The Drive for Digital Transformation
In this first article, we will explore strategic vs. tactical drivers to Digital Transformation, ROI you can expect, and the value a strategic partner brings to driving your portfolio of Digital Transformation projects and decisions.
The term “Digital Transformation” has been around for a few years now, at its root describing how established businesses use technology to remain competitive within a field of startups. The appetite for Digital Transformation can change based on several factors, including:
How bold is the C-suite vision? Are the leaders inspired to stretch their strategy beyond their current scope of vision? What constitutes Digital Transformation for one company will be completely different from what it means at another organization.
Are startups eating away market share? Many startups can push out sophisticated offerings and provide them to the market at a fraction of the cost, with a handful of employees, very little overhead, and little to no funding. Is this competition biting at their heels?
Obligations to shareholders. Being responsive to critical events - either positive, like a trending viral video, or negative, such as COVID-19 - can be another core factor for the drive for Digital Transformation. Legacy (non-digital) assets and processes weigh the companies down, and leaders are looking to improve their agility by orders of magnitude. Are shareholders insisting that they step up to these challenges?
Obligations to customers. Customers are now demanding companies move their existing interactions with them to digital platforms. Think in your own life; would you trust a business with no webpage? With no way to transact digitally? Customer complaints or turnover is often the primary driver for a digital strategy.
“One media executive said: ‘We’ve realized that if we don’t transform the way we do business, we’re going to die. It’s not about changing the way we do technology but changing the way we do business.’” - MIT Sloan Management Review
How successful are these initiatives?
In the summer of 2017, Censuswide performed a comprehensive survey on Digital Transformation on behalf of Fujitsu. Respondents came from across the globe, including the US, Germany, France, Japan, Italy, Spain, China, Australia, and Sweden. These were mid-size to large businesses crossing industries such as financial services, retail, manufacturing, and more. 100% of the companies were in or wanted to be in a Digital Transformation effort.
Of this group of highly-motivated respondents:
46% had completed a Digital Transformation project and have seen positive results
A third of the organizations have needed to cancel failed Digital Transformation projects at a typical cost of $660,000
Only 26% linked these Digital Transformation projects with corporate strategy
84% of respondents were willing to change their business model to fit the technology available
Only 20% consider technology the most important success factor in a Digital Transformation effort
This combination of statistics is very telling. We draw the following conclusions:
Strategy is a critical missing factor for many of these Digital Transformation projects. Most of the companies who have completed a Digital Transformation project had no strategy to tie the effort to. This fragmented approach leads to smaller incremental gains.
With the lack of strategy and the fear of competitors, companies are willing to change their business model to fit a technology they expect may give them a competitive edge. Unfortunately, this sometimes leads to companies embracing a buzzword, such as blockchain or RPA, with very little understanding of how this technology can benefit them or their bottom line. Technology should be a means to accomplish business goals, not the goal itself.
Yet, technology is *not* seen as the most important success factor. Respondents likely recognized that strategy and vision were much more critical to Digital Transformation success than the technology itself.
What is the value of Digital Transformation?
For companies that have embraced technology and started the journey with Digital Transformation, a wise investment will pay for itself quickly:
One life sciences client realized a roughly $1million annual ROI after swiftly automating less than a dozen small back-office processes.
A manufacturing client digitized their entire production and warehouse floor, seamlessly connecting everything from their barcode scanners to touchscreens on their plant walls, allowing them to scale from single-shift work to multi-shift 24/7 production without adding any additional overhead costs.
An oil and gas refinery reduced maintenance downtimes by around 10%, saving approximately $1.5M every few months.
Aside from these quick wins, the longer-term benefit of transforming the organization to become more agile pays dividends in being able to respond quickly - or lead! - marketplace changes.
What are the benefits of a First-Class Digital Transformation partner?
It is crucial to select a partner who can look beyond the confines of a particular technology or project to understand the full strategic vision, who has the ability to help you recognize which opportunities are core investments for starting your Digital Transformation journey and can help with critical change management for your people. The Macedon team has guided clients through all phases of the Digital Transformation journey with simple, logistical steps to reach the goals, as well as robust approaches to sustaining and growing the high ROI you will experience.
Where do teams typically start? Is a single, non-strategic process at the same level of maturity as a company that is 100% devoted to dominating their marketplace? My upcoming articles will explore both of these subjects.