The real cost of an unsuccessful Digital Transformation

We have seen a number of high-profile digital transformations fail with flying colours: Nestlé USA was forced to pause a $200 million-worth ERP project due to inadequate preparation, Hershey failed to deliver $100 million worth of candies for Halloween (and lost 0.5% market share) after a troubled system migration, Nike lost $150 million worth of orders for Airs after underestimating the complexities of their ERP implementation and destroyed 20% of its company valuation after the go-live[1] – and the list goes on.

At first glance, the cost of an unsuccessful business transformation may sound obvious – it’s mainly financial. Seeing your budget go out the window after all the effort is, from what we’ve seen, as daunting as it sounds. However, you’d be wrong to believe it ends there – lost money is only the tip of the iceberg. Not assessing your needs with proper planning will do more harm to your business than you may initially think.

In this article, we’ll explore the actual consequences of failing your implementation and why it’s critical to get it right the first time.

Here are the true costs of an unsuccessful digital transformation:

1. TIME

If you don’t get your implementation right, you will pay with your time – and we all know how much of a valuable resource it is. If your team spends countless hours dedicated to a technological initiative that ultimately fails, it can set your company back months – or even years. You’ll need to go back to decision-making stage and gather all partners, stakeholders and teams for realignment. Between redesigning your strategy, communicating it to your teams and making sure everyone is on board with the new roadmaps, you’ll waste valuable time that would be best spent engaging with your business needs, developing your products/services or prospecting market opportunities.

2. REWORK

Connected to the issue of lost time is the hassle of rework. An ineffective business transformation could lead to data inaccuracy, forcing you to spend effort fixing errors and repeating tasks that are not likely to be seen as pleasurable – especially when done the second time around. Not only does this cause you to waste time, but it also generates a feeling of pointlessness in previous efforts, leading to overall dissatisfaction. This process will also cause your organisation to be disengaged from other important tasks – the effort of rework will represent added workload to your teams, which could require you to hire additional staff, enlarging your budget gap.

To avoid having to start from scratch with a feeling of frustration, you must make sure your business is adequately prepared for change.

3. INNOVATION POWER

Failing to transform digitally can stifle innovation in your company. Without the ability to embrace new technologies and processes successfully, you could be missing the opportunity to better understand and serve your customer. Cutting-edge tech and digital tools can be used to automate routine tasks, streamline workflows, and enable real-time data analysis, all of which can improve operational efficiency and help companies respond more quickly to changing market conditions.?

Surrounding yourself with an experienced?ERP Implementation Leadership?team will help reduce the risk of falling behind on your digital transformation and help you explore your business’s innovation potential to the fullest.??

4. COMPETITIVE EDGE

As you lose time, go through rework and continuously lose your innovation power, the market doesn’t stop – it is filled with competitors eager to get ahead of the game. Companies that have successfully executed digital initiatives will be able to operate more efficiently, respond more quickly to market needs, and develop new products and services faster – this will put the non-transformed company at a disadvantage. When you’re unsuccessful in embracing digital innovation and fall behind with regard to tools and technologies, you risk missing the train of cutting-edge tech – and your customer will know it. If you can’t deliver a seamless experience, your target client will quickly move on to your competition.

If you want to avoid losing market authority and aim to be top of mind for your customer, make sure you’re equipped with the right?Transformation Methodology & Tools.

5. TALENT RETENTION

Regardless of their industry, business model or vision, all organisations share one common element – they’re made of and for people. This highlights the importance of considering the human dimension of a digital transformation.

In today’s job market, top talent is in high demand, and it can be challenging to attract and retain employees that combine technical knowledge, soft skills and values aligned with your business’. If an organisation does not properly manage the change associated with its upcoming initiative – accounting for its new processes, technologies and ways of working – it can result in a negative impact on employee morale, productivity, and engagement. When employees feel that they are not adequately equipped to handle the upcoming change, they may become frustrated, demotivated, and ultimately leave the organisation in search of a more suitable work setting. This can also happen if you are not successful in your implementation and end up overwhelming your team with repeated tasks due to lack of preparation. Needless to say that this will consume your budget even more – losing key employees with valuable skills can lead to delays in project timelines, increased costs, and decreased profit overall. This is particularly true in industries that are highly competitive. Therefore, it is important for organisations to develop a comprehensive strategy that ensures employees are equipped to handle the changes brought about by digital transformation – this includes a well thought-out Change Management Strategy with employee training and effective communication.

We’ve seen that the true costs of failing your implementation initiative are immensurable. To stay competitive, it’s critical to embrace digital innovation and to get it right the first time – to make it so that the investment is well worth the return in increased revenue, market share, and customer satisfaction.?

Good news is that a failed digital transformation is avoidable.

Here’s what we have learned from experience, and consider absolute key success factors for a successful business implementation in each phase:

1. Preparation

• Before implementing a new system, take the time to redesign business processes to understand the impact of the ERP solution. Only reengineer business processes if it is necessary.
• Define business goals and create a timeline around these goals to allow for proper testing and implementation.
• An ERP transformation is not the “silver bullet” for any structural, governance or cultural issues in your organization. Piggybacking other initiatives on the ERP transformation comes with high risk!
• It is paramount to onboard the most experienced (external and internal) resources your budget can afford, who will solve day-to-day project problems hands-on. Avoid helicopter executives.

2. Setup

• Structure your business organization so it can cope with the demands of a large-scale transformation. Bring in strong business leadership.?
• Change management is essential to reduce resistance to the new system, improve morale, and increase proficiency.
• A phased approach to digital transformation is preferable to a “Big Bang” approach. Avoid parallelization of phases as much as possible. ?
• Limit the number of customizations to avoid timeline and cost overruns, as well as potential bugs.?

3. Execution and deployment ?

• Avoid cutover during busy seasons and allow adequate time for employees to adapt to the new system.
• Don’t underestimate the complexity of the undertaking – invest early in strong methodology, clear roles and responsibilities and well-defined quality gates.

It requires deep industry knowledge, proven experience and the right toolset to fast-track your initiative. If you wish to know more about how we can support your business implementation and lead you toward success, do not hesitate to?get in touch.

REFERENCES

[1] “ERP Implementation’s failure cases (valuable lessons).”?by Bryan Fargreatco | Medium, 21 October 2019,