Six Ways to Mitigate Digital Transformation Risk

Share this post!
Share

The digital transformation of any organization will almost certainly involve the acquisition and implementation of technological assets designed to facilitate the journey toward a digitally empowered future.

Digital transformation is a long journey that features many challenges. As with any complex project within the enterprise, support for that project must be overt and obvious, particularly from upper management.

Acquiring any technology for the purpose of business improvement involves some level of risk. This risk may be magnified by factors such as organizational size and complexity. While digital transformation may be perceived externally as a single evolutionary process, it cannot be practically managed as a singular project.

Digital transformation is accomplished one process at a time, one department, division and organization at a time. The high-level management of the overall journey should be focused on assuring adherence to the high-level goals and vision of the organization as a whole.

With that in mind, let’s examine what constitutes risk in the acquisition of supporting technology in the digital transformative process and how it can be mitigated.

How to Mitigate Risk When Acquiring New Technology

These six factors are critical to your success.

Address Misalignment

When organizations establish and embrace specific visions, goals and objectives, one of two things happen. First, the specifics of these decisions will be articulated and promulgated throughout the organization and beyond. That, as they say, is the easy part. The second part is not easy. The visions, goals and objectives will either guide the actions of the organization, or they will be ignored and forgotten.

For companies acquiring digital technology, this is critical. Digital transformative technology must not only accomplish the specific desired improvements within the confines of the acquiring process or department, the technology must also interface, support and facilitate the overall requirements of other departments and the organization as a whole.

Other lines of business to consider would at least include Finance, IT and Operations.

How does Finance treat acquired systems and products? Are they best purchased or leased? For IT, relevant questions might include the nature of the acquired system in terms of it being an on-premise, cloud-based or SaaS type of offering. Operationally, does the product communicate with and interface with tangential systems? Does it play well with others?

Dropping the ball on these high-level considerations will have negative effects, if not immediately, down the road as the digital transformation spreads out across the entire enterprise.

Prevent Obsolescence

The acquisition of any technology requires some consideration of the medium- and long-term future of that technology itself. Again, as we discussed previously, the ability of the technology to interface with and communicate with other systems is essential. If the product’s developers don’t plan to support this or that platform beyond a certain date, that may render the product useless for the acquiring organization.

Consideration of obsolescence from the organizational standpoint is required. Does Finance see the ongoing support of the system as a budgetary priority over the next five years? Does IT plan on major changes internally? These might include the operating system environment or architecture of the IT infrastructure. This type of change could render the technology incompatible within the near future. Operationally, is the function of

From the standpoint of implementation, how onerous is the training required? Will employees see the training and time investment as something that increases their own worth and marketability? Professional development is critical to employee morale. Asking an employee to learn some outdated or soon to be antiquated technology will seem like a waste of time to that employee.

Hiring managers for departments served by outmoded technology may be challenging as well.

Accommodate Cultural Barriers

Culture is a factor in almost all companies and organizations. These elements may be unique to the company itself, or they may be engendered externally by regional or national customs. Regardless, they are critical to the efficient operation of the organization.

A great example is found in the initial attempts to employ the Toyota Production System in some western automobile assembly plants. The notion of a line worker stopping the production line because of some perceived problem was counterintuitive to autoworkers who were trained to push defective units down the line to be fixed after the initial assembly was complete.

Any technology has built-in usage requirements that can potentially be problematic for some organizations due to local customs.

Requirements of this type must be understood and evaluated in terms of how any given technological solution might be implemented within the organization. If an accommodation can’t be made, the solution should not be selected.

Ensure Management and Employee Support

Digital transformation is a long journey that features many challenges. As with any complex project within the enterprise, support for that project must be overt and obvious, particularly from upper management.

If management support waivers or if it is perceived to be less than one hundred percent, resistance to the project will become stronger. As exemptions are granted for this or that condition, and more and more exceptions are allowed, the easier it will become for others to delay or avoid implementing a solution.

Management must make their support known at the beginning of the project and demand compliance reporting throughout the implementation process.

Pre-deployment assessments across the organization should be made to determine the resistance level to the pending changes. These must include the departmental internal personnel as well as individuals who are affected outside the immediate group. Again, IT, Finance and Operations all should be included in this evaluation process.

Address Complexity

Complexity is a part of doing business, of manufacturing things and of designing and selling things. Complexity is something to be harnessed and not necessarily avoided.

As a risk factor, complexity is managed and mitigated through effective project planning, ongoing and continual communication, education and performance analysis.

The issue being resolved through the acquisition of technology is likely complex itself. The seductive call of a “simple” solution is almost certainly a delusion. Transparency and knowledge driving the reduction of complex processes into multiple simple processes through the effective use of technology is how complexity is mitigated.

Ensure Cost Effectiveness

Cost is always a risk in doing business. How that cost is calculated and treated is how that risk is mitigated.

Cost extends beyond the actual price tag for a solution. The cost of training, infrastructure modification and installation all figure into the real cost of acquiring a technological solution.

Going back to our big-three elements, the solution should be evaluated in light of Finance, IT and Operations.

Finance has specific rules and practices to consider in determining how technology should be paid for. As stated earlier, advantage may be found in renting or leasing technology. Is it an asset or a business expense? How important is ROI over time?

Work with Finance to determine the best acquisition model for any large purchase.

From the standpoint of IT, consider how they will be required to support the technology once installed. Will they be performing and paying for updates? Will their infrastructure require modification or the acquisition of other products in order to accommodate the solution selected?

Operationally, what cost burden is being placed on departments and processes served by or serving the acquired technology?

Understanding the risk of cost upfront and with complete knowledge is the only way to mitigate cost as a risk factor.

Keeping It Real – Spread Truth, Stifle Rumor

Acquiring technology is too frequently perceived as the acquisition of a magic solution. How many times have you heard problem after problem or almost every issue explained away with a promise that some pending solution will take care of things once it is implemented? And in some cases, that is true. But, too frequently the hope and hype level are so high, that the coming technology takes on an almost messianic quality that it can never live up to.

It is critical that expectations are realistic; that honest and open communication surround the entire acquisition and implementation process for the acquired technology. Keep an ear open for misinformation generated by rumor and innuendo. Build information and progress reporting into your implementation process. That will serve as the single most effective risk mitigation factor for the acquisition and deployment of technology.

Related Posts

Product Configuration Cincom Blog