The Importance of Digital Transformation
Performance improvement requires difficult tech decisions
By: Nevin Shetty, Managing Director
The hot buzz word being discussed in corporate board rooms across the world is digital transformation. The ubiquity of the “digital transformation” is vaulting it to echelon status that encapsulated “synergy” during the merger mania years. But the numbers don’t lie. International Data Corporation forecasts digital transformation spending will surpass $1.5 trillion dollars in 2020 and grow between 15% – 20% a year for the next three years.
With COVID-19 accelerating digital trends of ecommerce, digital customer service, and remote working, pressure is mounting on executives and management teams to invest in technology. However, industry research from McKinsey reports that 70% of all digital transformation projects will not achieve their stated goals. That is over $700 billion of technology investment wasted!
We will discuss why you need to invest in technology, how to avoid common pitfalls, and simple yet impactive digital transformation projects your company can implement immediately.
Why Invest in Technology?
Regardless of your industry or how long your business has been operating, there will always be challenges. The Bureau of Labor Statistics (BLS) tracks the birth and death rate of private businesses in the United States. The BLS tracks over 32 million businesses and there is no age at which a business gets easy.
A business in its 20th year has approximately the same probability of going out of business as it did in its 10th year. The ultimate demise of a company can be caused by a single event or a series of miscalculated decisions over several years. Retroactively, the evidence is clear but, in the moment, it is difficult to see.
One thing is clear: companies that are adaptable have the best probability of not only surviving but thriving. Companies that have been operating for decades tend to rely on certain employees, processes, or vendors. The “if it ain’t broke, don’t fix it” mentality is not necessarily wrong, it just makes you susceptible to an employee leaving, a workflow becoming antiquated, or a vendor going out of business.
By investing and utilizing the right technology, your company can become more agile in solving unforeseen issues. Additionally, technology can help your business scale without hiring more workers.
Most management teams make the mistake of spending a significant amount of time developing the digital transformation strategy and spend very little time developing the implementation strategy.
- Lack of cross-functional collaboration. Whether you know it or not, technology permeates through your entire business – from communication (email, chat, etc.) to productivity apps (MS office, calendar, etc.) and touches every organization from human resources (payroll, benefits, etc) to accounting (ERP, A/P and A/R, etc.). Whenever scoping, developing, and implementing a digital strategy initiative make sure to include at least one representative from each organizational department. Ask each department leader to nominate or select one person from their org to serve on the digital transformation task force. This not only improves communication flow and implementation success but helps groom future leaders of the company.
- Lack of accountability. Generally digital transformation is seen as a task that the I.T. team will handle. When in reality, digital transformation usually benefits a product, workflow, or department. As a result, there needs to be an appointed project manager for the digital transformational initiative, preferably someone with good business acumen that understands technology (or can learn it). An individual that can interface seamlessly with the executive team, I.T. and all the other departments. This will allow very clear readings and analysis of the project progress.
- Lack of Management Support & Engagement. Given how much energy is spent on developing the digital transformation strategy and then securing the budget, it’s no surprise that once approved, executive focus quickly shifts elsewhere. However, digital transformation initiatives need to be front in center until implemented. The CEO or another executive sponsor needs to make a formal announcement to the company, a progress update should be made every week at an all hands or leadership meeting, and every other week hold a deep dive meeting on a particular aspect of the implementation that requires more thought.
Best Digital Transformation Ideas
There is a plethora of considerations to designing, selecting, and implementing technology at your company. It will depend on your company circumstance and situation. The number one item to watch out for is technical debt (“tech debt”). Tech debt is the concept that all technology must be continually maintained and upgraded. If it is not, then tech debt accumulates and makes it more difficult to fix down the road as the “interest” accumulates against you. Before deciding on any project, you must spend a lot of time with I.T. to understand the benefits and drawbacks of a piece of technology in relation to the current tech debt. Otherwise, you may be compounding problems further.
Here are three simple yet powerful initiatives that can help your company transform digitally (i.e. low hanging fruit)
- Move your servers into the cloud. If your company is older than 10 years, there is a good chance that some or all of your servers are physically on premises. If that is the case, make this your first digital transformation project. This will require time, effort, and capital to make the switch but it is a very specific project that will build the muscle for larger future initiatives. Once your servers are in the cloud, it will be much easier to expand or bolt on new services. Additionally, you can reduce the overhead needed to manage the physical servers, reuse the physical space, and reduce the insurance associated with storing the servers on site.
- Move money transfers from checks to digital. It is shocking how many companies still issue physical checks for A/P and receive physical checks for A/R. Some companies claim the float is beneficial but if you think in the context of how much time is spent trying to find where checks are or dealing with a lost or stolen check, the float isn’t worth it. Many banks now offer a Bill Pay solution or there are low cost services that enable B2B payments. Moving A/P and A/R digitally improves the speed of financial reporting and allows the company to scale efficiently.
- Streamline payroll and benefits. Over the past few years, there have been a number of companies that now offer payroll and benefits combined an in easy to manage digital solution. So instead of working with three or four different services providers (e.g. payroll, medical, insurance broker, 401K provider), you just work with one company. These solutions are cost effective and allow you to manage a whole company with relatively few HR staff.
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SierraConstellation Partners provides an integrated set of services—from financial and operational assessments to interim management work—to a wide range of organizations.
We think strategically to address not just your immediate issues but your underlying business challenges. We assess opportunities, weigh risks, and explore the implications of both short-term and long-term decisions. Regardless of your company’s stage or situation, we will help find the right balance of people, processes, and technology.
Please contact me to find the best tech solutions at the best value – from chat to technology infrastructure to service providers.