Defining What is Digital Transformation
Digital transformation is a term that has gained a lot of attention in our increasingly digital age. But what exactly does the word digital transformation mean?
Digital transformation is the integration of digital technologies into your business processes. Having a digital transformation strategy is not just about adapting a digital technology but is a strategic and holistic approach that requires a shift in mindset, processes and culture.
Digital transformation is a concept that involves re-imagining your current business practices by incorporating advanced digital technologies. Examples of digital transformation technologies include cloud computing, artificial intelligence, machine learning, Internet of Things (IoT) and data analytics, among others. This article will look at:
- What is Digital Transformation
- The Importance of Digital Transformation
- The Benefits of Digital Transformation
- The Digital Transformation Framework
- Common Reasons Digital Transformation Projects Fail
- The Role of ERP in Digital Transformation
Digital Transformation Checklist
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What is Digital Transformation
Digital transformation is a concept that involves re-imagining your current business practices by incorporating advanced digital technologies. This process includes creating digital transformation strategy models and adapting your existing processes to meet the changing market trends and customer needs.
The Importance of Digital Transformation
Why is digital transformation important? Digital transformations are more than just staying current with the latest digital technologies trends. The primary goal of digital transformation is improving your existing business processes and systems so that your organization remains competitive and relevant.
To illustrate just how important digital transformations are, in December of 2022, Southwest Airlines had to cancel more than 15,000 flights between 21 December and 31 December of the same year. The major cause of this was because of the outdated technology the company was using. Southwest Airlines ended up losing up to $140 million in fines and $600 million in reimbursements to the passengers. As a result of the events, the organization lost between $1.1 and $1.2 billion.
But while digital transformations are necessary, it isn’t as simple as upgrading legacy systems. The challenge lies in transforming businesses rather than just running them.
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The Benefits of Digital Transformation Initiatives
Accepting a digital transformation strategy and utilizing digital transformation initiatives as part of your organization’s day-to-day operations can result in many benefits. The following are five digital transformation examples of benefits that your organization can unlock:
1. Boost Productivity While Reducing Labor Costs
A digital transformation project can help your organization boost productivity while reducing labor costs. Digital technologies automate repetitive tasks and business processes, enabling your employees to focus on the core business tasks that need human intervention, resulting in improved productivity.
Also, when manual and repetitive tasks are automated, there is no need to invest in hiring or training employees to perform these tasks, significantly reducing labor costs.
2. Enhance Customer Experience
Customer experience is crucial to the success of your business. When your business delivers exceptional customer experience, the customers become loyal to your organization. This encourages them to come back again and recommend you to their peers.
Digital transformation technologies—such as customer relationship management (CRM) systems—enable you to understand your customers’ preferences, behaviors and needs. This information ensures that you deliver personalized experiences to each of your customers, tailor your marketing campaigns and create targeted offers, enhancing your customers’ satisfaction and loyalty.
3. Drive Innovation
Digital transformation leads to business transformation, forming the foundation for innovation within your organization. Digital technologies enable you to re-imagine your company’s products, services and business models. This allows you to stay ahead of competition in the ever-evolving marketplace.
For example, transforming your business models by implementing e-commerce platforms enables your customers to purchase your products online. This move helps expand your market reach to areas initially you could not reach.
4. Improve Decision Making
Data is the lifeblood of our digital age. New technologies, such as advanced analytics tools and artificial intelligence (AI), help your organization collect and analyze large amounts of data from various sources. This ensures that business leaders make decisions based on data rather than instincts and guesswork.
Digital technology with advanced analytics enables your organization to better understand your operations, customers and market trends. You can identify key performance indicators (KPIs) and track them in real-time, enabling proactive decision making and timely interventions.
The Digital Transformation Framework
Every organization follows its own digital transformation journey. However, to ensure that your digital transformation project is successful, consider the following steps:
Stage 1: Align Objectives with Business Goals
The success of your digital transformation journey is directly dependent on how the digital transformation process is aligned with your goals and objectives. Questions to ask in this stage include:
- What business outcomes do I want to achieve for my customers?
- What problem is my business trying to solve?
Goals and objectives that are specific to your business ensure that your digital transformation efforts are focused and purposeful.
Stage 2: Bring IT and Business Departments Together to Co-Create
Another essential factor that can determine the success or failure of your digital transformation process is the collaboration and alignment of IT and business functions. In this stage, your organization breaks down silos and ensures that there is a cross-functional collaboration. You can create a dedicated cross-functional team with members from your different departments, such as IT, marketing, operations and other departments. The individual team members understand the unique challenges and pain points that exist in the departments they represent.
Stage 3: Pick the Right Strategic Partners
Because of the complex nature of a digital transformation undertaking, your organization may have to work with partners to ensure a successful implementation. To choose the right implementation partner, consider the following factors:
- Industry-specific expertise and experience
- Cultural fit and communication
- Project management and budget
Partnering with a digital transformation partner—such as Ultra Consultants—your organization reduces the time to business value and accelerates the digital transformation process.
Stage 4: Redesign Business and Products Around Customer Outcomes
The process of value realization capitalizes on your digital technology investments to build lasting relationships with customers that benefit your company over time. Prioritizing the customer experience to the center stage of a digital transformation journey ensures measurable results for your bottom line.
This stage ensures that your digital transformation process addresses your customers’ needs, pain points and expectations, delivering long-term value.
“Where do you start your digital transformation process? Most business leaders tell me that setting those priorities comes down to answering a basic question: How can we do better by our customers? After all, no business survives without satisfied customers, and nothing differentiates a business more effectively from its competition than doing a better job of making people happy.”
Stage 5: Retrain Employees around Digital
Once you implement new digital technologies, you will need to have a digitally skilled workforce to ensure that the new systems are being used effectively. Investing in effective change management is crucial to equip your employees with the necessary skills. This stage involves:
- Providing technical training
- Fostering a culture of continuous learning
- Offering development opportunities
Examples of Digital Transformation Projects
The following are examples of two companies who experienced digital transformation with the help of Ultra Consultants:
1. Food & Beverage Manufacturer
A regional beverage manufacturer wanted to expand its operations nationally. However, their 19-year-old legacy ERP system still had manual processes which forced the staff to work outside the system, especially for scheduling, forecasting and ordering.
They engaged Ultra Consultants in search of a new ERP system, and we focused on understanding the company’s current business processes. This made it possible for the company’s team members to identify the gaps so we could help define the company’s desired future state. Also, the Ultra team led the manufacturer’s team through the ERP vendor selection process, focusing on vendors who would help the company achieve their set goals and objectives. The project was a complete success, achieved within time and on budget.
2. Metal Manufacturer
Old technology was hampering one of the nation’s largest specialty steel service centers, with $300 million in annual revenue and locations throughout the Midwest and internationally. The company was operating on a 30-year-old green-screen Unix-based operations management system with heavy customizations, putting the company at a technology dead end. Although the system had served the company throughout different business models, it was a time for a change.
After a comprehensive interview exercise for an independent partner, Ultra Consultants was chosen because of our expertise and experience. Ultra Consultants was asked to direct the project, steer the company through business process improvement (BPI), guide the software selection process and manage the complex implementation.
The metals manufacturer had a high transaction volume with a number of special requirements and unique processes that needed to be understood, mapped and defined based on the future state opportunities determined by Ultra and their internal project team.
The implementation process brought several challenges, including that many of the manufacturers’ processes required custom development—and the utilization of expert vendor resources. This challenge was easily overcome, as one of Ultra’s consultants made sure the development team stayed on-track, with effectively managed timelines.
In the end, Ultra Consultants made sure that our client’s BPI, ERP selection and ERP implementation projects were all completed successfully, on time and on-budget.
Common Reasons Digital Transformation Projects Fail
1. Lack of Executive Sponsorship
When your project does not have a strong backing from top-level executives, your digital transformation initiative will struggle and experience resistance from the stakeholders. Executives play a crucial role in ensuring successful digital transformations by:
- Driving change
- Aligning resources
- Setting a clear vision for the digital transformation journey
Executive support ensures that your digital business transformation is a strategic priority and receives all the resources that are needed to ensure that it’s successful.
2. Not Having a Collaborative Culture
Digital transformation is more than just implementing new technologies. This process brings about a cultural shift within your organization. Therefore, a lack of collaboration and resistance to change can hinder the success of these digital initiatives. Digital transformation touches different departments, and when these departments don’t work together in one voice, the end result is a failed implementation.
3. Not Hiring Digital Transformation Talent
Skills and expertise are crucial in a digital transformation process. While it may be tempting to approach new technology as solely an IT project to be completed by an in-house team, true digital transformation effects all areas of your business. Avoid making the mistake of overlooking the importance of hiring the right talent with expertise and knowledge of the digital transformation trends. The right ERP consulting team is essential for your organization to effectively implement and leverage digital tools and strategies, getting the most ROI from your investment.
4. Lack of Clear Digital Transformation Goals
Digital transformation goals are the road map on your transformation journey. Without them you may find your organization lost in the complexities of the digital transformation. Establishing measurable goals with key performance indicators (KPIs) that align with your business strategy is crucial in ensuring that your digital transformation initiative stays on track.
5. Ignoring Customer Experience
Many organizations implement digital technologies by only focusing on improving internal processes and cost savings while neglecting customer experience. When you neglect the experiences of your customers, you may end up with a solution that does not meet your customers’ expectations and needs.
“Without a clear understanding of what your digital transformation should achieve, it’s easy for your company to get lost in the weeds. IT leaders must work with business leadership to help establish a clear understanding of digital transformation goals and a practical roadmap for achieving them.”
The Role of ERP in Digital Transformation
Enterprise resource planning (ERP) systems play a crucial role in the digital transformation process. ERP systems integrate the data and processes from the different departments within your organization, ensuring that you have a single source of truth.
1. ERP Systems Form the Foundation of Your Digital Transformation
ERP systems are the backbone for organizations, because these systems integrate and streamline various business processes across departments, such as finance, operations, supply chain management, manufacturing and human resources. ERP systems provide a centralized and unified platform for managing large amounts of digital data, laying a foundation that can be used for digital transformation.
2. ERP Systems Enable New Business Models
Digital transformation is more than implementing new technologies. This process is also about reimagining how your business operates to create value. ERP systems enable your organization to implement new business models.
ERP systems provide real-time inventory management, order fulfillment and customer data synchronization. This ensures that your organization delivers a consistent and personalized experience across touchpoints.
3. ERP Systems Empower Your Digital Transformation Leaders
Successful digital transformation strategies depend on strong leadership with a clear vision. ERP systems offer your digital transformation leaders with insights and tools needed to navigate the complexities of change and drive organizational success.
Real-time visibility into key performance indicators, financial metrics and operational data allows your digital transformation leaders to make informed decisions and steer your organization in the right direction. The leaders can also monitor progress—made possible by ERP dashboards and reporting capabilities—identifying areas for improvement and adapting strategies as needed.
4. ERP Systems Help Overcome Legacy Technology Challenges
The presence of legacy technology systems can hinder your digital transformation initiative. Legacy systems are outdated and lack flexibility, scalability and integration capabilities that are required for digital transformation. However, modern ERP systems can bridge the gap between legacy technology and modern digital tools.
ERP systems provide a unified platform that integrates with existing systems, processes and applications. This ensures that your organization uses the existing legacy investments while gradually making the transition to a more digital-friendly architecture. This approach not only minimizes disruption to your day-to-day processes but also reduces risk.
5. ERP Systems Drive Successful Digital Transformation Strategies
Successful digital transformation efforts take into account people, processes and technology. ERP systems are the technological foundation and enable your organization to streamline processes, empower employees and deliver exceptional customer experiences.
ERP systems allow your organization to redesign and optimize processes. Data analytics ensure that your organization is able to identify inefficiencies, eliminate bottlenecks and implement best practices, leading to increased productivity, reduced costs and improved agility.
“Intelligent ERP is the backbone of digital transformation, and it is running businesses in the increasingly digital world.”
Conclusion
Digital transformation is no longer a trendy catchphrase but a necessity for businesses that need to improve on their operations and deliver value to customers. Digital transformation is not about just adopting new technologies. It is about how well your organization can make use of the new technologies and drive innovation, improve the experiences of your customers and create new business models to take your operations to the next level. For your digital transformation strategy to be successful, your organization needs to have a clear vision and strong leadership to guide the process from start to finish.
Ultra Consultants has decades of experience helping manufacturers and distributors with digital transformation projects. Our experts help your organization follow practical steps to stay abreast of trends and developments in your industry. And, we successfully navigate the digital transformation landscape to unlock its benefits for your business.
Get started on your digital transformation journey today by requesting a free discovery call.
