The urgency with simplification & effective change management are key to digital transformation success

By Tjaart Malan, Head of Cloud Success Services Africa at SAP

JOHANNESBURG: Since the start of the pandemic, digital transformation has become a core objective and top priority for nearly every business in the world. From enabling remote and hybrid work environments to shifting customer-facing operations to digital channels and implementing data and analytics to better understand a volatile and highly unpredictable business environment, digital transformation has featured prominently in boardrooms over the past two years.

Even as the world races to a return to some form of normalcy, companies continue to invest heavily in digital technologies. A recent IDC report predicts that digital transformation investments will account for more than half of all ICT investments by 2024.

Clear business imperative to transform

While the immediate task of adapting to disruptions and changes caused by the pandemic and a host of other factors remains the focus, all indications are that new digital technologies will feature prominently in future transformation initiatives.

For example, the same IDC report found that 90% of organizations worldwide are expected to prioritize investment in digital tools that augment physical spaces with digital experiences.

And considering the urgency of the fight against climate change, it’s no surprise that more than 90% of companies will use digital transformation to reduce their carbon footprints by 2023.

Even prior to the pandemic, studies found that companies that reach a higher level of digital maturity were 26% more profitable, grow 9% faster and have market valuations 12% higher than their less transformed peers.

However, despite the enormous benefits of digital transformation, the majority of digital transformation projects fail, with McKinsey data estimating that less than a third of such projects are successful worldwide.

Every failed project costs the business money, resources, time, and opportunity. A failed digital transformation project undermines faith and confidence in future initiatives and increases organizational resistance toward further digital transformation efforts.

So, why is digital transformation success so important to building successful modern businesses?

The ‘why’ of digital transformation

For most companies, a digital transformation initiative will be rooted in either growth objectives or protecting the business against disruption.

A growth-based digital transformation may see the organization adopt new technologies such as IoT to bring greater transparency to core business assets, for example, sensors based in delivery vehicles tracking e-commerce fulfillment.

By integrating the data produced by sensors into a powerful analytics and business intelligence platform – and matching those insights to third-party data such as traffic and weather data – organizations could identify ways to optimize the delivery process and improve the customer experience.

A growth-based digital transformation initiative could also involve a re-engineering of customer experience processes, for example, a retailer developing omnichannel customer experiences that deliver personalized offers at scale through a variety of digital and physical channels.

For companies wishing to utilize digital transformation to protect against disruption or risk, the use cases will be slightly different. For example, in light of ongoing supply chain issues, many organizations are seeking to digitally transform their supply chain processes to achieve greater transparency and predictability over such processes.

Building safe, accessible, and collaborative hybrid work models protect the organization against the disruption of lockdowns and help to future-proof their workforce engagement strategies by enabling much-needed flexibility.

A blueprint for successful digital transformation

Every digital transformation effort has three core elements: People, Processes, and Technology. Each of these elements needs to be aligned to a clear, strategic vision and defined business objectives to ensure the digital transformation project delivers to actual business and customer needs.

One McKinsey survey found that companies believe their digital transformation initiatives were a success mainly when they improve performance and equip the organization to sustain improvements over time.

What are the key ingredients to implementing a successful, value-generating digital transformation initiative?

Firstly, organizations need a sense of urgency about the transformation, driven by senior management throughout every layer of the organization. Many of the most impactful digital transformation projects show quick time-to-value, which helps secure further support and buy-in for the project from the broader organization.

Digital transformation projects should focus on simplification by means of standardization and the use of templates. In most cases, the biggest cost of an implementation stems from the organization’s need to adapt systems to meet unique requirements. Leveraging a global services provider that can bring international best practices to a digital transformation initiative can significantly cut down on the project timeline and reduce associated costs.

Prioritization is also essential. Digital transformation initiatives are meant to shape the future of the organization. Companies should therefore commit their top talent and skills to see the project to a successful outcome.

This does raise the challenge of how to keep the business running optimally when some of the best teams and people are focused on the new initiative. Companies need to be clear on their current capacity and not take on too much, avoiding in particular large-scale once-off transformation initiatives. Finding the correct balance is key to a successful transformation project.

A sometimes neglected but always critical element to any successful transformation initiative is the change management needed to embed new systems and processes within the organization.

Digital transformation initiatives promise a new end-state for the organization, one that features new and enhanced capabilities. But the implementation itself puts the organization in an interim state between what was and what could be. Companies should be ready to navigate users through this interim phase and give the correct level of consideration to technical and change management elements, over and above successfully deploying the technology.

Once companies have established a suitably powerful technology platform, they can innovate across a broad range of business areas. Digital transformation is not about finding new tech to perform old functions better or faster: it’s about shifting mindsets to unlock greater innovation capacity that can help drive the organization’s success for years to come.

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August 30, 2022