why do ERP software implementations fail. Discuss at least the top five root causes of ERP failures. (CMPT 641: Digital Transformation (HBD-WINTER24-05) )

Digital Transformation

Digital Transformation Is Not About Technology by Behnam Tabrizi, Ed Lam, Kirk Girard, and Vernon Irvin

March 13, 2019

Summary.   

Colin Anderson Productions pty ltd/Getty Images

Companies are pouring millions into “digital transformation” initiatives

— but a high percentage of those fail to pay off. That’s because companies put the

cart before the horse, focusing on a specific technology (“we need a machine-

learning strategy!”) rather than...

A recent survey of directors, CEOs, and senior executives found

that digital transformation (DT) risk is their #1 concern in 2019.

Yet 70% of all DT initiatives do not reach their goals. Of the $1.3

more

trillion that was spent on DT last year, it was estimated that $900

billion went to waste. Why do some DT efforts succeed and others

fail?

Fundamentally, it’s because most digital technologies provide

possibilities for efficiency gains and customer intimacy. But if

people lack the right mindset to change and the current

organizational practices are flawed, DT will simply magnify those

flaws. Five key lessons have helped us lead our organizations

through digital transformations that succeeded.

Lesson 1: Figure out your business strategy before you invest

in anything. Leaders who aim to enhance organizational

performance through the use of digital technologies often have a

specific tool in mind. “Our organization needs a machine learning

strategy,” perhaps. But digital transformation should be guided by

the broader business strategy.

At Li & Fung (where one of us works) leaders developed a three-

year strategy for serving a marketplace in which mobile apps were

just as important as bricks-and-mortar stores. They chose to focus

their attention in three areas: speed, innovation, and

digitalization. Specifically, Li & Fung sought to reduce production

lead times, increase speed-to-market, and improve the use of data

in its global supply chain. After concrete goals were established,

the company decided on which digital tools it would adopt. Just to

take speed-to-market as an example, Li & Fung has embraced

virtual design technology and it has helped them to reduce time

from design to sample by 50%. Li & Fung also helped suppliers to

install real-time data tracking management systems to increase

production efficiency and built Total Sourcing, a digital platform

that integrates information from customers and vendors. The

finance department took a similar approach and ultimately

reduced month-end closing time by more than 30% and increased

working capital efficiency by $200 million.

There is no single technology that will deliver “speed” or

“innovation” as such. The best combination of tools for a given

organization will vary from one vision to another.

Lesson 2: Leverage insiders. Organizations that seek

transformations (digital and otherwise) frequently bring in an

army of outside consultants who tend to apply one-size-fits-all

solutions in the name of “best practices.” Our approach to

transforming our respective organizations is to rely instead on

insiders — staff who have intimate knowledge about what works

and what doesn’t in their daily operations.

Santa Clara County in California (where one of us works) provides

an example. The Department of Planning and Development was

re-engineering work flows with the goal of improved efficiency

and customer experience. Initially, external consultants made

recommendations for the permit-approval process based on work

they themselves had done for other jurisdictions, which tended to

take a decentralized approach. However, customer-facing staff

members knew, based on interactions with residents, that a more

unified process would be better received. Therefore, Kirk Girard

and his team heavily adapted the recommended tools, processes,

diagrams, and key elements of the core software as they

redesigned the work flow. As a result, permit processing time was

cut by 33%. Often new technologies can fail to improve

organizational productivity not because of fundamental flaws in

the technology but because intimate insider knowledge has been

overlooked.

Lesson 3: Design customer experience from the outside in. If

the goal of DT is to improve customer satisfaction and intimacy,

then any effort must be preceded by a diagnostic phase with in-

depth input from customers. The staff of Santa Clara County’s

Department of Planning and Development conducted more than

ninety individual interviews with customers in which they asked

each customer to describe the department’s strengths and

weaknesses. In addition, the department held focus groups

during which they asked various stakeholders – including agents,

developers, builders, agriculturalists and crucial local institutions

like Stanford University – to identify their needs, establish their

priorities, and grade the department’s performance. The

department then built the input into their transformation. To

respond to customer requests for greater transparency about the

permit approval process, the department broke down the process

into phases and altered the customer portal; customers can now

track the progress of their applications as they move from one

phase to the next. To shorten processing time, the department

configured staff software so that it would automatically identify

stalled applications. To enable personalized help, the department

gave Permit Center staff dashboard control of the permit

workflow. Leaders often expect that the implementation of one

single tool or app will enhance customer satisfaction on its own.

However, the department’s experience shows that the best way

to maximize customer satisfaction is often to make smaller-scale

changes to different tools at different points of the service cycle.

The only way to know where to alter and how to alter is through

obtaining extensive and in-depth input from the customers.

Lesson 4: Recognize employees’ fear of being replaced. When

employees perceive that digital transformation could threaten

their jobs, they may consciously or unconsciously resist the

changes. If the digital transformation then turns out to be

ineffective, management will eventually abandon the effort and

their jobs will be saved (or so the thinking goes). It is critical for

leaders to recognize those fears and to emphasize that the digital

transformation process is an opportunity for employees to

upgrade their expertise to suit the marketplace of the future.

One of us (Behnam) has coached over twenty thousand employees

from multiple organizations through the digital transformation

process (he has also consulted with the organizations mentioned

in this article). He often encounters participants who are skeptical

of the entire operation from the get-go. In response, he developed

an “inside-out” process. All participants are asked to examine

what their unique contributions to the organizations are, and

then to connect those strengths to components of the digital

transformation process — which they will then take charge of, if

at all possible. This gives employees control over how the digital

transformation will unfold, and frames new technologies as

means for employees to become even better at what they were

already great at doing. At CenturyLink, where one of us works, the

sales team had been considering adopting artificial intelligence to

increase their productivity. Yet, how AI should be deployed

remained an open question. Ultimately, the team customized an

AI tool to optimize each salesperson’s effort by suggesting which

customers to call, when to call them and what to say during the

call in any given week. The tool also contained a gamification

component, which made the selling process more interesting.

Vernon Irvin, who watched this process from the inside, observed

that it made selling more fun, which translated into an increase in

customer satisfaction – and a 10% increase in sales.

Lesson 5: Bring Silicon Valley start-up culture inside. Silicon

Valley start-ups are known for their agile decision making, rapid

prototyping and flat structures. The process of digital

transformation is inherently uncertain: changes need to be made

provisionally and then adjusted; decisions need to be made

quickly; and groups from all over the organization need to get

involved. As a result, traditional hierarchies get in the way. It’s

best to adopt a flat organizational structure that’s kept somewhat

separate from the rest of the organization.

This need for agility and prototyping is even more pronounced

than it might be in other change-management initiatives because

so many digital technologies can be customized. Leaders have to

decide on what apps from which vendors to use, which area of

business best benefit from switching to that new technology,

whether the transition should be rolled out in stages, and so on.

Often, picking the best solution requires extensive

experimentation on interdependent parts. If each decision has to

go through multiple layers of management to move forward,

mistakes cannot be detected and corrected quickly. Furthermore,

for certain digital technologies, the payoff only occurs after a

substantial portion of the business has switched to the new

system. For example, a cloud computing system designed to

aggregate global customer demand can only generate useful

analytics when stores in different countries all collect the same

type of data regularly. This requires ironing out differences in

existing organizational processes across different regions. If the

details of how a new technology will be used are chiefly developed

by employees from one country, they might not be aware of the

potential incompatibilities.

Working with Li & Fung, Behnam helped to create six cross-

functional teams, each staffed by employees from different offices

in Hong Kong, mainland China, Britain, Germany and the U.S.

These teams led different stages of the digital transformation.

Since the structure of these teams was flat, they were able to

present ideas to and obtain input from Ed Lam (CFO) and heads

of business units quickly. This allowed the teams to experiment

with new ideas about how innovative data structure, analytics,

and robotic processing could best be integrated. Furthermore,

because new proposals were vetted by employees from different

country offices and different functions, these teams were able to

foresee problems with implementation and were able to address

them before the entire organization fully adopted the new

technologies.

Digital transformation worked for these organizations because

their leaders went back to the fundamentals: they focused on

changing the mindset of its members as well as the organizational

culture and processes before they decide what digital tools to use

and how to use them. What the members envision to be the future

of the organization drove the technology, not the other way

around.

BT

Behnam Tabrizi has been teaching Leading Organizational Transformation at Stanford University’s Department of Management Science and Engineering and executive programs for more than 20 years. An expert in organizational and leadership transformation, he is the managing director of Rapid Transformation, LLC. Behnam has written six books, including Rapid Transformation (HBR Press, 2007) for companies and The Inside-Out Effect (Evolve Publishing, 2013) for leaders. Follow him on Twitter at @TabriziBehnam.

Ed Lam is CFO of Li & Fung Ltd.

Kirk Girard is former Director of Planning and Development in Santa Clara County.

Vernon Irvin is president of Government, Education, and Mid & Small Business Division at CenturyLink.

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