Given the multiplicity of firms offering digital transformation initiatives and the challenge that selecting the right provider for your needs presents, it is incumbent on supply management professionals to ensure that the needs of the organization are accurately defined and embraced by senior management.
This sounds like common sense but notes that in 2017, the World Commerce and Contracting organization sponsored a study of its global members and found that, for that year, the $13 B USD spent on digitization projects, over $900 M USD of the spend on those projects did not return a single benefit. That means that almost 70% of those corporation funds were lost.
Why?
A review of the World Commerce and contracting organization’s “Ten Pitfalls to Avoid in Contracting” presents some compelling elements that point to the failure of adequate change management.
Those pitfalls are available on the World Commerce & contracting website at Ten Pitfalls to Avoid in Contracting (worldcc.com).
We will not discuss all of the pitfalls here but suffice to say that over the last ten years the list has changed extraordinarily little.
From a change management perspective, the pitfalls that stand out are 1) lack of clear scope and goals, 2) failure to engage stakeholders, 3) contracts lack flexibility, 4) insufficient focus on governance and 5) poor handover to the implementation team. These five pitfalls plus the other five listed in the article have been found to lead to contract value erosion of 9.2%. Very few companies can afford to maintain that type of erosion.
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What is Digital Transformation?
According to Wikipedia Digital transformation (DX) is the adoption of digital technology by an organization. Common goals for its implementation are to improve efficiency, value, or innovation.
Also according to Wikipedia, digitization is the process of converting analog information into digital form using an analog-to-digital converter, such as in an image scanner or for digital audio recordings. As the usage of the internet has increased since the 1990s, the usage of digitization has also increased. Digital transformation, however, is broader than just the digitization of existing processes. Digital transformation entails considering how products, processes, and organizations can be changed through the use of new, digital technologies. A 2019 review proposes a definition of digital transformation as "a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies." Digital transformation can also be seen as a socio-technical program.
Adopting digital technology can bring benefits to a business, however, some company cultures can struggle with the changes required by digital transformation.
A 2015 report stated that maturing digital companies were using cloud hosting, social media, mobile devices, and data analytics, while other companies were using individual technologies for specific problems. By 2017, one study found that less than 40% of industries had become digitized (although usage was high in the media, retail, and technology industries).
As of 2020, 37% of European companies and 27% of American companies had not embraced digital technology. Throughout 2017-2020, 70% of European municipalities have increased their spending on digital technologies. In a 2021 survey, 55% of European companies stated the COVID-19 pandemic has increased the demand for digitalization, and 46% of companies reported that they have grown more digital. Half of these
companies anticipate an increase in the usage of digital technologies in the future, with a greater proportion being companies that have previously used digital technology. A lack of digital infrastructure was viewed as a key barrier to investment by 16% of EU businesses, compared to 5% in the US. In a survey conducted in 2021, 89% of African banks polled claimed that the COVID-19 pandemic has hastened the digital transformation of their internal operations.
However, since there are no comprehensive data sets on digital transformation at the macro level, the overall effect of digital transformation is still too early to comment on.
If you wish to discuss this further and explore the skills needed to succeed, comment below.
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(A) Technology, design, cost, co-development, quality, intellectual property, and risk management
(B) Delivery, cost, and quality
(C)Supplier contract and relationship
(D) The supplier's history with the buying company
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