Hesitant to Digitalise?
How much can reluctance to digitally transform hold the business back?
Digitalisation? Digital transformation?
The terms digitalisation and digital transformation do have a distinction; digitalisation refers to the concept of using new and emerging technologies to improve business processes, while digital transformation is the process of adapting business structures to be more responsive to the potential of digital technology.
An example can be seen in the ‘work from home’ movement. Introducing WFH is part of digital transformation; implementing VPNs and multi-factor authentication would belong to digitalisation. In the end, both are part of the same process.
The goal of digital transformation is to maximise the use of the opportunities afforded by digital technology. Throughout history, organisations that stay proactive and adapt to technological developments have seen more success. Those that cling to outdated practices or hesitate to change inevitably fall behind. Despite this, many executives are still hesitant to push forward with digital transformation within their business.
Top barriers to digitalisation
Any IT manager investigating digitalisation is likely to see discouraging and confusing material online. Discussions and statistics about digital transformation failures are ubiquitous, and do nothing but make the concept more confusing and intimidating than it need be. Many media articles are misleading – they don’t explain whether digital transformation ‘fails’ to help the company, or whether the company fails to effectively digitalise. Effective digitalisation requires specialist expertise, so an executive juggling many business duties could easily feel out of depth.
It’s undeniable that digital transformation – just like any form of large-scale change within business – can cause organisational disruption, especially without thorough planning and careful management. Staff can present one of the biggest challenges. As many as two-thirds of businesses have struggled to digitalise because of staff reluctance to adopt new practices, which can have a knock-on effect on other operational procedures.
Discouraging statistics and the potential for disruption are further compounded by the imponderable nature of the costs of digitalisation. Getting even a ballpark figure for a budget before beginning the process is nearly impossible – the technology landscape is always shifting, and the needs of each individual business within it are unique. Without direct, expert consultation, executives can’t expect anything more specific or helpful than ‘it will be worth it’.
Issues caused by slow digitalisation
The costs of not digitalising, while still hard to pin down in fiscal terms, are easier to understand. Digitalisation has evolved far beyond simple adoption of e-commerce. The supply chain, distribution logistics, personnel management, marketing, sales, manufacturing and inventory management are all touched by digitalisation. No matter the field or specialisation, businesses that resist digital change will be left behind.
According to OGL’s research, over 80% of UK wholesale and distribution businesses believe that online selling, ERP (Enterprise Resource Planning) and automation of business processes are important to their company’s success. Digitalisation plays an intrinsic role in all these functions. If any aspect of the business falls behind the competition, or fails to respond to changes in technology, the business loses out – whether in terms of direct revenue, internal efficiency, market insight or anything where they’re not maximising technology’s potential.
The consequences of falling behind in the digital age have been evident for decades. In the ‘80s and ‘90s, long before the advent of cloud computing, widespread internet access, or even computers as an expected feature of any home, IBM went from one of the most profitable, stable businesses in the entire world to losing over $8 billion in a single year due to its failure to respond to the challenges and changes in the world of home computing. Arguably, this is both the earliest and most costly example of failed digitalisation.
When digitalisation fails
We can see more examples of digital transformation gone awry in all the years since then. Hewlett Packard’s efforts to introduce ERP to their order processing system in the early 2000s caused a disastrous shortfall in revenue of about $400 million; HP under-prepared for the disruption that would be caused by the project and fumbled the implementation of the new, more advanced systems.
Procter & Gamble set out in 2012 to become ‘the most digital company on the planet’, before the market was fully ready for such an extensive transformation. P&G severely over-invested in digitalisation at a time when there was too little potential return on investment to make the effort pay off. A more responsive approach with smaller digitalisation projects would have allowed critical areas of the business to stay ahead of the curve without crippling the day-to-day running of the organisation.
More recently, in 2018, candy manufacturer Haribo began to implement new ERP systems in several factories, but poor planning led to severe supply-chain issues, and the shortage of Haribo products in many retailers caused a 25% loss in sales for the year.
When digitalisation succeeds
As discouraging as these stories may seem, it’s vital not to lose sight of what successful digital transformations can bring. IKEA, taking an holistic approach to digitalisation, has tripled its rate of e-commerce over three years. Taking advantage of algorithm-based material sourcing and extensive analytics, the furniture giant has also changed warehouse floorplans and adapted physical distribution to maximise digital effectiveness.
Microsoft, as befits a world-leading tech giant, has adopted an ongoing digital transformation culture. Changing its revenue model from one of software sale to online license is an example of successful digital transformation.
Given the prominence of Microsoft as a service provider and key part of the business model of so many organisations, digitalisation for Microsoft is both internal and external. While Microsoft as an enterprise digitally transforms and adapts its internal processes, the products and services it offers change in kind. The Office/M365 suite gives a clear example, having evolved from a collection of separate productivity apps to a suite of interconnected and cloud-integrated solutions. For a richer understanding of how a service provider’s digital transformation can support and enable other enterprise’s digital transformations, See OGL’s analysis of Microsoft 365 for business.
Hasbro’s digital transformation also shows that digitalisation can be product-centric as well as business-centric. With Hasbro having historically specialised in physical toys and tabletop games, one could expect its digital transformation would be limited to distribution, the supply chain and e-commerce. Hasbro has instead found innovative ways to enter the digital marketplace with video-game versions of its tabletop games, online content creation and multimedia experiences.
Embracing the digital era with OGL
These examples of success and failure all give us a valuable opportunity to gain insight. One important thing to note about Haribo, HP and P&G is that all those companies have bounced back since their digitalisation difficulties. Far from abandoning digital transformation, they committed to improving their digital transformation processes and continuing to make positive internal changes. The ‘digital transformation failures’ that can look so discouraging are not examples of how digital transformation fails to improve the business, but examples of businesses failing their digital transformations.
The successful digital transformations show us that the best implementations are the ones which account for the needs and potential of the whole organisation. Innovative thought and a keen understanding of the business’ core competencies and potential for growth are the keys to success. Nonetheless, making a definite decision with full understanding of the means, processes and aims of digitalisation is an arduous task for any cyber executive to undertake alone.
Dedicated, expert advice from a specialist organisation that works one-on-one with its clients can help create a bespoke, future-proofed plan that gives a clear and adaptive way forward for digital transformation. OGL Computer Services offers a range of solutions that allow enterprises in any field to start unlocking the potential of digitalisation, with ongoing support to help the client respond swiftly and proactively to developments in the tech landscape.
The Covid-19 pandemic has introduced an urgent need to digitalise thoroughly, digitalise effectively and digitalise fast. Digital transformations have accelerated by seven years throughout the world, and as businesses and economies begin to recover, it has never been more important to make sure your business isn’t left behind. Check OGL’s digital transformation guides for more information. . Whether a comprehensive, managed transformation plan or dedicated software solutions are needed for digital transformation, the years of research, development, and experience at OGL can help any enterprise digitalise in the right way at the right time.