- September 19, 2017
- Posted by: Javier González Montané
- Category: Cost reduction, Turnaround
The rate of technology innovation is part of the digital disruption challenge facing companies, department, teams and employees. That disruption is threaten many traditional businesses like banking or my last turnaround assignment that is a traditional software reseller threaten by cloud services. In my last turnaround, I decided to use the digital transformation as a business turnaround tool at the same time that the whole organization would understand better the cloud advantages and how to adapt the business model for the new cloud services.
First at all, let’s define what is a company-wide digital transformation.
What is a company-wide digital transformation?
We have to say that there are many definitions, for instance large traditional software firms that has been focused on offering many features and customization options to customers for long time would probably define digital transformation as access to new important business “features” like new customer engagement features, etc. However, I think that a transformation is something deeper than just adding a new business functionality to our systems.
I would say that a company-wide digital transformation should create a disruptive change in the organization that take full advantage of the new cloud systems to make what use to be complicated simple, and the processes and systems that used to be expensive affordable. Thus, a digital transformation should create a competitive advantage or at least neutralize the digital competitive advantage of our largest competitors.
That disruptive change would be produced, if we were able to create a better, faster and more cost-competitive organization. If our digital transformation does not achieve any of those three objectives, we shouldn’t talk about digital transformation and we should talk about just a digital upgrade.
What is involving a company-wide digital transformation?
A company-wide digital transformation should rethink the firm IT strategy and must affect several key areas of the firm by changing processes that enhance the customer experience and boost employees productivity:
- Feature-rich software versus software based on simplicity: For instance, 80% of Microsoft Office users only use 20% of Office’s features. So, why should we pay more for features that many users won’t use and will make their work more complex? Another common example for SMB (Small and Medium Business) is: should we buy a feature-rich and complex ERP as SAP, if our SMB firm doesn’t have the resources to invest heavily in the long-term on consulting, training, licenses, etc? Using a lean approach to process and software could be a source of competitive advantage rather than a disadvantage. Investing in pre-internet and pre-cloud software without a large budget used to bring a poor ROI investment. Even if you are a large corporation with a huge budget, you should rethink your feature-rich approach versus lean. Moreover, those software were focused to “lock the system,” I mean to push customers to buy new license from the same software firm rather than ready to connect with new applications.
- Software best of the breed versus integrated ERPs: In the pre-internet and pre-cloud era, connecting applications used to be complex and expensive. Nowadays many software firms are offering pre-built connections easy and cheap to implement. One of the major advantage of integrated ERPs used to be “the unique data” that users have to enter just once and it is shared for all the ERP modules. However, in order to take advantage of “the unique data”, anytime that you make an ERP customization this is likely affecting many others areas of the company which means that the customization process is slow and costly. It looks that the traditional ERPs are the new legacy system, and nowadays organizations need agility, flexibility and cost competitiveness. The new cloud ERPs are offering “strength functionalities” with less complexity, faster and simpler implementation, and much lower cost.
- IT “make versus outsource” SaaS (Software As A Service): In the past organizations has to build big IT department to buy hardware and software, setup, maintain and upgrade systems, and so on. Right now, we are reducing the complexity of our IT department moving to the cloud as many as possible of our Information Systems. At the same time that we created a lean company, we improve our IT cost structure because of large data center transfer to us the benefits of economies of scale.
- Processes change: A properly implementation of any new software should bring processes review in order to improve processes and reduce business complexity.
- People change management: People need to understand and accept the benefits of the new processes and systems.
- Enhance the customer experience: At the center of any business transformation and turnaround should be the customer. We shouldn’t forget that most customers expect agile services with no errors and at competitive price. So, the design of our information systems, processes and team should be aligned with the customer experience expectation.
What is the connection between a firm-wide digital transformation and turnaround?
A turnaround is a deep company transformation in which we need to improve drastically and quickly the operational and financial performance of the firm to “guarantee” the survival of the company. Many times, improving the operational performance will require important changes in the company processes and in the mindset of the people to be able to improve productivity and the cost structure of the firm. So a digital transformation could bring those benefits to a turnaround.
Nevertheless, someone could say “but a company-wide digital transformation can be an expensive and a long-term project no suitable for a turnaround”. Well, today innovation is happening at a faster rate than ever before. That innovation is not just happening in the technology field, it is happening as well in many business fields. So, nowadays you can find “new generation” software firms that are able to deliver excellent state of the art software solutions easy a fast to be implemented and with very affordable prices. Therefore, find those solutions is part of the successful digital transformation planning process.
Our experience using digital transformation to turnaround a firm
As I have mentioned before my definition of digital transformation is a transformation that must produce an important organization impact allowing the company to be better, faster and more cost competitive. So, in my last turnaround assignment I decided to implement the following digital and turnaround initiatives:
- ERP Financial software in cloud: The new financial software supported us to redesign the so critical turnaround process of controlling the cash flow. The invoicing process that wasn’t been reviewed in the last ten years was optimized, improving the productivity of that area. Additionally, we started using a fintech firm to make our receiving process faster and cheaper. Finally, our software was connected with our outsourced accounting services, getting a reduced service price based on our fast, easy and reliable way to share and transfer information with the accounting firm.
- The traditional telephone was migrated to cloud PBX system: Our communication costs dropped more than 50% and we enhance the communication flexibility of our team.
- Productivity/Office suite in the cloud: Local files servers, e-mails servers and backup systems were no longer to need it. Maintenance and support tasks provide for those servers by the IT area was no longer to need it either. The most important achievement was that people was able to collaborate better and with higher productivity.
- The 10-years-old CRM was changed for a new state of the art cloud based CRM: We took advantage of the CRM migration to clean and update the CRM database. Moreover, before migrating the database, we review the sales definitions (customer types, active customers, pipeline stages, deal types, etc.) and reports (dormant accounts campaign, cross-selling campaign, sales campaigns by products, customers and deals profitability, etc.) Right now the sales team has better and faster information. Last but no less important, the new CRM is focused on improving sales reps productivity rather than on sales management.
- Formalize the use of applications that improve productivity and reduce the traditional costs in areas as sales (Linkedin), advertising (Google Adwords), communication (Skype), project management (Trello), travels (Uber, Waze, Kayak, booking), and so on.
We would like to clarify that we are not suggesting that a digital transformation must be part of the turnaround toolbox but it could work very well in some situations as it was in our case.