Guidelines for a successful digital transformation
14 March 2023Article by Eduardo Oliveira, researcher in industrial engineering and management at INEGI.
Digital technologies are ubiquitous in our lives and businesses. But have you ever wondered if you're using them in a way that really creates value?
Our experience in consulting projects and support for digital transformation allows us to say that the digital transformation processes are complex and carry many variables. These difficulties are reflected in the national reality, where several strategic initiatives (e.g., Recovery and Resilience Plan - PRR, National Initiative on Digital Skills - INCoDe.2030), seek to catch up in terms of digital skills at national level when compared to the European Union1. It turns out, then, not to be an easy process. What to do to be successful?
In order to better understand this process, it is important to clarify the difference between three key concepts, namely digitization, digitization and digital transformation2.
Digitization refers to the process of switching from analogue media (e.g., paper) to digital media (e.g., storage in an information system or cloud). This allows easy access to information and dematerialisation of processes, but does not significantly change the way the business works.
Digitalization is the use of digital technologies in order to change the business model, creating new opportunities to produce value and revenue. An example of this is the easy sharing of information between the various business areas, which enables cross-data analysis and a more complete perspective on how the business operates.
Finally, digital transformation corresponds to considering digital technologies a central part of the business model, making it more robust and resilient. It implies radically rethinking processes, such as personalizing the customer experience through the use of apps, and/or making the registration and delivery of orders a unified procedure on a single platform.
It is essential to understand where your business is in the transition, in order to understand what value technologies are creating in your business. Digitization and digitalization entail less risk and less radical change, but they also bring less value and revenue to your business, particularly in the long term.
Organizational
Environmental
Organizational
Environmental
In general, the success of a company's digital transformation depends on the degree of exposure that the organization and its elements had to the implementation of digital technologies, and the way in which this experience and the expected results are transmitted to the entire organization, in particular those who have less exposure to digital technologies and those who may be most affected by digital transformation. It is essential to convey an idea of the future, the concrete steps to get there, and the potential gains.
Higher profit sometimes implies higher risk
But if succeeding in digital transformation and transforming your business involves radical changes and risks, what are the main barriers and success factors?
Barriers and opportunities for digital transformation can be divided into technological, organizational and environmental. The main barriers3 to consider are the following:
Technological
- Limited knowledge of existing IT infrastructure by operational managers
- Lack of compatibility between features and
- Used computer systems
- Technology maintenance costs
Organizational
- Lack of foresight in technology planning
- Lack of transparency between the management team and the operational team
- Skills and mindset of operational managers
- Little exposure to digital technologies
- Dated layouts and processes
Environmental
- Competition
- Internal tensions (silo mentality)
- Pressure from customers and suppliers
As far as opportunities/incentives are concerned, they are the following:
Technological
- Already implemented digital systems (e.g., Warehouse Management Systems - WMS, Enterprise Resource Planning - ERP) allow some familiarity with digital technologies, and facilitate the implementation of new technologies.
Organizational
- Experience with new technologies at management level
- Focus on the gains that digital transformation can bring (e.g., increased productivity, making work easier)
Environmental
- Digital transformation allows you to overcome competition
- Digital transformation projects can stimulate the creation of cooperation between companies and other entities.
In general, the success of a company's digital transformation depends on the degree of exposure that the organization and its elements had to the implementation of digital technologies, and the way in which this experience and the expected results are transmitted to the entire organization, in particular those who have less exposure to digital technologies and those who may be most affected by digital transformation. It is essential to convey an idea of the future, the concrete steps to get there, and the potential gains.
Given the impact of past experiences with technology, a successful digital transformation is important not only for the value it creates, but also for the positive impact it can bring to an organization's culture, providing a foundation of support and example of success that can be leveraged into future initiatives, making your organization more resilient and innovative. Just as an unsuccessful process can make it more difficult to implement future innovations, and stagnate the organization.
Taking into account the barriers and incentives listed above, it is essential to build a team with skills in terms of digital technologies and change management, who are capable of transmitting their knowledge and experience in a clear, structured and objective way. Even at the operational level, more and more hiring will be based on know-why rather than know-how2, since the knowledge update will be permanent, and it becomes more important that the operational know why than what is happening and the changes that occur, and part of the competences will be delegated to technology.
Related Pages
Consulting | Industrial Engineering and Management
Related Pages
Consulting | Industrial Engineering and Management
References
1 Ministério do Planeamento de Portugal. (2021). PRR – Recuperar Portugal, Construindo o Futuro. Lisboa: Ministério do Planeamento.
2 Brusati, I. (2021). Digital Transformation and the Crucial Elements for Success. Obtido de Prosci.com: https://www.prosci.com/blog/digital-transformation-and-the-critical-elements-for-success
3 Mahroof, K. (2019). A human-centric perspective exploring the readiness towards smart warehousing: The case of a large retail distribution warehouse. International Journal of Information Management, 176-190.
4 Klumpp, M. (2018). Automation and artificial intelligence in business logistics systems: human reactions and collaboration requirements. International Journal of Logistics Research and Applications, 224-242.