The 21st century is bringing businesses all kinds of new challenges and opportunities. Twenty years into our new millennium, it’s become increasingly clear that the businesses best equipped to thrive in the new market are the ones that have made the best investments in digital transformation. Now, with COVID-19 accelerating the pace of change, businesses (and enterprise organizations in particular) are entering a critical period for building their digital futures.
There is no shortage of options for digital transformation of business functions, but not all of those opportunities will have equal ROI for your business. A collection of unrelated technologies under the same roof doesn’t make a transformative digital enterprise solution any more than a collection of random parts in a plastic enclosure makes a computer. Thus, it’s critical to address digital transformation with a smart approach that prioritizes the most impactful investments.
So, how should a modern business prioritize its investments in digital technologies? Here are four key strategies that you should know.
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- Understand your market before you make any moves.
Successful digital transformation will always be backed by robust data and research. Before you even start planning your pilot projects, make sure that there are data to support the direction in which you choose to move.
Market segmentation is a good place to start when considering the nature of your investments in digital transformation. Which segments of your customer base will see the most benefit from digital transformation? Which segments may find it cumbersome or difficult? How does a specific digital transformation strategy play to your strengths and shore up your weaknesses?
At the same time, you want to use analysis as a basis for action, not as an excuse to avoid it. If you’ve studied the issue and are confident in your data, a small pilot project may be a better investment than another round of consultant studies.
- Carefully assess the value of a digital transformation project.
Analyzing a project’s value should be central to your prioritization strategy. This analysis should be grounded in what a new technology brings to the table that makes it worth the expenditure of resources.
One of the easiest ways to do a quick analysis is to use a value matrix. Use a standard x-y plot, with the vertical axis representing technical complexity and the horizontal representing customer value. Then, assign each project a relative value on both axes.
- Upper Left: High complexity, low value. Usually not a good investment—think of another way to tackle this task.
- Upper Right: High complexity, high value. A substantial but worthy investment that will require a lot of work but yield big results.
- Lower Left: Low complexity, low value. Can offer some benefits, but ultimately shouldn’t be a high priority.
- Lower Right: Low complexity, high value. Offers value to your customers without requiring intensive long-term effort on your end. These are “quick wins” that will wow customers and should be high priority.
Most organizations benefit from a strategy that pursues a mixture of projects in the upper right and lower right corners, with some from the lower left. If few of your project proposals are landing in these categories, or if your projects tend to be more complex and/or less valuable in practice than they were on paper, it’s time to reevaluate your innovation strategies and ask why.
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- Invest in innovation resources that promote organizational buy-in.
Organizational buy-in is absolutely critical for the successful implementation of digital transformation. At an enterprise scale, this can be challenging because of the different cultures within different departments, as well as the cognitive obstacles that can make adjusting to change difficult for anyone.
To this end, it’s important to prioritize an investment in IT resources that are easily available for anyone who needs them. Employees should never be shamed or made to feel inferior for asking for help, particularly older employees who may be used to older systems. This is an area in which it’s critical to select good middle- and lower-level management, as they have a great deal of control over how culture is expressed in everyday office life.
Moreover, remember that digital transformation will always have ripple effects across your organization and supply chain, even if it’s only executed within certain departments. Thus, it’s crucial to invest in strategies that facilitate clear communication throughout the organization so that senior leadership can effectively evaluate where digital transformation is happening smoothly and where it isn’t.
- Recognize that digital transformation is a never-ending road.
Digital transformation is a constant, iterative process. With digital technology evolving constantly, the hard truth is that there will never be a time when complacency becomes acceptable. Even when the physical components inside the electronics enclosure remain the same, the software that makes them useful often changes by the month or week.
Some businesses choose to address this by creating permanent “innovation departments” led by a Chief Innovation Officer. While this strategy can be effective, it’s important to avoid siloing your innovation department from the people who have to actually implement the technologies and use them every day. An innovation department must have a company-wide scope, which requires the ability to work with people across department and even demographic boundaries.
When it comes to the nitty-gritty of prioritizing investments, however, the best advice is to buy for the long run. It’s often a good idea to invest in modular technologies that can be upgraded as needed. Many of today’s business technologies, such as cloud-based ERP software, also feature self-maintaining designs such as software patches that are pushed from the vendor and install themselves automatically.
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There’s no one-size strategy for digital transformation, especially when you’re operating at the complex and multifaceted level of an enterprise business. Effective digital transformation requires technology to be implemented at deep and fundamental levels of company operations, not merely at the surface. That’s why the most successful digital transformation projects are always the ones that are in constant dialogue with an organization’s business strategies, history, customer base and philosophy.