Software vendors and systems integrators often peddle their products and services with “best practices” and other one-size-fits-all answers, but digital strategies are much more complex and nuanced than that. Making the decisions that constitute a well-defined digital strategy that is aligned with your strategic goals and objectives is an important activity often overlooked by organizations.
Below is a video overview of some of the key decisions (or “votes”) that need to be made before embarking on a digital transformation:
The importance of digital strategy decisions
Without a clearly defined vision, direction, and strategic parameters, your digital transformation is more likely to go off track. This leads to a great deal of misalignment – a situation that is very difficult to succeed in.
In addition, there are several other reasons why a clearly defined digital strategy is so important:
- It provides direction to your team
- It aligns your digital transformation is aligned with your
- It mitigates organizational resistance and risk
- It can fuel more business value, growth, and profitability
- It ensures that you select technology that is best aligned with your business goals and objectives
- It ensures that your executive team understand expectations and how the transformation ties to bigger-picture goals
The decisions that need to be made go well beyond things like “choose a new ERP system” or “replace our current systems.” They need to more clearly articulate the direction and strategy that makes the most sense to your organization.
Below are a few of those decisions that need to be made. Note that these decisions are not necessarily either-or answers. Instead, these are decisions that need to be made over the course of a continuum, though I present them below as two extremes to help underscore the pros and cons of each decision.
Massive vs. incremental change
The degree of change that you would like to pursue is one of the most fundamental decisions that need to be made, yet most forget to answer this important question. On one hand, ERP and other enterprise systems may enable quantum leap improvements to your business. On the other hand, your organization may not be able to absorb all of these potential changes – or at least not all at once.
Organizations that are risk-averse may find that they need a more incremental approach to change. This decision will typically result in a more incremental and phased rollout strategy. The biggest drawback to this approach is that even though it may reduce risk by moving at a more measured pace, employees can suffer from change fatigue over longer timeframes. These organizations are more likely to want (or need) to invest in quality assurance, organizational change, and other proven risk mitigation factors.
Other organizations find that massive change is their preferred approach. They will tackle machine learning, internet of things, cloud transitions, and aggressive timelines – either because they have a higher tolerance for risk, or because they are fighting for survival in a disrupted industry and therefore have no choice.
In this latter example, organizational change management will be extremely important to manage a steep transition curve for people. In addition, business processes will need to be clearly defined and documented well before the implementation, while third-party implementation quality assurance can be used to mitigate the higher risk profiles of these types of transformations.
Standardization vs. flexibility
Another big decision entails the sort of operating model you are striving for. Some want to drive standardization, efficiency, and scale, while others want to enable more flexibility to accommodate growth, M&A activity, and changing customer demands.
Standardization is good for more mature companies that operate in siloes, are inefficient, and/or are providing commoditized products or services. In these cases, it is often desirable to drive costs and inefficiencies out of the operations, even if it means limiting flexibility. For example, many organizations that pursue this path will move to consolidated shared service HR, IT, or finance operations.
Flexibility can be more suitable for higher growth companies in industries that are being severely disrupted (example: brick and mortar retail). In these cases, standard processes and lower costs are less important than being agile in responding to customer and market needs.
In these more flexible situations, companies are less likely to choose a big, rigid ERP system like SAP S/4HANA and more likely to choose more flexible systems like Oracle ERP Cloud or Microsoft Dynamics 365. They are also more likely to accept the risk of customizing the software to fit their needs in exchange for not having to be boxed in by technology constraints.
Single ERP system vs. best of breed systems
Another common controversy entails choosing between one common ERP system and best of breed systems to handle specific functional needs. Though many vendors will tout the superiority of either model, the answer depends on what you want to accomplish.
Single ERP systems enable a common platform across the entire enterprise with a single source of truth. It can be easier to maintain and to train employees. But it also fails to be everything to everyone, as no single system can perfectly handle all of the complex needs of an organization.
Best of breed systems are more likely to give employees more of what they want since they don’t necessarily need to settle for the tradeoffs of single systems. On the flip side, they also require more complex technical integration, solution architecture, and data management.
There are no simple answers to these and other questions surrounding your digital strategy. The key is to define the path that makes the most sense for your organization and best supports your big-picture strategy and direction.
What do you think? What will you vote for? Take the quick survey below to case your vote and to see how others voted:
Please feel free to contact me if you still aren’t sure how to define these and other digital strategy questions. I am happy to be a sounding board as you continue your transformation journey!