The Hiccups in Digital Transformation

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Digital transformation aims to bring automation, eliminate onerous, manual tasks and streamline processes to deliver the desired results in an expedient manner. Studies show that on average 87.5% of digital transformations fail to meet expectations.

Three main reasons for the high failure rate are lack of appreciation of the scope of transformation, poor change management, and underestimated sustainment effort.

Lack of appreciation of the scope of transformation

A utility company wanted to transform its supply chain. The goal was to replace two legacy applications with an ERP and automate the end-to-end process, from materials request to delivery.

The scope of transformation was broad, affecting multiple departments. It included teams which design infrastructure projects, do construction, purchase, warehouse, and deliver materials.

Through a series of requirements gathering workshops, the transformation team learned that extensive adaptation of the ERP would be necessary. The complex nature of the business required a lot of flexibility in handling various scenarios of material requests.

To avoid a delay in the implementation, the transformation team decided to reduce the scope by removing functionalities. The reduced scope translated into less flexible user interfaces.

The rollout was met with disappointment. The design and construction groups found the application cumbersome to use. The inconsistent processes to access materials information and availability statuses were confusing. The purchasing department had difficulties in accessing material requests information in an easy-to-consume format.

Getting the appropriate subject matter experts involved is crucial to define a realistic transformation project scope. It is better to start small and build buy-in than aim for the sky and end up with a mediocre solution.It is better to start small and build buy-in than aim for the sky and end up with a mediocre solution. Share on X

Poor change management

Digital transformation introduces not only technology changes, but also process modification and changes to roles and responsibilities. Without a good change management plan, the transition could cause havoc.

To prepare for the ERP rollout, the utility focused on a role-based training progam. Role-based training made sense for learning how to use the new application. But it was inadequate to address the changes in processes and responsibilities.

At the training sessions, users were informed about the process changes and additional responsibilities related to data input. Needless to say, folks were not thrilled.

To properly prepare for a transformation, there needs to be frequent communication to apprise everyone impacted on the status of the initiative, potential changes that have an effect on how work would be done and who does what.

The purpose is not just to inform, but also provide an opportunity to address concerns which could steer a change in functionality design, for instance. A change management program that encompasses pre-implementation updates, pilot demonstrations, and training is important to build engagement as well as preparation for the transition.

Underestimated sustainment effort

After implementation, the work on sustainment begins.

Six months after the ERP rollout, users were still struggling with the tool. The purchasing team became the ERP Help desk when users had problems. The respective dedicated support person in their department didn’t work as planned. Due to their infrequent use of the application, the support person could not master the input required for materials requisition.

For the purchasing team, the data gaps and infrequent user updates on delivery dates led to stock-outs and untimely deliveries.

Without the purchase order automation that was originally planned, the purchasing team was challenged to see any benefit from the transformation. The turnaround time for the reports they needed for purchase planning took weeks.

The sustainment effort necessary for the utility’s transformation turned out to be another mini project to get all users familiarize with the changes.

Many organizations tend to underestimate the sustainment effort. They are thrilled to see the project completion hoping the operations folks would carry on without issue. In practice, sustainment is critical to maintain the change and momentum so improvements achieved would not be lost quickly.

With significant capital and manpower committed to digital transformation, it is disheartening when the outcomes don’t meet expectations. Not only would the business see a diminished return on investment, employees and those impacted by the transformation would become disgruntled users of the new tool. It would take much longer to realize the desired improvements.

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