Top 5 Digital Transformation Strategies During Economic Recession and Uncertainty

Written By: Eric Kimberling
Date: February 8, 2023

In times of economic turmoil or recession it's more important than ever to have a solid recession-proof digital strategy. One of the things we often help our clients with is defining digital strategies. Digital strategies are very important regardless of when or where you might go through a digital transformation but in times of economic uncertainty and recession, whether you're in economic uncertainty at the moment or whether you're anticipating potential economic uncertainty, having a solid, right size digital strategy is more important than ever. So what we want to do today is talk about the various digital strategies that are most effective if you want to recession proof your business.

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Historically, organizations have focused on implementing single, enterprise-wide technologies such as ERP systems or Human Capital Management and CRM systems; these are big, expensive, complicated endeavors. They're risky, they take a lot of time and money and they can be challenging regardless of what type of economic environment you're operating in. However, in times of economic uncertainty or recession, it's even more important to make sure that you rethink that approach and look at options and alternatives to how you can implement solutions that aren't necessarily big, massive, bloated digital transformations but ones that are a little bit more prescriptive, a little bit more targeted and a little bit more right size for economic turmoil.

Interoperability Instead Of Big Tech

One option that organizations often pursue is this concept of interoperability. In other words, instead of implementing a single ERP system that spans your entire operations, you might leave some of your legacy systems in place and put in systems that can tie together those technologies and provide a more complete enterprise-wide solution without necessarily having to replace every system you have throughout your organization.

Some examples of systems that can accomplish this would be systems such as Palantir or Servicenow systems that aren't necessarily ERP systems but systems that are meant to operate with other systems and coexist with other systems within the environment. That's where the term interoperability comes from and the reason that this digital strategy is so important in times of economic uncertainty is because it allows you to get business value faster, there's less risk, there's less upfront investment, you can get the business value faster because you're not replacing your broad enterprise-wide technologies but instead you're putting in more targeted solutions that can help you mitigate risk as well as maximize value at a lower cost. So, as you think about digital strategies in times of economic uncertainty, it may help to consider this concept of interoperability within your digital strategy.

Business Blueprints & Implementation Readiness 

One of the most effective digital strategies that organizations can pursue is this concept of making sure you have a business blueprint and an implementation readiness plan prior to starting your digital transformation. Now, this strategy is something that's highly effective anytime but especially during times of economic uncertainty, the reason for that is because the more time you invest in getting your implementation readiness in place and ensuring that you have a solid business blueprint prior to starting to deploy technology, the faster and cheaper you're going to actually be able to deploy the technology.

When you're in the midst of a recession and resources are constrained and you don't have unlimited budgets, this investment in this upfront phase zero of a project can be highly effective in ensuring that you get the most bang for your buck and the highest possible ROI from your investments in technology. If you're concerned about the economy, if you're concerned about a recession and you're about to start a digital transformation, one of the most important things you can do is to start with this phase zero, this implementation readiness phase, this business blueprint to ensure that you have a solid plan to address your overall digital transformation. 

Business Case Value Realization

When there's economic uncertainty on the horizon, your CFO and others within your organization are going to have a bull's-eye on any sort of capital spending. When you think about what your digital transformation is going to look like, it's extremely important that you tie it back to a business case that focuses on delivering business value to your organization and if you're making decisions or thinking about digital transformation investments that don't contribute or don't materially add to the business value being delivered, then you probably shouldn't do it.

By being proactive and only focusing on high value, high ROI types of activities, that's going to make it less likely that you do reach an economic rough patch at some point during the transformation. It'll make it a lot less likely that the project gets shut down or delayed or worse yet, canceled as a result of the economic uncertainty. So have a clear business case and a benefits realization or business value plan that really ties the investments, the costs in the business value that will be delivered to the organization and you want to do this not only as a philosophical exercise but also as one that more importantly you can use to measure actual results as you're implementing new technologies throughout your organization.

Independent Project Governance 

An important insurance policy in digital transformations that are happening during economic uncertainty is this whole concept of independent project governance and risk mitigation. Think of it as a sort of insurance policy that ensures that you finish your project on time and on budget and you actually deliver the business value that you expect to see. What we mean by independent project governance and risk mitigation is, first of all, to ensure that you have a solid PMO in place, a program management organization that's managing not just your software vendor but all the other non-technical aspects of your transformation. Things like data migration and change management, your internal resources that are being added to the project integration, overall system architecture, things of that nature are examples of things that tie into an overall PMO. 

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Something that runs side by side with this concept of PMO is risk mitigation or quality assurance and that's really just a way to proactively and objectively identify where the risks in the implementation might be and more importantly putting together mitigation strategies to proactively address those risks before they become so problematic that it completely disrupts your project. Now, when you think about risk mitigation, there's a quality assurance framework that you can use to identify and anticipate where some of the most common risks are. There are 13 different areas that we use with our clients as part of their risk mitigation efforts in a way that we help manage the overall transformations and the important thing here is to do a couple things. 

One, is to make sure that you're looking at the complete picture of your overall transformation and you're identifying all the risks within those different dimensions of your project but also making sure that you do so in an independent and technology agnostic way. What we mean by that and another way to say it is, make sure that it's not your software vendor or your system integrator that's doing the quality assurance of the risk mitigation, the reason being is that typically their vested interest is to paint a rosy picture of how things are going and how well their technology works, where your interest is to make sure that you're identifying risks and mitigating risks and making the project successful. 

So you really want to make sure that you have an independent third party that can manage quality assurance and provide that overall program management and program governance that you're looking for to make your project successful. Independent and technology agnostic consulting firms like Third Stage Consulting are good options to help you through that process and by the way if you're interested in learning more about this quality assurance framework i encourage you to check out some of the videos on my YouTube channel that cover this quality assurance framework in a lot more detail.

Last but not least you want to focus on organizational change management. Anytime you go through a digital transformation, change management is critical but especially in times of economic uncertainty. If you're about to go through a recession or you're in the middle of a recession, people are generally worried about their jobs to begin with there's a lot of stress and turmoil in people's lives. So, if you throw a digital transformation on top of that, their acceptance of change is going to be diminished, they're a lot less likely to accept and embrace change and even if you're not in the midst of economic uncertainty, change management is absolutely critical because digital transformations tend to impose a lot of change on people and organizations, more than most organizations realize.

Change management is a highly effective way to mitigate the risks of the people or the human side of change and it's a great way to ensure that your project stays on track, that your digital transformation is delivering business value and just as importantly making sure that your digital transformation doesn't undermine your operations and your culture and other things you've worked so hard to create over the years.

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.

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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.
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