It has become clear in recent months that many companies won’t survive the pandemic and recession of 2020. Hertz recently filed for bankruptcy – the latest in a string of casualties in an uncertain economic environment.
What did Hertz do wrong?
While this may not be a surprise given that travel plummeted 90% earlier this year, I can’t help but wonder how the company’s recent digital transformation may have contributed to the company’s failure. As I pointed out in a recent analysis of Avis vs. Hertz’s digital transformations, Avis (one of Hertz’s primary competitors) used its digital transformation to overhaul its business model. It redefined its operations to better accommodate changing market forces (example: Uber and Lyft) before carefully overlaying technology and process improvements into its new business model.
Hertz, on the other hand, outsourced their transformation to Accenture and called it good. It took a traditional – but highly ineffective – technology-first approach and became distracted by the bells and whistles of software. It lost sight of its customers and the market. The whole disaster culminated in the Hertz v. Accenture lawsuit.
The results of the two transformations was stark. How could two large competitors in the same industry end up with such different results?
It raises another question that we should all be thinking about in the coming months and years: will old, traditional digital transformation frameworks work for the future? Fortunately, the answer is “no.” Even better, this answer is finally becoming more apparent to executives and digital transformation project teams across the globe.
Gone are the days of the big, unaccountable systems integrator
The old systems integrator business model is extremely outdated. Hertz lost control of its system integrator, and as a result, the transformation project became misaligned with what the company needed to navigate a changing landscape. Hertz spent far too much money on its initiative with little results to show for it, which undoubtedly must have undermined its financial stability.
The deficiencies of this model were especially apparent when the global pandemic grounded hundreds of thousands of “on-site Monday through Friday” consultants. They could no longer park themselves full-time at the client with seemingly unlimited billable hours (for more on this, read “My Name is Eric and I’m a Recovering Big 5 Consultant”). Their high-price existence became harder to justify while many companies were furloughing their own employees and/or scrambling to keep the lights on while working remotely.
Replace “digital” transformation with good strategy and culture
Losing control of your systems integrator and overall transformation isn’t the only problem. Too many companies focus too much on technology and too little on the things that really matter.
I too love seeing what predictive analytics, internet of things, artificial intelligence, and other cool new technologies can do, but we need to stay focused. Just because ERP vendors are constantly spending millions of dollars on new capabilities doesn’t necessarily mean that they are right for our businesses. Technology might be a secondary enabler to the challenges of the 2020s, but it is not nearly as important as strategy and culture.
With limitless new opportunities and market disruptions, organizations need to be rethinking their strategies. What should our business model be? What new markets should we be pursuing? What openings have been left by failed competitors? How can we shift our operational model and business processes to better accommodate these new opportunities? These questions should be answered before jumping headfirst into a digital transformation.
We also need to determine how we need to bend our culture to truly enable our strategic and operational improvements. Effective organizational change management strategies can help us transform our people, culture, and roles and responsibilities in a way that aligns with the defined future state.
Then – and only then – should we start determining how we will overlay technology into this roadmap for the future.
Resist the temptation to outsource your transformation
I was a young consultant when business process outsourcing became a thing in the early 2000s. It seems to be making a bit of a comeback twenty years later, but that rarely (if ever) means that it is a good idea to outsource your transformation to others. You may find value in outsourcing low-value capabilities like accounts payable, but in order for your transformation to deliver competitive advantage, you need to own and manage it.
The old model of handing off to your systems integrator and rushing to start projects on their timelines – which ironically typically leads to project delays later on – is a vestige of the past. Like handshakes and other relics of a pre-pandemic world, this lack of transformation accountability is (or should be) fading into a distant memory. With limited resources, time, and opportunities, companies simply don’t have the luxury of a large margin of error on these projects.
Key takeaways: how will you lead your digital transformation?
Consider this a call to action. A rallying cry, if you will. Digital transformation and ERP failures may be all-to-common, but that doesn’t need to be the case for your initiative. What will you do to ensure that your project is successful? How will you take ownership to lead the charge to success instead of tripping over the pitfalls that most have fallen into?
Please contact me if you would like to brainstorm ideas regarding your initiative. My team and I are independent third-party consultants, so I am happy to be a neutral sounding board as you continue your transformation journey!