From the likes of it, the world has undergone some structural changes in the last few quarters. Ecommerce adoption has increased, remote working has become the norm, and companies are increasingly spending capital on ensuring technology keeps them connected.
Businesses that tend to invest in technology asymmetrically to the needs of their operations, industry, and business model, can witness capital losses and permanent damage to brand equity. So, is there a perfect way to adopt technology? There is no ‘cookie-cutter’ approach. But applying the framework, discussed later here, can turn the probability of value-generating technology investments for your business.
Biggest Challenges Businesses Face in 2021
While analyzing your business, it might seem a little challenging to separate the core problems that technology adoption can solve, from their effects. Here is a list of common challenges businesses are projected to face in 2021:
- Increased Dependence on Localized Supply Chains
With COVID-19 restrictions in place, businesses had to turn to their local neighbors as countries went into complete shutdowns. Businesses got cornered to reimagine their supply chains. Amazon’s ‘lights out initiative’ is creating a zero-human intervention that can maximize local efficiency. IDC’s research shows that 65% of warehouses across the globe will employ bots and contextual data analytics systems by 2023.
- Creating Financial Resilience
In 2008, McKinsey researched companies that did not shut down post the financial crisis. Top performers in this cohort produced 10% growth in 2009 when their peers shrunk by 15%. McKinsey found that the top performers had strong balance sheets and the ability to manage operating costs.
SMBs can move in this direction by using digital tools. Accounting solutions like Xero and Freshbooks provide a good start to ledger management. Apps like Buddy Punch and Deputy can be integrated right into your payroll management systems. Personal finance apps like Mint can also help in monitoring cash and sundry expenses for the business.
- Engaging Safer and Yet Engaging Customer Interfaces
All major industries, from retail to healthcare, saw a prolific growth in contact-less delivery systems in 2020. Customers are now expecting a safe and omnichannel experience. Areas like self-service using knowledge-base, blogs, white-papers, and case studies as well as real-time conversational chatbot assistance on Facebook Messenger or iMessage have become the norm.
- Deeper Compliance Needs
As governments provided grants, tax holidays, and updated workplace policies for SMBs, the degree of compliance also grew deeper resulting in increased overheads.
Deloitte has created a directive template for businesses to adopt new compliance standards. To make the adoption process more manageable, businesses can integrate cognitive computing, RPA, blockchain, ML, Big Data, and initiatives like comprehensive assurance, automated administration, and conformance-performance measurement.
- Dealing with Industry Dynamics
Competition analysis can be an educational experience for businesses. Tools like the Pew Research Center, Growthbar, Living Facts, Consensus Data, Qualtrics, SocialMention, Google Trends, and Facebook Audience Insights can provide insights on systemic shifts in the competitive landscape. SimilarWeb, Spyfu, Ahrefs, SEMRush, BuzzSumo, iSpionage, and Alexa are great tools for a more targeted approach.
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Going Beyond the Façade: Technology is Not the Panacea
Simply accumulating the right set of tools does not pave the path for successful implementation of digital transformation initiatives, as per the data reported by The Enterprisers Project, close to 70% of digital transformation projects fail.
Here are some of the popular ones:
- Missing Executive Sponsorship
Ford Motor Company created a separate entity called the Ford Smart Mobility. It was supposed to be the frontier of digital initiatives and telematics. But, it was created as a separate entity away from the corporate HQ. Eventually, the distance resulted in a larger bill for the company, as it faced a plunging stock price.
- Lack of a Tangible, Agile, and Iterative Plan
In 2012, P&G announced its intentions to become the world’s ‘most digital company’. Despite its leadership, the project added CAPEX and did not scale efficiently. Market tailwinds attributed to their challenges.
Eventually, Bob McDonald, the then CEO of P&G, was asked to leave by the board of directors, even though the stock price did not go into an immediate tailspin.
- Going Digital-First from Day One
GE created GE Fanuc in 1980 to make it the focal point of its enterprise-wide digital efforts. By 2009, despite several acquisitions under this entity, GE had lost over 80% of its market cap. In 2011, the company started working on GE Digital, an extension of its Centre of Excellence. Till the formal announcement of GE Digital in September of 2011, GE had lost 25% of its value in that year itself.
The key reason for this fiasco was doing too much too soon. GE wanted a federated digital platform, sensors on its products, and deep analytics capabilities early in the project lifecycle. It bloated the expense accounts and resulted in a negative ROI for decades.
Framework for Value-Creation: Best Practices for Adopting Technology
How can a small business with less than a fraction of access to capital like the giants mentioned above, ensure that its investments in adopting technology do not backfire? This framework can help in establishing the ground-rules, directive principles, and hygiene practices, as you adopt technology into your business:
- Plan for the Needed Human Capital.
BCG conducted a comprehensive study on the probability of success for digital transformation initiatives across the threshold of 30% and reached 80%. One of the key parameters for this success was the enterprise’s capability to source, allocate, and augment human capital.
The firms that succeeded were able to locate the right individuals for leading the digital transformation process. These would be people who had a deep understanding of digital tools and organizational dynamics. They had the right mix of people and operational skills and took an open-minded approach to take feedback and focus on the KPIs.
Along with sourcing the right talent, these firms were also able to ensure that non-functional requirement was taken care of in the most cost-effective way possible, often outsourcing such processes if necessary.
Finally, the management teams at such firms ensured that the digital transformation team was empowered with the right set of resources, tools, and support of the board, to execute its plans.
- Structure an Agile Plan with Active Monitoring.
This study observed that only 40% of the firms with a failed digital transformation initiative in their hands paid attention to planning and monitoring. On the other hand, 90% of businesses that succeeded with their initiatives were doing this actively.
The process may seem obvious, but it can make the results more value-generating. Each digital adoption or transformation plan has to begin with clearly defined goals and centers of responsibility. The management team has to define the operational and financial KPIs that are monitored transparently and regularly.
Along with these, the leader of the initiative has to ensure pristine reporting of data. It will help the management team understand both the outside-in and inside-out perspective regarding the progress made with the plan.
- Take a Business-First Approach to Data Infrastructure
It may seem easy to spend the excess cash flow on a ‘digital initiative’ that provides validation to the management team’s visionary image. However, if the initiative is taken for the sole purpose of window-dressing, there are increased chances of it failing the test of time and resulting in profound losses.
Instead, the firm’s business model and operational needs should perfectly fit into the digital adoption plan. The simpler way of defining this parameter would be by questioning – ‘If it does not solve a problem, is it required?’, every time an addition is made to the digital transformation plan.
Besides this, paying attention to the operations shows whether the firm is ready for a technological change. For instance, many companies started hiring data scientists when they saw a surge in data availability and storage facilities. However, they did not have the right systems architecture, reporting mechanisms, defined responsibilities, or access to ‘clean & usable’ data, before they set out on their data science initiatives. The same holds true for the digital transformation plans.
Evaluate the project’s requirements throughout its lifecycle and see whether the resources are available and whether acquiring the resources will yield net positive results.
As visible, the process of adopting digital adoption or transformation begins with successful preparation within the firm. Management sponsorship, a well-defined & iterative plan, human capital, business-first approach, and data infrastructure can ensure each digital initiative generates value for the enterprise.
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