Digitization is an absolute MUST in order to stay up to date in business. There are no two opinions on this. Digitization makes it possible to use digital means to create added value for the company. This can be done, for example, through the development of new products, the creation of new sales channels, the development of new customer segments, the improvement of the customer experience or internal cooperation. The value can be generated in the short, medium or long term. In a survey by Ernst and Young in 2019, 66% of German companies rated it as an opportunity, 36% as insignificant. However, there is a lot of confusion about what specific activities a company should undertake as part of digitalization. A multitude of buzzwords combined with corporate marketing hype, social media noise and limited internal capabilities lead to significant disorientation within a company. This sometimes leads to the initiation of digitalization activities without a clear direction. This approach represents a huge waste of financial resources as well as the time of highly qualified employees within the company or outside. According to a report from handelsblatt.com, four out of five digitalization projects fail. This post looks at some simple rules that companies should follow when it comes to choosing and implementing the right initiatives for their business.
Rule 1: Keep it simple
As simple as it may sound, this is one of the most neglected rules in many companies I have encountered. Any initiative under the name of digitalization should impact either revenue or costs. END. Unless the company is a nonprofit organization, there is no other purpose. Pay attention to the word used. I didn’t use the word “increase” but “effect”. Although digitalization initiatives often lead to an increase in sales and earnings performance, they often help to keep sales or profits stable or to remain in competitive parity with other players in the market. Let’s stay away from creating additional bells and whistles that only have aesthetic value.
Rule 2: Focus on your individual situation.
The digitalization initiatives for your company depend on four factors: the size of your company, the industry in which it operates, the function you represent and, above all, the individual challenges of your company. Consider these factors very carefully when defining your digitalization initiatives. For example, while the Internet of Things is one of the promising digitalization trends, its application in the banking sector would be completely different than in the automotive industry. Likewise, big data will be more interesting for larger companies than for small companies. (more on this topic in another post)
Rule 3: Define goals and communicate them clearly
As mentioned above, many companies and departments launch initiatives without thinking about what they want to achieve. In the effort to do something cool, we lose track of the “WHY.” This can lead to very complex discussions and a long need for coordination. To avoid this situation, think carefully about what you want to do for each initiative: Improve your revenue (top line) – Improve your customer base – Expand and enrich the product offering – Increase and improve sales channels Improve your profits (top line) – Reduction of operational workload – Reduction of manual labor – Reduction of large investments
Rule 4: Start small, think big.
Implement an iterative MVP (Minimum Viable Product) based approach and prioritize topics with short-term benefits to start with. Focus on just a handful of “low-handed fruits” with a high probability of success and turn them into success stories. The outcome of this research will actually determine how much interest there is within the company to further invest in digitalization initiatives. The MVPs should be able to be implemented within a few weeks or months, if necessary to arouse interest within the company.
Rule 5: Promote a “fast-fail” culture and resilient behavior.
As I mentioned in rule 2, your situation is unique. Your teams explore unfamiliar areas. To support your team here, establish a fast failure culture. Plan for failure. Communicate that failure is acceptable and an integral part of success. A previous failure should be appreciated even more. This can be done in a simple way by forming an autonomous team for a short time, which consists of different departments. This team will have full responsibility for ensuring that an initiative is completed. Take a hint from the 2 pizza teams at Amazon.com .The team will have full authority to make decisions about this initiative. There shouldn’t be a specific need to coordinate with your line manager unless you want to request more resources or critically change the direction of the initiative.
Rule 6: Don’t reinvent the wheel.
The cloud industry is innovating at a very high speed. There are out-of-the-box services, either SaaS, PaaS, and IaaS, that organizations can use directly with minimal lead time. For example, Amazon has 1000+ engineers just working on Alexa, or Microsoft has 200+ services that can be accessed through their O365 and Azure cloud catalog, simply by swiping a credit card. Use these innovations to accelerate your digitization journey. Focus on customizing and integrating these services into your company. However, it is important that the technology or the vendor and product discussion do not take precedence over the use case discussions. It would do the same thing as attaching the cart in front of the horse.
Rule 7: Use strategic outsourcing.
Almost 95% of US SMEs outsource IT services to India. As a result of such outsourcing activities, the resources in India have extensive expertise in digitization. There are more than 3 million experts in the IT field. Exclusively in digitization, India has more than 500K experts. In addition, NASSCOM, India’s IT association, plans to train more than 2 million people in digitization by 2025. Open your mind to use these skills. This is particularly necessary for the following reasons: Firstly, there is a lack of digitization competence in Germany. Second, smaller companies in particular face major challenges in attracting talent for their company. Third and last, the temporary labor markets (contractors or external consultants) are very expensive.
Rule 8: Keep reporting and alignments lean.
It is well known that digitization teams spend a significant amount of time reporting on progress or reconciling results across departments. It also shows that several general management consultants are actually working on digitization projects. This actually leads to two big problems: First, digitization becomes a Powerpoint exercise. Very few general management consultants actually have the competence to communicate with top management and at the same time are technical enough to carry out a certain phase of digitization initiatives. Second, they come at an expensive price, which leads to a rapid depletion of financial resources. When it comes to digitization, please leave the work to the speaker.
Rule 9: Dealing with authenticity:
Let’s not turn our digitization exercise into a PR exercise. Nevertheless, we should speak with clarity to the people within the company about the goal and the benefits and openly discuss how the employees can contribute to it. If job losses or restructuring are to be expected as a result of digitization, then people should be drawn into the trust. Communicate with honesty. There is always more than enough that an intelligently committed employee can contribute to digitization. Some of the staff may need further training. Offer such opportunities to further develop the employee’s skills. According to a study by Accenture, most of the existing employees show great interest in digitization and are highly motivated to get involved. The use of these employees is the key to the success of digitization.
Rule 10: balance between security and agility:
As more and more cloud services are used, a company’s network edge becomes more and more blurred. This requires a completely different way of securing your data and systems than in the traditional data center environment. This in combination with new regulations like GDPR makes the impact of potential violations significantly higher. The information security community within a company must forego legal and formal language and establish really simple, understandable and actionable rules for managing the systems and data inside or outside their premises without losing agility. We should avoid a situation that British Airways found itself in. When it comes to digitization, it’s about doing first and asking for forgiveness, except in the areas of information security and privacy.
These simple rules will help you focus on the important aspects when it comes to initiating or accelerating your digital journey.
For more personal support, you can contact me at any time at antoshin.lazar@expertxtend.de We are always there for you. . Let us know what you think. We always look forward to learning from your experiences and observations.
