While multinational corporations with deep pockets can afford to throw money at a major project if things aren’t going to plan, most firms don’t have that luxury. They must be smart with their limited funds, which means that it’s crucial to get the technological choices right first time during a digital transformation.
But business leaders are often unsure about where to spend their IT budgets. When the Boston Consulting Group (BCG) surveyed nearly 2,700 senior decision-makers in 13 countries last year, it found that 96% were planning to either maintain or increase investments in digital transformation in 2023, yet 93% admitted that their firms were “struggling to navigate the rapidly growing landscape of disruptive new technologies”.
James Lupton is chief technology officer at IT consultancy Cynozure. He believes that “the technology landscape has never been more saturated. It offers everything, from exceptionally niche vendors right through to platforms that promise to do it all. Any company embarking on a digital transformation is going to be spoilt for choice.”
Identifying the problem
With such a huge array of options on offer, it’s no wonder that business leaders are struggling to pick out the right ones for their firms. While it may be tempting for them to choose the flavour of the month because everyone else is doing so, they would be well advised to ignore the latest trends, according to Lupton.
“Businesses suffer in the long run when they base decisions on how fashionable a piece of technology is. This can lead to impulsive choices that aren’t the most effective use of budget,” he warns.
Think of your business like a car: if it needs a new set of tyres, you don’t want to have to replace the whole car
Another classic mistake to avoid is buying tech because you’re familiar with the brand or another company has recommended it. So says Amanda Russo, founder and CEO of Cornerstone Paradigm Consulting, which helps firms in several sectors to streamline their operations.
But before they even look at what’s on the market, firms must determine the root cause of the business issues at play, she stresses. If they don’t do that, they’re likely to waste their IT budgets on tech that not only fails to solve those problems but also creates new ones.
Shaun Connolly, vice-president of international strategic services at software company Precisely, agrees. To pinpoint the right technology for a transformation, companies must first be absolutely clear about the processes they need to improve and the outputs that would make the project a success, he says.
While this may sound basic, Connolly points out that, in his experience, “businesses will often implement a new tool without having defined outcomes; without considering how it will align people and processes; and without having effective ways to measure the return on investment”.
Lupton underlines the importance of gaining a full understanding of the business’s requirements before proceeding any further with a transformation, adding: “Establishing a clear set of selection criteria by which potential technologies will be judged should ensure that any decisions are informed and rational.”
Mapping technology stacks
Conducting an audit of all the IT in use by your firm is a good starting point. This exercise should assess the effectiveness of each tool and determine which ones are becoming unfit for purpose.
“You’re likely to find a lot of manual processes and tech that hasn’t been stacked, as well as technology that’s no longer serving the business,” Russo says. “After uncovering what your current state really looks like, then you can start having that conversation about what you need and don’t need.”
Once the tech stack has been mapped, the next logical step is to get a handle on data integration, integrity and governance. Your firm’s ability to manage the various types of operational data it’s generating will have a direct bearing on the success of its digital transformation strategy, according to Connolly.
Companies must ensure there’s a steady flow of data across their departments and consider how trustworthy that material is. They can use it to monitor the health of technology stacks, extracting actionable insights to inform their decisions.
The purchasing stage
Once they’ve determined the root causes of their problems, mapped their tech stacks and got a handle on data governance, companies are in the best position to go shopping for tech.
Just over half of the respondents to the BCG survey said that they were the sole decision-makers in their company when it came to buying IT, while just over a third said that they were part of a committee.
Businesses suffer in the long run when they base decisions on how fashionable a piece of technology is
Lupton believes it’s a good idea for purchasing decision-makers to consult other functional leaders during this process, so that they can understand their priorities. On the other hand, while a digital transformation requires the backing of many stakeholders, including external ones, listening to too many voices could prove disruptive. The final call is generally best left to the senior IT experts whose task it will be to work with the new tech and keep on top of data governance.
A significant proportion of boards will be apprehensive about making radical changes involving new tech, especially when the economic outlook is poor. They could therefore be unwilling to allocate significant sums to a digital transformation. If this is the case, it may be worth starting on a smaller scale and focusing on a manageable process that clearly needs improving. While there’s nothing wrong with testing the water this way, it is vital to think big and plan for the long term, Lupton stresses.
Your firm’s requirements will inevitably change over time, he says, which means that the tech you choose “needs to be scalable enough to grow in tandem with the business”.
Putting the pieces together
With this in mind, companies must weigh up the pros and cons of monolithic and modular approaches. The former may seem the more straightforward option, but it can prove costlier when the time comes to replaie that tech. By contrast, a modular approach makes upgrading and replacing systems easier.
Lupton uses a motoring analogy to distinguish the two approaches. “Think of your business like a car: if it needs a new set of tyres, you don’t want to have to replace the whole car, as you would with a monolithic solution. You merely want to change the tyres – that is, a modular solution.”
The final stage, after buying the right combination of technologies, is implementation. This process is far from straightforward, of course, with 84% of respondents to the BCG survey complaining of poor coordination among vendors.
“Engaging with specialists who can help you to navigate that market can save you time and ensure that you avoid pitfalls,” Lupton says.
Digital transformation is a constant process, rather than a one-off project. The right partner, he adds, will help you to extract maximum value from the new tech you’ve chosen throughout its useful life – until it’s time to shop around again.
