Realistic expectations are required for a successful digital transformation strategy.

Realistic expectations are required for a successful digital transformation strategy. As more businesses seek digital transformation, the method they choose can often determine whether they succeed or fail.

Eric Kimberling, the founder, and CEO of Third Stage Consulting Group, a Lone Tree, Colo.-based independent business computing industry firm, has advised many firms on their digital transformation strategy and processes and understands what distinguishes the winners from the losers. He's discovered that while great leadership and excellent strategy are critical for success, projects can be jeopardized by a lack of project definition and the seduction of flashy new technologies. Kimberling presented at Third Stage Consulting Group's Digital Stratosphere 2022 virtual conference.

While the term "digital transformation" is still a bit of a misnomer, Kimberling characterized it as the "combination of technology, business processes, and organizational changes that drive change in an organization." Creating a strategic initiative to help a company compete better; resolving built-up technical debt by upgrading outdated systems; leveraging R&D research investment in newer technologies; or recognizing the limitations of existing systems due to changing circumstances such as COVID-19 are all examples of this pursuit.

According to him, a digital transformation plan is similar to launching a rocket ship, having three separate stages.

Companies execute duties such as selecting software and potential partners, as well as planning and starting the project, during the initial stage. In the second stage, some system or technology elements are pushed out, and the project achieves partial benefits realization; it's also when budget and time overruns can be checked. Implementation is completed in the third stage, and the ROI is more completely recognized.

Realistic expectations are required.

Organizations can enter a "digital nirvana" by reaching the third stage, where they have the processes, organizational structure, and infrastructure in place to use cutting-edge technologies like AI and IIoT to alter their businesses, according to Kimberling.

However, he cautioned, many businesses do not make it to this point. Unrealistic expectations and underestimating the amount of effort, time, resources, and money required for a digital transformation project are two of the most common reasons for failure.

"You want to be pragmatic and practical about where technology can help your business in the next two to three years rather than the next five to ten years," he said.

Vendors are including new technologies in their products with novel features and functionality, but there's often a gap between the new capabilities and an organization's ability to use them effectively, according to him.

"Technology is unquestionably a tool and enabler for solving business problems," he said, "but it's only one component of the entire puzzle." "You must also enhance your procedures, change your culture, change your employees, and redesign your organization."

Why do some people succeed and others fail?

According to Kimberling, firms that make it to the third stage of digital transformation share similar features and strengths to those that do not.

In general, a successful digital transformation strategy includes realistic goals and strong management, whereas a failed digital transformation strategy has an overly ambitious scope and overly optimistic estimates of project costs and timelines.

Kimberling described some of the characteristics of successful and unsuccessful digital transformations in her talk.

Expectations and objectives Organizations must set reasonable, attainable objectives. Companies might focus on the result while embarking on a digital transformation, such as replacing an ERP that is no longer adequate or won't be supported by the vendor beyond a specific date. However, this may lead to erroneous expectations that the digital transformation will be simple and that the new system will solve all of the company's issues.

Organizations that are focused on the result may underestimate the amount of time, money, and effort required to plan and structure the project, according to Kimberling.

"Impossible expectations are a very real, prevalent dynamic that leads to a lot of failures," he stated.

Leadership. Experienced leaders in key positions are required for successful digital transformations. They should, ideally, have led such programs before. A healthy skepticism regarding claims from vendor salespeople, who are not compelled to disclose the risks and problems of the technologies, is a vital aspect for successful leadership. He believes that having a decision-maker who can ask the correct questions and identify potential barriers or problems while installing technology is beneficial.

"[Vendors] aren't encouraged to sell you the terrible side," Kimberling noted, "and any technology you implement is going to have a poor side." "There is no such thing as perfect technology, and there is always a risk to be controlled."

Balance. Companies must combine technological investment with business needs as part of any digital transformation strategy. Organizations that lead with technology expenditures may not generate the promised business value and, instead, cause operational interruptions that are difficult to recover from. Companies have gone out of business as a result of challenges caused by botched ERP adoption initiatives in some situations, notably those involving SMBs.

"Those are extreme instances," Kimberling explained, "but more modest failures and challenges are more typical and are what most firms have to worry about."

Change management is a term that refers to the process of It's just as crucial to managing the people part of a transformation journey as it is to manage the technology. Successful transformation leaders know that change can be tough for employees, even if they appear to welcome and be ready for new technologies on the surface.

"Successful leaders understand that, despite people's claims to the contrary, there will be underlying fundamental resistance to change due to the magnitude with which organizations are changing," Kimberling noted.

The emphasis of the project. There are many moving elements in every digital transformation, but most firms become myopically focused on selecting and deploying enterprise software, ignoring other critical components such as change management and reengineering business processes. The purpose of a digital transformation should be to adopt new enterprise technology in such a way that the business is fundamentally altered.

"You don't want to just put in a transactional back-office system," Kimberling said. "You want to acquire something that truly gives you better insights and visibility into the processes." "You must also have project quality assurance operating from beginning to end, with a focus on project governance, controls, resources, and risk reduction."