Digitalisation & Eating the Elephant – LogiSYM April 2018
(no elephants were harmed in the writing of this article)
We’ve heard the term digitalisation for some time now. At events and in the press (including at LogiSYM ) there are strong messages that tell us that digitalisation is necessary. We often overlook the fact that company digitalisation initiatives fail to address key factors: the lack of understanding of what is required and how it is applicable at various levels of the organisation.
And then there is the fundamental question – how do we begin?
Digitalisation – do we have to?
What does Digitalisation really mean for our business?
There are a number of definitions of digitalisation. And there is some debate over the use of digitisation vs digitalisation. We use digitalisation deliberately, as we are not talking about turning paper documents in to electronic documents, but rather seek to change processes. This addresses streamlining the way information is pushed around the organisation. This also incorporate digital means to improve the productivity of the organisation.
One of the definitions that strike to the heart of what businesses need to do is as follows:
”the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” (Source: Gartner Inc. [online] Available at: https://www.gartner.com/it-glossary/ digitalization/)
Why? & Do I have to?
Digitalisation can assist organisations with growth. All Companies can improve the efficiency of their business processes, consistency, and quality across a global organisation. Even if businesses today are not processing global transaction, digitisalisation can strongly enable with growth beyond country borders at a fraction of the cost. Other gains and benefit for those who choose a digital culture include:
- Integrating a digitised records system with partners, vendors, customers to increase productivity and reduction of manual processing. You can manage more with fewer staff;
- Improve accessibility and facilitate better information exchange worldwide. Use of tools that include translation/localisation assist with this now more than ever;
- Increase response time and customer service globally, allowing for management by exception and other process efficiencies
- Reduce cost per transaction or process
- Ability to take advantage of analytics, to improve decision making strategically and operationally
- Help with the flexibility of staff, allowing organisations to grow and scale back personnel based on need, as well as looking at a global staff base
A well designed digitalisation plan can help reinvent processes, improve quality and promote consistency. But how should organisations begin?
How do you eat an elephant?
Digitalisation projects can potentially affect the entire organisation and such programs should have support from the top. However this can be overwhelming for large and small companies alike. It can be reminiscent of the old pun – how do you eat an elephant? One bite at a time!
Experiments and pilot testing can be one way to take a “bite” out of digitalisation, minimise risk and evaluate opportunities for returns. Similarly, with the proliferation of SaaS providers (Software as a Service), the exposure can also be limited to an operational fee (monthly or annually) rather than a capex line item in the tens or hundreds of thousands.
What is a Pilot Test?
A pilot project, pilot test or pilot experiment are small scale preliminary test or implementation. They are conducted with smaller groups, teams, departments, country or range or products in order to evaluate feasibility, time, cost, adverse events. This simulates improvements for the final project or product implementation. For a limited sample or range of products – example, a certain grouping of SKUs, or ocean freight in a certain geography like ASEAN.
Selecting the Pilot Case
To ensure the optimal business gains from the proposed project, it is important to ensure the range being piloted is significant enough to measure the impact and to drive a business case. In some cases, this will be opportunity driven. For example, an organisation might be considering tender management software for their business and an upcoming tender exercise for ocean freight in the ASEAN region is on the planning horizon. This could be an opportunity for testing the viability of the proposed solution in order to determine whether it is suitable for the whole organisation.
Evaluating the Case vs the Solution
In determining whether the proposed solution will be appropriate, it is important to evaluate the capabilities of the software to the overall parameters of the pilot and also versus the existing systems.
- What problem is being solved?
- Why is this required?
- Is there a sense of urgency?
- How will the problem be solved by the software and the solution proposed ?
- What can and cannot be done?
- What are the benefits to be gained?
- What are the costs to the organisation?
Proposing the Case to Management
In positioning the digitalisation pilot with management, one of the biggest issues is in explaining the need for the pilot to management. The questions of “why?” and “why now?” need to be addressed. Typically, organisations will often cite that “we’ve always done it this way” as a reason to not replace current practices with digitalised processes. Unfortunately, there is a sense of urgency around this with regards to:
- Changes in the competitive environment. Are there changes to the ways that other organisations are using technology? Keeping up may be the main reason as the pressure is on to do more with less. Examples of other businesses that are utilising digitalisation can assist in convincing management that it is time to take action.
- Cost and productivity pressures. Businesses are faced with the competitive reality that often means that prices are a race to the bottom. Failing to increase the productivity of processes could certainly put any business at a disadvantage. Return on investment (ROI) projections and productivity calculations can demonstrate the gains to be made with regards to these pressures, and often the SaaS/software vendors will assist.
- The need for transformation. The organisation may be in an industry or market that is being disrupted. Being able to fight back with digitalised procedures may give staff the breathing room to think of ways to remain relevant to customers instead of doing procedural work.
- What does success look like? Presenting projections about the costs saved and time saved as Year-on-Year benchmarks will assist in terms of presenting the potential success for the organisation. There can be intangibles as well – examples of this may include employee wellness (reduction in medical leave), as well as reduction in employee turnover. Will the organisation be able to free up resources, improve efficiency, or be more lean?When detailing success criteria, it is crucial to be specific and clearly illustrate the facts in a structured format. Typically Gantt charts, simple calendars, whichever are appropriate, depending on the size and scope of the project.
Figure 1 below – demonstrates some key format data
Challenges and Obstacles
This is a simple overview of the basic steps to get your pilot off the ground. While the pilot makes business sense, there are often challenges which may arise. In looking back on our own experience, the following are some obstacles to be aware of.
Inability to Upsell to Management
A number of projects that make business sense die before the pilot can be run. It is often because the functional areas are unable to “Sell” their idea to senior management. Identifying and engaging the right stakeholders is important for success. This helps to articulated the project benefits in a way that matches the overall priorities of the business. Knowing what is important to management when evaluating these projects, is fundamental. Generally SaaS do not require large capex commitments (often a major hurdle). Engagements need to occur at the right levels of management and decision makers. The project expenditure must be correctly identified, as SaaS solutions can often be allocated as an operating cost rather than a capital cost (capex).
Some pilots may fail due to the fact that the data included in the pilot is incomplete or incorrect. Vendors may ask for specific data when setting up your pilot or project, and failure to give them the data they require can result in project failure. Remember garbage in = garbage out.
Training and Support
Non-use of any software solution will ultimately mean that the project will fail. It is important to deploy user training so that there buy-in of the software and used effectively. Use of inactive login reports, usually a report able to be provided by most serious software vendors, will give insight in to which users are not engaging with the solution. Reasons for this could be lack of training, or there could be a fear of technology. It is important to ensure that users are engaged to reduce this as much as possible. Make sure that users are motivated to use the product and are comfortable enough with it so that they are not afraid of making a mistake and therefore will resist the change less.
Ultimately digitalisation is occurring, and organisations will need to make the step change to remain competitive. To do so earlier could allow your organisation to stay ahead and enjoy the advantages of digitalisation before competitors. Try a pilot project and take advantage of free trials, trial implementations and other offerings that are available from software vendors to succeed or fail-fast, make a smart decision with less risk to your organisation (note that pricing models vary from vendor to vendor). Start your digitalisation project today, and start taking that first bite!