Analyst Insight: Eighty-three percent of participants in APQC’s quick poll research report that their supply chains are undergoing digital transformation. Yet despite the widespread embrace of this major organizational change, digital transformation in many supply chains suffers from the lack of a consistent definition and overarching strategy. As a result, rather than realizing the strategic integration of multiple technologies, too many organizations are solving discrete business problems with one-off digital solutions.
The root cause of the struggle that many supply chains have with digital transformation starts with a key word — transformation — that’s often overlooked or misinterpreted. It means a significant large-scale change that orients the organization in a new direction, not an incremental improvement or transition to a new system or application. Unfortunately, many organizations aren’t embarking on true transformation. Instead, they’re solving discrete business problems with digital technologies by creating one-off solutions, rather than embracing an integrated approach to addressing multiple problems. Because these types of projects have digital components, they often get mislabeled as digital transformations.
APQC examined digital transformation across numerous research projects and found four primary components:
Digitizing data and information — decreasing the use of paper so data can be read and analyzed electronically,
Automating processes — reducing tedious tasks so that they require les or no human intervention,
Applying analytics — deriving insights from data and making data-driven decisions resulting in smarter choices, and
Enabling digital interactions — improving collaboration so people can work together more seamlessly.
When defining digital transformation, keep in mind that organizations have different goals for that effort, and the exact nature of each initiative is influenced by its scope, governance, and strategic intent. The nature of the change might be functional, multi-functional, or enterprise-wide. Governance, which determines where accountability lies, might be centralized or decentralized. Strategic intent for the digital transformation entails establishing why the organization is undergoing the change — to achieve greater customer intimacy, improve operational excellence, or drive organizational growth.
APQC research participants cited change management as the most critical success factor for supply-chain digital transformation. The effort can radically alter the substance and nature of employees’ work and required skills. Some employees will be uncomfortable, while others will fear losing their jobs. The depth, breadth, and evolving nature of change involved in digital transformation necessitates a more responsive change-management approach. There is no new normal after the transformation — there is only the next normal.
APQC recommends:
Conduct a current-state assessment to understand the organization’s cultural preparedness for change, and employees’ fluency with relevant technologies.
Use a portfolio approach to manage the change aspects of smaller initiatives in the overall transformation.
Deliver tailored communications that answer “What’s in it for me?” for different roles, teams, and departments.
Leverage peer-led training and communications to cultivate buy-in and decrease leadership’s burden.
Use value and behavioral measures — not just milestones reached and activities completed — to evaluate progress.
Incorporate desired behaviors into employee evaluations and promotion considerations.
Outlook:
In 2020, expect to see organizations continue to invest in the foundational elements of digital transformation: data management and advanced analytics. By getting a firmer grasp on data cleanliness, accessibility, and the analytics needed to build algorithms, supply chains will see progress in the widescale implementation of digital transformations.
Digital initiatives are broad transformational initiatives. Leading organizations are establishing strategies for supply-chain digital transformation with a clearly defined scope, governance model, and strategic intent.
Marisa Brown is senior principal research lead for supply chain management at APQC.
