Harnessing the Power of Digital Transformation
With the fast-paced development of new technologies for all sectors, business leaders are feeling the pressure to step up their operations to a new digital reality. In a competitive global environment, not jumping along on the transformation may mean losing business opportunities to the competition.
The adoption of new technologies can create new business models and transform business operations to a disruptive extent. A US-based study concluded that for 64% of companies, digital transformation is already having a profound impact on their business and their ability to be competitive.
The challenge for most companies is to create a digital transformation strategy that focuses on the key processes of the organisation while guaranteeing a company-wide connection, team engagement, tangible results, and high return on investment.
What is digital transformation and what are the gains?
Digital transformation has been a buzzword in businesses for a few decades now. This concept and its applications may vary between the different sectors, however, the constant is that digital transformation aims to take advantage of technological tools to improve or create new processes that deliver more efficient operations, better customer experiences or leaner services.
The goal of digital transformation in businesses should never be solely around the implementation of the technology itself. The focus should be on how useful the technology can be in supporting innovation to achieve results in terms of:
- Flexibility: Adaptation to changes in customer needs, reactive capacity sizing and increased customisation.
- Efficiency: Higher productivity, better quality, less resource usage and fewer stocks.
- Safety: Improved ergonomics and fewer accidents.
- Service: Shorter Lead Times, higher customer satisfaction and less rework.
- Organisation and decision-making: Easier team management, transparent information, real-time data and data-driven decision-making.
Why do digital transformations fail?
As the trend sets in, many companies are defining strategies and implementing digital transformation projects. However, the majority of these have a low impact on performance or financial results and the Return On Investment (ROI) is far from satisfactory. In fact, leaders report that 70% of digital transformation projects do not reach their defined targets.
To what can leaders attribute the failure of these projects? With several variables at stake, most failures revolve around the same two topics: processes and people.
Digitalise processes without optimising the processes
The first crucial mistake that businesses fall into is to transform processes and information from manual/analogue to digital, without rethinking the process itself. When this happens, teams find themselves digitalising processes that are not relevant for the organisation, that do not increase the value for the customer, or even that are redundant and full of bureaucracy and waste.
Processes need to be redesigned to their optimal sequence before the digital tools can come in. This guarantees that we are investing in digitalising only the critical tasks and that the process that will be ‘hidden’ behind the tool is the most efficient, lean, and correct one.
Isolated digitalisation and deploying without strategising or piloting
The implementation of isolated digitalisation projects within an organisation may lead to technological silos, created by different tools that do not communicate properly between each other. This will result in a disaggregated data structure, which will not serve the organisation towards data-driven decision-making and will make cooperation between the areas harder. A recent survey concluded that 41% of businesses still use digital technologies as stand-alone solutions.
It’s important to approach digital transformation as a strategic business process, diagnosing the areas of the company which would benefit more from this upgrade, along with the critical processes to be redesigned and digitalised.
With the right roadmap at hand, piloting solutions guarantees basic stability before a company-wide deployment. When deploying, incremental improvements will emerge from the massive usage of the technologies, and leaders need to be comfortable in improving while scaling.
Neglecting change management in digital transformation
Harmit Singh, Executive Vice President and Chief Financial Officer at Levi Strauss emphasised the importance of the cultural shift in digital transformation in the HBR article ‘4 Lessons from Levi’s’ Digital Transformation’: “Going through this experience, we discovered that the changes digital transformation spurred in our company culture are just as much of a benefit as the new technical capacities it enabled.
“Digital transformations are more than turning on new solutions or digitising platforms and workstreams. They’re about transforming your workforce to think in an agile and digital-first mindset, and encourage the creation and adoption of technology that is new for the team and sometimes new for the industry overall”.
How do KAIZEN™ and digital transformation match?
The KAIZEN™ approach delivers breakthrough results in process transformations and gives teams the capabilities to operate smarter while deploying the newly-improved processes. This improvement backbone sets the perfect scenario for digital transformation: an environment where the critical processes are optimised and where teams are capable of adapting to new ways of working in an agile way.
A digital transformation journey should not happen as a stand-alone process with the purpose of digitalising the company. It should be part of the improvement strategy for the business, along with process transformation, skill development and culture advancement.
That means that an integrated approach of KAIZEN™ and Digital transformation ensures a sustained trajectory for the business that matches the most efficient use of technology implementation to the long-term company vision in terms of results, processes, people and culture.
Building a digital KAIZEN™ transformation strategy
Building a digital transformation strategy starts with the company’s strategic goals. The medium and long-term goals for the business determine the areas of the organisation that will need strategic improvement, whether it is to reduce costs, improve service or boost quality.
Once we have the value streams for improvement defined, it is time for a deep analysis that will point out the opportunities that should be addressed in terms of process improvement, digitalisation and knowledge or resource gaps.
With the priority areas defined, the design of the future state vision for the company’s value streams will deliver the transformation roadmap for the teams to continue. This is the moment where the impact of the initiatives to be implemented should be clearly measured along with the benefit they will deliver. This will prevent any low ROI activities from being addressed.
To prepare for this discussion on the digital strategy, one needs to first understand the areas where the strategy may be applied:
- Smart operations: Implementation in industrial processes - mainly production, logistics, maintenance, quality, safety and environment.
- Digital services: Implementation in transactional and service departments such as finance, admin, accounting, HR, marketing, sales or customer service.
- Smart development: Implementation in engineering activities like innovation, research, or product development.
Secondly, learning about the available technologies allows for a more fruitful discussion on the business’ digital opportunities. The most suitable technology depends on the sector, company, and business area. There should be an assessment phase and the best technology and supplier of technology should be defined according to the opportunities identified. The main three groups of technologies to be applied are:
- Automation of processes and tasks through tools such as Robotic Process Automation (RPA) or simple robotisation.
- Digital Information Flow: Information systems, vertical integration of machines and information systems, horizontal integration through connectivity with suppliers and customers and other company sites.
- Advanced analytics: Powerful analytical tools that process large data sets and transform them into actionable knowledge to help decision-making and process improvement.
How to get started on the implementation of digital transformation
The implementation of the digital KAIZEN™ strategy should start with an assessment to define the best roadmap for each area within the company. This is where the detailed solution is designed to achieve the desired goals established in the strategy definition.
After solution design, the pilot product/area/team/process is defined. This will be the controlled environment to develop, test and perfect the implementation of the technology.
When basic stability is achieved and results are proven, the solutions are deployed to all other suitable areas. For fast and efficient scalability, the internal resources should set up a training and ramp-up process that takes advantage of the pilot experience gathered to smoothen the onboarding for the new implementation points.
Implementation steps for a digital KAIZEN™ transformation
Get all the latest news about Kaizen Institute. Subscribe now.
* required fields