The First (and Most Important) Step to Digital Transformation Success

Written By: Eric Kimberling
Date: November 23, 2022

Digital transformations are challenging endeavors but do you know what the number one cause of failure is and what the number one step is that you should take to make sure your project does not fail? That is what we are going to discuss in this article.

When people think about digital transformation success versus failure, they often think about things like project management and governance, making sure we address change management, making sure we get our processes right, making sure we have our requirements well defined and more.

There's an underlying reason why so many projects fail. Most projects fail in the very early weeks and months of a transformation. The very first step that you should be taking in a digital transformation is the most important for success but most project teams overlook this first step and that's what i want to unpack here today.

When walking through this first step, it should be pointed out that there's actually a series of sub steps that we are going to discuss as well. In general what we are talking about is the entire digital strategy and implementation planning phase of the project. Then we are going to talk about not only the steps that fall within this general work bucket but also the things you can do and some additional resources that will help you define the right digital strategy and roadmap for your organization.

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When we're looking at phase zero, the implementation readiness, the digital strategy, the roadmap to planning, that entire upfront phase of a project, one of the first components and one of the most important components is making sure that you've defined the parameters for your digital strategy in a way that's aligned with your organizational strategy and objectives.

For example, if you're an organization that's going through mergers and acquisitions and you're trying to integrate operations as well as create a common operating model, then one of your parameters might be to decide which areas of your business to create a common operating model and a common set of business processes.

Additionally, which part of the business we're going to set those aside and let remain independent or decentralized. Without that clarity and vision and that alignment between your digital strategy and your overall corporate strategy, you're going to be misaligned pretty early on and if you're misaligned early on, it wont matter how well you manage the project, it doesn't matter how well you handle organizational change management or define your business requirements, you're not aligned as an organization.

This will lead to failure, that is why it's vitally important to make sure that your digital strategy is aligned with your organizational strategy. More often than not, this step is overlooked by organizations and their transformation teams.

Consider Future State Business Processes

Within this phase zero of your digital strategy, you also need to be looking at your future state business processes. Most organizations have a tendency to think that “we'll just wait and see who our software vendor is and what they can do before we define our future state processes.”  

There can be some merit to that way of thinking, there's certain capabilities that technology brings to the table that you may not even know about, you may not even be thinking about or envisioning for your organization so there are some inputs that technical capabilities should provide. That being said,  if we go too far down that rabbit hole, what ends up happening is we defer so much to the technology that we don't have a clear vision of what it is we want to be when we grow up operationally. 

You need to define those things early on because even though it's going to take more time and it might seem as though we're slowing down the start of the project, it's actually going to speed things up a lot more later. Take your time to figure out what your future state business processes are, independent of technology. Future state should really drive and serve as a blueprint for your overall digital transformation.

Assess The Maturity of Your Digital Capabilities

The next step in this phase zero of digital strategy planning is to assess the maturity of your digital capabilities. In other words, what are your digital capabilities now versus what it is you might be looking to enable in the future. For example, if you get a situation where you are using an old AS/400 or I-Series, green screen based system from the 1980s, that's okay, that's who you are as an organization but it's important to recognize the digital maturity or lack thereof that comes along with that.

If you are going to take a jump from I-Series green screens or mainframe systems and moving to a cloud-enabled artificial intelligence fueled type of digital transformation, that's a huge leap.  Not to say you shouldn't do it but you just need to understand where you're starting from and what that maturity level is versus what the maturity level is going to be or need to be for your future state.

The trickiest part of this phenomena is the fact that the bigger that chasm is between your digital maturity today and the digital maturity you're trying to get to tomorrow, the longer it's going to take to do your project, the more it's going to cost and the more risk that's entailed. That's not good or bad but too often organizations underestimate that divide or that jump from where they are today to where they're going.

Often businesses don't fully understand where they are today and what their real digital maturity capabilities are. They don't have a good estimate of what it's going to take in terms of time, cost and resources, so, ensuring you've got a good handle on what your digital maturity is today and where you're headed in the future is critical to making sure that your transformation is successful.

Organizational Structure of Your Business

Once we have alignment on our digital strategy, we've defined our future state business processes, we understand our digital maturity or lack thereof, now we need to look at the organization itself. How are we organized, how are people doing their jobs, what are the roles and responsibilities and more importantly, how are those roles and responsibilities going to change in the future as part of our transformation?

Typically, the bigger the change in your organization, the longer it's going to take, the more it's going to cost and the more risk you're going to incur. Therefore, you really want to have a solid understanding of where you are today and what that future state organization is going to look like. This is especially true if you're trying to move to a shared services model, where you're trying to consolidate HR, IT, finance or accounting. Generally, the bigger those gaps, the greater the change, the more risky and the more important organizational change management will be to your project. 

Additionally, you don't want to just assess your organization for assessment sake. This is what we suggest you do, you can create a change strategy and a change management plan that's unique to you, that fits who you are today and where you're headed as an organization. That is a really important input into your overall transformation plan and strategy.

If you don't do this organizational assessment, you're not going to have the right inputs into what it's going to take from a change management perspective and you're largely flying blind. You're exposing yourself to too much risk if you don't do an assessment. That's why this organizational piece of the strategy is so important to the whole digital strategy implementation, planning phase of a transformation.

Define A Transformation Plan Budget

Once you've prioritized these business processes, you've assessed who you are and where you're headed, only then can you realistically define a transformation plan and a budget risk plan. You want to take these inputs and make sure that you're dialing in what your transformation strategy and plan needs to look like to make you successful. This is also a good exercise to ensure that the employees within your company are all on the same page before you get started on the project. 

It's imperative that you don't skip any of these initial steps. Organizations too often want to gloss over these important first steps to just get straight to the technology and start building. Executing these steps will ensure you are  setting yourself up for success and a likelihood that you're going to take more ownership and have more accountability for the implementation.

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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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