What is Digital Transformation?


Understanding what digital transformation is and how it can help your company.




Digital Transformation

Digital transformation is simply the application of technology to create or modify existing business processes to improve business performance. It can be as simple as automating manually repetitive tasks or as complex as predicting market trends.

Introduction


Every business is built upon a set of business processes. Every process could be described and documented as a discrete workflow with specific inputs and outputs. The efficiency, and therefore profitability, are dependent on how well these processes work. High performance companies typically have lean efficient processes, with a focus on achieving the end goal with the least effort.

Technology is now making a significant impact in business process efficiency. The process of digital transformation is a process of reviewing all of your business processes and looking for opportunities to apply technology to improve your process efficiency without compromising the output of the process. Solid examples of this are:

  • Automation of moving data between systems
  • Digital approval processes replacing paper based processes
  • Digital marketing improving cost efficiency by removing printing costs
  • Improved customer invoice payment tracking and late payment tracking
  • Supply Chain Improvements leading to reduced stock costs

How to create a digital transformation strategy

A successful application of Digital Transformation is dependent on a complete understanding of the current business processes and their interactions. Once this is achieved, you can start planning your strategy. A simplified strategy can be the following 5 step outline:

Step 1: Define your vision - The very first step of any Digital Transformation journey is to have a clear vision of where you want the company to be once you have finished the project. Consider every stakeholder in your vision, including your customers and suppliers as well as your internal staff. Have a clear understanding of the issues you are attempting to resolve and the impacts that it will have on the organization.

Step 2: Manage Leadership Stakeholders - Managing stakeholders is key to any project, but Digital Transformation projects are typically much more dependent on a strong backing from the company leadership. Politics in Digital Transformation projects can be positive or negative, just like any other project, but negative politics are very detrimental to the end result, and the backing of the company leadership will help give the project team the required importance/authority to drive the project to success.

Step 3: Manage the culture - Getting the buy in from the company as a whole is key to success. Understand the people and their roles in the organization, present the vision to them and listen to their feedback. Never forget that the people actually doing the work are the best experts there are on that specific process and their knowledge will help you be successful. There are always some people who hear 'Digital Transformation' as 'cost savings' or 'headcount reductions', and is critically important to ensure that this is addressed to get a better buy in from everyone involved.

Step 4: Plan your Digital Transformation project - At this point, you should now have a good understanding of your existing business process, a vision of what you want them to be and an idea of the key stakeholders. At this point, you can start to identify the key resources (especially key process owners), and start selecting appropriate technologies which support the specific process transformations you are targeting. Once you have all of this pre-requisite information you can start building out your project plan.

Step 5: Review and Adjust - It is good practice to constantly review your business process performance. Ensure that your project has delivered measurable performance improvement. There are various ways to measure performance, some being:

  • Time (effort and duration) required for process pre and post project
  • Improved quality of output from a specific process (e.g. reduced time spent correcting manual data entry issues)
  • Improved customer satisfaction / customer retention rates
  • Reduced billing turnaround times

Typical pitfalls


It is important to be realistic with your vision. Large organizational changes have a lot more risk attached, and typically involve a lot more stakeholder management, which can lead to project paralysis. You may consider running multiple sequential Digital Transformation projects to make incremental deployments leading to a larger vision. The benefits of that approach are to establish a track record of delivering improvements and to adapt the company culture in a smoother manner.

Some transformation visions call for consolidation of all teams on to a single central product such as an ERP platform. In these cases, it is important to asses the cost of serializing multiple Digital Transformation projects against the costs of a single move with the understandings highlighted above. It may be that a migration path can be defined to follow the path of least resistance, and the ERP provider should be able to provide consultancy on the best approach in this scenario.




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