The first big decision that an executive team and a project team needs to make is to decide what your operational and technology strategy is. Many organizations think that their sole strategy is to replace their old systems or to implement a modern ERP system. Those aren't great reasons, they might be reasons why you're deploying technology but they're not strategy decisions. Your decisions need to focus more on the impact we want to see in your operations, what kind of technologies are going to best enable these operational and technology strategies. You need to connect the dots to the overall corporate goals and objectives, so you need to translate the corporate goals and objectives into meaningful decisions regarding what type of operational improvements you want to see and what type of technology you want to deploy.

For example, as an organization, you might have some immediate pain points that could benefit from technology, perhaps your sales team doesn't have the right tools to manage their sales processes or perhaps your finance group doesn't have the right tools to consolidate financial results. Additionally, should you go ahead and solve those immediate problems now and find technology and process improvements that will enable those improvements. Furthermore, do we back up and look at the entire technological landscape? That's a pretty big decision that needs to be made and you need to make sure you're aligned as an organization and as a team before you get too far into your transformation.

Magnitude of Change

Another key decision that needs to be made is what is the magnitude of change that we are willing to take as an organization. A lot of organizations think that they’re just going to deploy technology and that's going to drive a lot of our changes but the reality is there's a lot of different magnitudes of change that can affect an organization. You might be risk averse and decide that you just want to do more incremental changes, you don't have the appetite or the tolerance for risk that will allow you to take bigger risks and that's okay as long as you're aligned on the fact that you are making more incremental changes. Other organizations might be more aggressive, they might want to swing for the fences or a quantum leap on improvement to their business, so they’re willing to take on a bigger magnitude of change.

In addition to making this decision, you also need to understand what the consequences, as well as the pros and cons and trade-offs are, of each of these decisions. In the case of the big magnitude change, that just means that you're going to require probably more time, more money and more focus on change management and more risk and potential disruption to your business along the way. The incremental approach might have the downside of not being up to date on technology and perhaps not taking full advantage of some of the quantum leap improvements that could be available to you, so, these are major decisions that need to be made. You want to make this decision before you jump in and start evaluating and deploying various types of technology.

Level of Standardization

Another common decision that digital transformation teams need to make is the level of standardization that they want to enable as part of their digital transformation. In other words, a lot of organizations we work with are going through merger and acquisition activities and/or aggressive organic growth. As a result of that, they've grown up with disparate systems, disparate processes, disparate data points and just different ways of operating throughout the organization. One of the benefits they want to see as a result of their digital transformation, is a standardization of those processes. The reason this is such a complex and difficult decision is because it's not just one decision you're making, you're not just making a yes or no decision of if you standardize or not, you’re making a decision of where you standardize. It's extremely rare that we see an organization that effectively standardizes their entire operations.

Typically, it's a hybrid set up, there's certain functions within your business that you are going to standardize or consolidate. There's going to be other parts of your business where you decentralize or have more flexible processes that are perhaps closer to the customer or perhaps more localized to the individual market, so it's really important that you have a clear vision going into the transformation of where you're going to standardize. The better handle you have on this and the more alignment you have on this big decision, will allow you to save time and money when it comes time to select and deploy technology.

Organizational Impact

Another factor to consider is the degree of organizational impact that the transformation will have on your organization. This is where we look at the technology and process improvements that we're envisioning and we articulate and analyze how we give an impact. The reason this is so important to understand, going into your digital transformation, is because organizational change and the human factor of change is oftentimes the thing that delays digital transformations, it's usually not the technologies, its usually the people or the process side of the equation. The better the handle you have on what the change impacts are the better handle you can have on what the real implementation plan, the real budget and resource commitments and the real risks are going to be.

Business Value and ROI

The final big decision that most organizations overlook, is a decision regarding the business value and the ROI that you expect to get out of the digital transformation. There are two sizes to this equation, there's the cost side of the equation and there's the business value side of the equation. On the cost side, we need to start with realistic expectations of really understanding what the real, total cost, of ownership is for this digital transformation.

On the business value side, which most organizations completely neglect, you need to understand and quantify where we expect to get the business benefits, not only to justify the project and to build a business case to get approval for the project but more importantly to track business benefits and to hold people accountable for actually achieving those business benefits. This entire process of benefits realization and value creation is extremely important but so many organizations overlook this process. It is something that really hasn't changed in the industry and frankly its difficult to understand why companies will spend months or years and millions of dollars on these transformations but they don't hold themselves accountable to ensure that they get the business value to justify those investments. Be sure you have a clear analysis of what the business value is, what the business case is and most importantly how you're going to track those benefits and who you're going to hold accountable for those business.

I hope this has given you some things to think about in terms of decisions that you need to make not only to speed up the process later but also to ensure that you have alignment going into the process and the more aligned you are on these and other key decisions the faster your implementation is going to go the less cost it's going to take and the more value it's going to create and perhaps just as importantly it ensures that you're mitigating the risk of operational disruption throughout the transformation. 

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If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Feel free to reach out to me here with any questions you may have ryan.glisan@thirdstage-consulting.com

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices. https://www.thirdstage-consulting.com/reports/2023-digital-transformation-r

Author:
Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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