As we plan for the coming year, it is helpful to look at trends in the market and understand how to piggyback on some of the options available to us.
Digital transformation is one of those common trends and industry buzzwords. It’s a pretty broad term that can mean a number of different things to different people, but it can also be an important capability for many organizations.
Before going all-in on a digital transformation, it is important to sift through and clarify some common myths regarding digital transformation:
1. Myth: digital transformation is the same thing as an ERP implementation.
A digital transformation is not the same as an ERP implementation. There may be some similarities between the two, but there are some subtle (yet important) differences between the two.
Digital transformations do not assume a single, off-the-shelf system of record for an organization. Instead, digital transformations open the possibility of best of breed, custom and point solutions to leverage the option that will best transform your business. In other words, digital transformations allow your business needs to drive your technological needs – rather than the other way around.
A digital transformation typically entails a more revolutionary approach to operational and organizational change. ERP systems typically result in more incremental improvements. Those that take a more progressive digital transformation approach are typically doing so to completely overhaul their businesses rather than to simply “pave the cowpaths.”
2. Myth: your digital transformation software needs to be provided by one ERP vendor.
Because digital transformation opens a plethora of options, organizations can avoid being backed into a corner by one specific ERP vendor. In years past, companies often felt as though they had no choice but to choose one vendor for the enterprise software needs, but technological advances – coupled with the alarmingly high rate of ERP software failure – has allowed more organizations to be the captains of their own destinies.
For example, our team at Panorama is currently working with a mid-size, global distribution company. This client has found that they are likely to benefit from a traditional ERP vendor for its back-office functions such as finance, inventory management and accounting, but that other functional needs will likely be addressed by other point solutions. The sales team will likely have their own standalone eCommerce solution that allows them to transform the way they interact with customers. Executives will have their own best-of-breed business intelligence solution. All of these software solutions will be integrated, but we have advised them to not be beholden to any one ERP software provider.
3. Myth: digital transformations should be run by the IT department.
As a general rule of thumb, any enterprise software initiative is going to be more successful if it is spearheaded by the business rather than the IT department. However, the reality is that most organizations still run their ERP implementations through their CIO or IT Manager – either due to capacity constraints or because IT is the one taking the initiative to run the projects.
With digital transformations, business and executive involvement is even more important.
These are not initiatives designed to simply replace an outdated legacy system. Instead, they are very important strategic initiatives intended to overhaul their business models, operational processes and organizational designs. This is something that the IT department can and should certainly support, but they should not be leading the charge. Instead, the business should ensure the appropriate level of focus on organizational change management, business process reengineering and other critical success factors.
4. Myth: digital transformations are best for every organization.
Given the first three myths, it may appear as though we are advocating that every organization take more of a digital transformation approach and less of a traditional ERP systems angle. But that’s not the case.
For some companies, a more incremental, evolutionary improvement is just fine. Perhaps their operations are pretty solid to begin with and their industries are not being upended by competitors (think: Amazon’s impact on brick-and-mortar retail distributors). The key is to identify what type of project you want this to be, and then ensure that you have alignment in how you allocated resources, focus and measures of success for the project.
Too often, companies say they want a digital transformation, but they make decisions as if it is a more relatively simple ERP initiative. This should all be clearly defined as part of your overarching digital transformation and enterprise IT strategy.