How to Realize the ROI in Digital Transformation Technologies

Written By: Eric Kimberling
Date: March 27, 2023

Organizations are notorious for spending a lot of time and money on digital transformations, but they often fail to spend the last little bit at the end of a project to ensure that they get the full ROI or return on investment of their digital transformation. But how exactly do we ensure that we optimize the value of our investments in digital technologies?

YouTube player

One thing that is fascinating about the digital transformation space is that organizations are notorious for spending a ton of money, a ton of time, and experiencing a ton of heartburn and chaos in their digital transformations. Yet, they often fail to go that last mile, that last little bit, to ensure that they fully optimize the value of what they just went through in their investments. So, what we want to do today is talk about what those little things are that you can do during and after a digital transformation to ensure that you're really maximizing the business value and getting the full ROI on your investments in new technologies.

Establish A Realistic Business Case

Now, the first step to ensuring that you maximize the business value of your digital transformation is to ensure that you have a business case and that you've identified clear performance metrics of what you expect to get out of your digital transformation. After you've deployed new technologies, process improvements, etc., it's essential to quantify what you expect to achieve from the transformation. If you don't, you're not going to achieve it. Deploying new technologies alone will not magically make things happen. While you might get some random benefits here and there, you'll leave most of the business value, most of the business benefits, on the table if you haven't clearly defined your metrics and organizational efficiency and effectiveness goals after the transformation.

The other reason having a business case is so important is even more short-term than that, which is to ensure that your project stays on track, and that you have the right project governance and controls in place. A lot of people don't equate or associate a business case with project governance and controls, but it's extremely important. There's an extremely tight connection there. If we have a business case that quantifies the business value we expect to get out of our transformation, it's going to make decision-making and governance a lot easier as we go through the transformation.

For example, let's say that one of your stated and quantified business benefits is that you want to reduce inventory levels by 25%, and if you do that, you'll save x million dollars over the course of ten years. Now, through our transformation, at some point, someone says, "Hey, I want to customize the software or add this new module." Let's assume that the same person requesting the new module or customization is saying that it will help us improve our business in some way. If they can't point to a business benefit, like reducing inventory or enabling another business benefit, we might say no, we're not going to do that, we're not going to add that to our scope.

But if we can point to the business case and say, "Actually, by doing this or making this decision in our project, we're now enabling a significant business benefit," then we might be inclined to go ahead and make that investment and adjust our overall project scope. These are just two reasons why a business case is so important. It ensures that you maximize and measure your post-implementation value. Even before that, it ensures that your project stays on track, and you're deliberate about how and where you invest time and resources throughout the transformation.

Align With Your Reporting and BI Strategy

Now, one of the reasons why so many organizations struggle to achieve business value in their digital transformations is that they don't have the data, business intelligence, or reporting to understand the impact of their business after going live. This is obviously a big problem and defeats the purpose of going through a digital transformation in many ways. You go through a digital transformation largely because you want better visibility, better reports, better business intelligence, better predictive analytics, and things that measure and tell you how healthy the business is and where it's headed. If you don't have those metrics in place, you won't have that visibility, and you certainly won't know where the potential business benefits lie.

So the key here is to make sure that once you've defined your business case, you want to make sure that you have a business intelligence and reporting strategy that gives you the visibility, data, and insights that you need to know whether or not you're achieving your business benefits.

Assign Accountability for Benefits

Now, the next step is to make sure that you have accountability for business benefits. Once you've quantified the business benefits and ensured that your digital transformation is going to give you the data and insights you need to know how well you're performing as an organization, you need to have accountability. Who owns each of the business benefits and each of the line items in our business case? You need to ensure that someone is held accountable and responsible for achieving those business benefits. If we don't do that, then this is just an academic exercise that states and quantifies what we think might happen if we're lucky. It doesn't hold any human accountable for ensuring that we actually achieve those business benefits. Even the best-run and the best-executed digital transformations aren't going to deliver business value just because you think you will, or because you want it to, or because you want to will it to deliver business value. Ultimately, it's going to come down to individuals and humans within the organization that are going to focus on optimizing business benefits, not only during and right after go-live but longer-term as you look to a more continuous improvement sort of environment post-transformation. For some organizations, by the way, they never stop their transformations; they're constantly changing and evolving, so they need to have someone that's accountable for and owning these business metrics and measures.

Measure Post Go-Live Results

Now, ultimately, we will not achieve our business benefits or know if we have achieved them unless we have actually measured the post-go-live results. This is really scary for a lot of organizations for a number of reasons. Many organizations do not want to go back after going live with new technology. They don't want to go back and measure the actual results for a couple of reasons. Firstly, it's scary to go back and measure how much benefit you're actually achieving versus what you expected. Chances are pretty high, if not 100% certain, that you're not going to realize all the business benefits that you thought you would. This is not because the transformation was necessarily unsuccessful or the project itself cannot deliver or is not capable of delivering business value, but because it takes time, focus, and optimization to ensure that we actually get the business value.

This is why the stabilization and hypercare phase of a project are so important. Although I'd say that stabilization and hypercare is a bit misleading or doesn't focus on the right activities, which is not only stabilizing the system but also improving the adoption and usage of the software to be more effective. That's one reason why organizations often don't measure business value. It's not in their instincts because they're afraid to go back and look. Sometimes, you don't want to know what the actual results are because you're probably going to be disappointed. The key here is not to be disappointed and recognize that we've got a gap. Now, we've got to focus on optimizing to make sure that we look to the remediation stuff that needs to happen to ensure that we maximize the value. I'm going to come back to that remediation point next.

The second reason why so many organizations don't go back and look and measure business performance and business benefits after the fact is that these projects tend to move so fast. More often than not, team members in the organization as a whole are either moving on to the next phase of the project or they're just relieved to have gotten through the go-live without losing their jobs and without disrupting the business. They just want to get back to their day-to-day lives. They don't necessarily want to go back and now spend months or weeks looking back at what business benefits they did or didn't achieve and what they need to do to maximize the value. People are pretty tired. The organizations get tired after a digital transformation, and they don't want to do it.

Again, it's very important because it doesn't take a lot of time to do this. What we're talking about in terms of the steps I'm outlining in this video is a tiny incremental addition to the project, but it has a huge amount of value. I would argue that it has more value than any other activity you might do in a digital transformation. So, making sure that you take that time to measure post-go-live benefits is extremely important to ensuring that you optimize the business value of your investment

Implement A Remediation Plan

The final major step in optimizing the business value of your digital transformation is going to be to analyze why you're not achieving the business benefits that you should or could be, and then ultimately implementing remediation plans. I love doing this exercise for our clients because it's not easy, but there are so many things you find that organizations could be doing to really get low-hanging fruits and massive improvements to the business value that they just invested in. Usually, it's not significant in terms of having to re-implement or make major massive overhauls to the way you deploy technology. Typically, it's a bunch of little things. For example, someone wasn't trained on how to perform a certain function, or a switch within the technology wasn't turned on, or a certain piece of the technology needs to be reconfigured or integrated into another system. It could be that people just didn't understand how a process was supposed to work.

A lot of times when you go through the analysis of what the root causes are for holding you back from getting the business value you expect, it's a bunch of little things, not anything major. You can typically identify a handful of things that are low-hanging fruit that can have immediate value, don't cost you a lot of time and money, but are going to have a huge impact on the overall ROI. So you want to have a remediation plan that focuses on the low-hanging fruits, and if you do have major disruptions or major problems that have just happened as a result of your transformation, then of course, you want to focus on putting out those fires too. But you want to prioritize based on where you can get the most bang for your buck during and after the implementation to ensure that you get the most business value.

These are just a few steps to ensure that you not only think about how to maximize business value but really focus on achieving business value within a digital transformation. Hopefully, I've outlined some steps that will help you get there and think about how you might incorporate some of these concepts into your overall digital transformation strategy and plan.

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. Please contact me for more information eric.kimberling@thirdstage-consulting.com

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices.

Kimberling Eric Blue Backgroundv2
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.

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.
Subscribe for updates
We never share data. We respect your privacy
Stratosphere 2024
Register Here
Additional Blog Categories

Categories

Resources

International Office Locations

Follow us on:

Third Stage Consulting

Third Stage Consulting Group is a global thought leader in business transformation, ERP software systems, operational change management, and business advisory. Let us take your organization’s digital transformation to the Third Stage.
2022 - Copyright Third Stage Consulting Group LLC  |  All Rights Reserved  |  Website developed and maintained by Denver Web Design.
Privacy Notice  |  Terms of Use  |  Sitemap
crossmenuarrow-right