4 Reasons Digital Transformation Fails

McKinsey Digital recently conducted one of their many surveys regarding the impact of digitization on industry and the general economy. They pointed to how today’s smartphone, in just 15 years, has revolutionized not just communication but retail, media, travel, transportation – even our home environments.

Yet, the study laments the fact that, while digital transformation has truly taken place societally, it has yet to have the same impact in industry, even though many companies claim to be implementing plans to do just that.

There are many reasons why digital transformation adoption may be slow. So, let’s examine a few of the reasons why digital transformation is failing to, well, transform. However, rather than look to global think tanks like McKinsey, we’ll turn to someone who has “been there and done that” – former global CEO Tim Gollin.

In a recent interview for Gerent’s podcast series, Ahead of the Curve, Gollin spoke frankly about how many companies get technology wrong. Tim was the global CEO for Arc International, a French manufacturer of glass and tableware with 10 thousand employees and operations in China, Russia, Europe, and the United States.

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Executive Problem-Solving Should Inform Technology Selection

Manufacturing executives can be easily confused by the many kinds of technology available to them today, Gollin said. It comes in all sorts of forms and deployment methods that make it difficult for executives to know where to start. The problem arises when executives begin to think about how technology can solve their problems.

“You have to come back to earth and say, ‘okay, what does my enterprise really need?’ Don’t forget why you’re doing this. What do your employees need? A lot of software is about solving problems at the C-Suite level when the real problems have to be solved in the value stream, itself,” he explained for Ahead of the Curve.

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Knowing Where to Start Can Be Challenging

Many executives assume that defining the starting point for a digital journey should be straightforward. Gollin disagrees. 

“Maybe the most difficult thing for managers to do is acknowledge that they don’t really know where to begin,” the executive said. 

“When you look back 20 years at the implementation of big enterprise software like SAP, what often comes, too, is a view of your business that’s held by somebody external. Most of us in management would say the best view of the world doesn’t come from an external operator who’s got a canned solution for you, but rather from your own people.”

Per Gollin, executives must identify the everyday processes their employees face in the value stream. Is it a fairly simple problem, like managing the accounts payable process more efficiently? Or is the issue more complex. Organizations shouldn’t opt for a shotgun to kill a mosquito.

“A lot of what I think works is bringing together small scale solutions to solve unique problems in the value stream, because what you can do today is connect all of those solutions through the cloud to create data that’s actually useful to you,” he said.

The Struggle Between Sales and Production

An ongoing challenge for manufacturers is balancing the demands of a sales force with the realities of the production line. Why does this conflict exist? Because, Gollin says, “manufacturing is less flexible than market demand. The market wants orange today and manufacturing is set up to make purple. The quantity of purple the market wants is unknown so the tendency is always to overproduce in order to have enough inventory.”

The flip side of this coin is that when market demand shifts, it shifts quickly and manufacturing capabilities can’t keep up. “So, the question becomes how do you intermediate between these two things so that you’re sensitive to the needs of the sales force – and by extension, market demand – but you’re also retaining a competitive edge from a manufacturing cost point of view.”

There is no digital software solution for this problem, yet. Gollin suggested that the best option is a platform like Salesforce that can be modified to connect to existing data systems in a constructive manner. “With any technology implementation, the first job you have is to figure out what your process does and, in conjunction with a strong technology implementation partner, determine how to use technology to make it better.”

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A Major Misstep for Manufacturers: Failing To Listen

Gollin is a big believer in Lean methodology. While there are lean evangelists who believe that technology is an excuse to avoid implementing a lean process, he sees a symbiotic relationship between the two.

“Technology is part of the Kaizen tool kit. When you do a Kaizen project, you’re trying to figure out how you can use technology as well as Scotch tape and Post-It notes and whatever else is available in order to create an improved process and document it,” he explained. 

“And I think that’s the promise of tools like Salesforce when they’re used in combination with a sensible implementation that maps well to the needs that you have on your shop floor, whether that’s your office or factory.”

When he was CEO of Arc International, Tim’s sales team approached him with a need for a CRM solution to enhance communication among the company’s salespeople. Gollin says he wasn’t sure what CRM was but ultimately listened to his staff. 

“They were the people facing the pain and looking for a solution. A lot of an executive’s job is letting the people who are out there talk about what their needs are, rather than you telling them what they need,” he reflected. 

He let his sales team run with the project and they selected Salesforce technology. “ I hadn’t been convinced of CRM because I hadn’t seen what the benefit would be for me,” Gollin admitted. “But if you can get out of yourself and say, ‘what’s the benefit for the value stream if we do this’, great things can happen.”