When embarking on digital transformation, let’s be honest, we're all looking for the “easy” button. Or that silver bullet that will make our transformation completely smooth and immediately effective. This desire for all the answers ultimately leads to misconceptions about what it really takes to make a digital transformation successful.
With that said, here are the top 10 misconceptions that you should avoid and watch out for in your digital transformation.
One of the most fundamental misunderstandings about digital transformation is that digital and technology are somehow going to drive the transformation of any business. There certainly is a great amount of technological innovation that's happened in recent years, and the opportunities are endless. Technology can certainly enable change, but it's not the technology that's going to drive the transformation, or at least it shouldn't.
What should drive the transformation, are the things related to operational and organizational improvements that are aligned with your overall strategy. Do not fall into that trap of thinking that just because you bought the shiny new technology that somehow, it’s going to drive the transformation for you. It's still your business needs, your organizational needs, and your overall strategy, that should be driving your transformation, not the other way around.
In the world of software development and even startups, the whole concept of agile is becoming more popular by the day. Organizations are shifting their mindsets from the traditional waterfall approach to implementation, which basically defines an implementation as spending time upfront defining your processes. Whereas agile is more focused on picking off little pieces of your organization and technology than deploying them quickly.
Now, in theory, it sounds like the agile approach is going to be faster. But what we found, at least with enterprise-wide digital transformations, is that if you start off with an agile mindset, that's actually going to lead you faster down an unclear path. With unclear alignment, the risk of failure is much higher.
With the more traditional waterfall approach, you take the time to define a blueprint for what you want your overall transformation to look like in terms of your operations and organizational improvements. Then you can shift to an agile mindset in terms of how you execute that rollout.
You want to make sure to not get too enamored with agile or think that agile is somehow going to solve all your problems. Agile may be one arrow in your quiver, but it's not necessarily the silver bullet you're looking for.
One of the most common misconceptions in the market is also the fact that a lot of vendors are out there selling the idea that cloud deployments are cheaper than on-premise deployments. There's also a claim that cloud systems are cheaper in the long-term even post-implementation. We found this to simply not be true.
Now, on one hand, you may be saying, "but we're getting rid of our servers. We don't need as big of an IT staff." While that might be true at face value, we do find that most organizations fail to realize those cost savings. The bigger challenge is that with cloud solutions you may have high ongoing annual costs that are going to be more long-term than your initial purchase of on-premise systems.
It's a lot like leasing versus buying a car. When you lease a car, you have a steady ongoing payment, and you have less flexibility as to what you can do with the product that you're leasing. The same is true for the cloud. Versus buying a car where you have a bigger upfront payment, but then you don’t have the large monthly investment. That's a lot like on-premise.
Don’t get me wrong, I don't want to suggest that the cloud is not a good solution. Most vendors are going that way and customers want cloud solutions. Just make sure you go in with eyes wide open, and understand that you're probably going to spend more money on your cloud deployment and your long-term ownership of that cloud solution than if you had on-premise.
Now you may be getting more value out of the system, and it's probably likely that you're getting a higher ROI out of that higher cost, but don't go in thinking that you're going to save money because we find that most organizations simply don't save money in the long term.
Building on this whole misconception related to the cloud, we talked about the cost side of things, but there's also a misconception that the cloud is somehow better than on-premise.
First of all, it all depends on what you mean by “better”. For some organizations it's clearly better, for some organizations it's not. I think the biggest pitfall that organizations fail to realize is that cloud solutions simply aren't as mature as on-premise… yet.
Someday this statement will be completely obsolete.
For right in 2021, cloud systems simply haven't developed to the point of what the old on-premise systems have. The reason for that is not because cloud technology is somehow inferior, it's simply because the software vendors had decades of R&D and innovation in on-premise solutions. Now, they're trying to shift everything over to the cloud, which will take some time.
Even if the cloud is the right answer for you and that's the direction your business is going. Go in with a realistic understanding that you're probably going to have some gaps. The products probably aren't going to be as mature as you'd like. There will be weaknesses that you’ll need to identify in order to avoid failure.
Another common misconception perpetuated by the software and technology industry is the fact that if you upgrade to a newer version of the solution that the vendor provides, that it's going to be an easy upgrade. This is not always the case.
As I mentioned before, cloud solutions are largely rewrites of new technology for a different platform in the cloud. Shifting from an on-premise system to a cloud system isn't as easy as most vendors will tell you. This is not simply an “upgrade” – it’s a full-on transformation.
For example, if you're an SAP customer, and you're using ECC, or if you're a Microsoft customer and you're using Dynamics AX, shifting to SAP S/4HANA or a Microsoft D365 is not an upgrade. That is a re-implementation. Yes, there may be some common look and feel that is familiar because you're used to SAP or Microsoft or whatever your product is, but you're largely going through a re-implementation of an entirely different product.
Just be sure to recognize that you are implementing a new solution, regardless of whether you have used that same vendor in the past or not. It's generally a more significant shift and larger change than most organizations realize.
One of the most dangerous hidden misconceptions that we see in digital transformations is the phenomenon of organizations thinking that change is going to be easy. Or that their people are ready for change and their people want the change. They don't like old systems and old processes, so change management isn't going to be a problem.
You ask, how hard can it be? They're probably all on board and they want to move forward, right? That's probably true and I rarely doubt that statement when dealing with a new client. However, what I do doubt is that is going to be the reality.
What typically happens is people start off excited, but then they get less and less excited as the project goes on because they realize how painful the change is really going to be. No matter how excited your team might seem right now, chances are they will be less excited over time, and even the best-intentioned employees are going to resist change, even if it's unintentional.
In the end, you want to make sure you have a very solid change management plan and invest just as heavily in organizational change as you do other parts of your digital transformation to overcome this misconception.
If your digital transformation entails some sort of ERP technology, enterprise resource planning, like SAP, Oracle, Microsoft, whatever the case may be. You're probably hearing messages like, “ our system, our single ERP system, can solve all of your problems! It can fully automate your entire organization from order to cash, procure to pay, customer relationship management, everything you need can be addressed by our ERP system.” …
To be fair, It's a great sales message.
This is what vendors typically will say to get you to invest in a full ERP suite. You need to understand that by definition, ERP systems, yes, can provide a broad set of capabilities, but it is impossible for them to be everything to everyone within your organization. Inevitably, you're going to have trade-offs when you implement new ERP technology.
Yes, there will be strengths in areas where the technology is a great fit for your organization, but you will have areas where the technology is not as great of a fit. This then becomes an organizational change and technology issue. You need to be sure you understand realistically that if you go with an ERP system if that's the way you want to go.
This may be the right answer for you but remember to still look at the dark side. Evaluate the risk, cost implications, and change management repercussions, because that's where the project will either succeed or fail. A single ERP system is no more of an easy button than any of the other things that we've talked about in this blog.
Another misconception is that a pre-configured solution off the shelf is somehow going to speed up your implementation. In theory, that's sort of true, certainly from a technology perspective to the extent that the vendor really does have pre-configuration. Although, I will say that that concept is oftentimes oversold and under-delivered by vendors.
Let's just say, in theory, your vendor really does have pre-configurations, either an industry pre-configuration or pre-configured workflows that can just work off the shelf, out of the box. Yes, from a technical perspective, that is true. This will speed up the deployment.
However, what it doesn't speed up it in fact might actually slow things down as it relates to adjusting your business processes and people to those pre-configurations. That's what takes the most time and effort is the people and process side of things.
Even if you could speed up the technology side of the equation, you might be speeding that workstream up, but you are extending the other parts of the implementation on people and processes.
Always be sure you just go in with eyes wide open, again, understand that this is a sales tactic. If they have pre-configurations and they really exist, great. That's a good starting point. I wouldn't say to abandon that concept, but just recognize that you're going to have to make up that time, effort, and focus elsewhere in the transformation.
When I was coming up in the world of consulting in the late '90s, into the early 2000s, a common saying we would hear is no one ever got fired for hiring IBM to handle their transformation. Except, I learned over the years that plenty of people have gotten fired for hiring IBM, as well as Accenture, Deloitte, and some of those other big names that you might feel safe with. Just because it's such a big, well-known name, doesn’t mean it will reduce risk.
I can make a pretty strong argument that your risk is actually increased by using a big system integrator, simply because you're going to pay for that system integrator. You're going to pay for an army of consultants that are full-time, dedicated to your project, and are very good at getting more and more people on your project. That's their job is to staff consultants on your project. I know because that's how I started my career.
I was right out of grad school and was immediately put on a project that I probably didn't need to be on, and I started billing full-time a day one, even while I was getting trained. That's just an example from my background. Even beyond that, going forward over the last 20 years, I find that same phenomenon. System integrators are generally going to cost you more when they're one of the big names.
If you're a larger global organization and you feel like you need that global footprint and extended resources - you certainly want to consider those big systems like Accenture, Deloitte, Capgemini, Ernst and Young, IBM, etc., But it's also important to look at those mid-tier providers as well.
There's a lot of really good mid-tier system integrators that may not have the same name recognition but are oftentimes more experienced and better resourced. The big system integrators are known for hiring kids out of college, whereas the mid-tier providers are often the ones that will get the senior people that want to stay in consulting. So really look at those mid-tier options and really fully compare your options to make sure that you're getting the best option for your organization.
The final misconception is that your system integrator is your project manager. This is a common mistake, it may sound like I'm splitting hairs here, but the devil is in the details in this example.
What I mean by this, is oftentimes organizations pick a technology and then they go hire a system integrator. That system integrator is then viewed to be the outsource model that's going to manage the entire project.
There are two problems with this approach:
As an organization, you need to focus on the entire transformation. You need to look at the business process model, the overall strategy, the organizational change strategy, the data migration strategy, the overall solution architecture, your end-to-end business processes. All the things that your system integrator may say they do, but they're doing it in the context of technology.
In order to be successful, you need to look at everything outside of that.
It's always important to resist that temptation to fully outsource a project to a system integrator. You should have someone sitting on top of the system integrator as well as other workstreams within your project, managing all of the internal and external resources as well.
I hope this has helped dispel some of the common misconceptions related to the myth of the “easy” button. In reality, there is no easy button and there's no easy answer. If it sounds like it's an easy button, silver bullet, type of answer, chances are it's probably not real. For more information on this and other best practices for how to make your transformation more successful, I encourage you to download our 2021 Digital Transformation Report.
If you do have any feedback or questions regarding potential points of failure for your digital transformation, please reach out to me directly. I’m always happy to be an informal sounding board for you and your team.