Digital Transformations – Internal Redesigns and Risk Management
This is the final post in our four-part series on Digital Transformation. For a more in-depth definition of Digital Transformation and its four types, read the first post.
For many companies, the technology strategy begins and ends with technical details in which the Board has little interest. The absence of experienced IT leaders with vision means that the IT slot on the agenda is a wearisome discussion of details, issues and gripes.
But IT genuinely has the ability to transform a business. There are radical new ways to grow the business, to serve customers better, and to make more profit. Businesses that can connect with these benefits are, understandably, valued far higher than their low-technology competitors.
For our clients, Digital Transformation simply means using IT to deliver dramatic improvement. It’s more than just an upgrade or fixing niggling problems. It means using IT to make a significant change for the better.
It doesn’t have to be complicated. It may just mean simple IT done well—which is surprisingly rare! Or it may mean genuine technology innovation, something breaking new ground.
For one of our clients (discussed below) Digital Transformation not only radically improved how the business worked, it reduced IT spending by 75%! Other clients halved delivery times or became vastly more competitive with more accurate risk calculations and pricing.
We break down Digital Transformation into four categories:
- Market breakthrough
- Wowing customers
- Internal redesign
- Risk reduction
In this post, we’ll discuss internal redesigns and risk reduction.
Growing Pains—When Problems Often Start
Entrepreneurs naturally focus on seizing opportunities. They tend not to worry too much about the details.
But when company revenue turns from millions to tens of millions, organizational issues build up. Typically, people’s jobs become progressively less productive. There is increasing reliance on individuals, and often there is friction between people because the processes have been designed ad hoc.
Most importantly, many employees begin to see these issues as normal, and they see handling these problems as the purpose of their job.
People stop complaining about how much time they spend in Excel processing an order; instead they ask for more Excel training. Meanwhile everyone seems to have forgotten that order processing should be entirely automated.
Three Main Opportunities
A useful way to navigate Digital Transformation is to consider three specific opportunities:
- Integrate with suppliers and customers. For many companies, integrating with their suppliers is the best way to reduce waste. Their ability to understand and integrate with customers is their biggest way to provide great service and differentiate themselves in a crowded market.
- Address “swivel-chair” users. Often employees spend their time switching between one system and another. We call this the “swivel-chair” problem. Often these manual tasks are complicated, and these employees may seem indispensable—but they are not really adding value. Free up their expertise with properly integrated systems or with software robots.
- Better decisions with real-time, accurate data. It’s impossible to make intelligent, informed decisions without real-time, accurate data. And in many cases decision-making can be simplified with simple rules-based automation or more sophisticated AI and machine learning.
In some cases, it’s possible to bring about genuine transformation via a well-engineered top-to-bottom system replacement program.
British Retail Consortium (BRC) is the go-to trade association for all UK retailers. Their membership encompasses over 70% of the UK retail industry (by turnover). With its twenty-five years history, BRC had a number of inefficient systems. Over the last two years, they have been through a complete systems transformation project with impressive results.
BRC’s CEO Helen Dickinson summarizes their objectives: “We had systems and ways of working that were deeply embedded but not always efficient. Several areas of our business were caught up in this problem, and it impacted people’s attitude to their work. Many aspects of our business are about publishing, and our website was completely out of date. Not only did it fail to project our brand, but publishing content was difficult and time-consuming. Our working practices were looking old-fashioned—lots of expensive office space and everyone chained to their desks. It was time for a major overhaul.”
A Freeman Clarke’s Principal became BRC’s CIO. Over a two-year period he shaped, planned and delivered a program of changes. He explains:
“Real change is about systems and how people work, so a large part of this project was ensuring effective communication and that people were on board. For example, once we had created a more effective website and publishing system, we had to work out how to take BRC’s brilliant content and turn it into things people want to read, watch or listen to. This meant new ways of working as well as new roles and new attitudes.”
With his guidance, BRC replaced every system in the business. BRC also moved to modern offices and reduced office space by 30% with flex-time. To ease staff through the transition, they invested in workshops and discussions.
“The results speak for themselves,” He says. “The old systems were not fit. Overall IT costs were 10% of revenue. Now it’s 2.5%!”
Chillisauce is an example of how a Freeman Clarke Principal removed swivel-chair problems and improved integration with suppliers—and radically improved their customer experience at the same time.
Chillisauce is an events agency that specializes in bachelor and bachelorette parties. It offers a choice from over 5,000 different activities in seventy cities worldwide. Customers use their website to select all the components of their own event including activities, locations, hotels and transport.
James Baddiley, CEO of Chillisauce, explains their challenge: “Our website was just an online brochure. If a customer wanted to actually book an event they had to call us. We would craft the event with them over the phone, and we would liaise with the suppliers manually. We’d communicate with the customer through emails, and at the end, hopefully they would book!”
Another problem was their inflexible website. It was a major undertaking to add or change a product.
“A bachelor or bachelorette party is a major event for people,” Baddiley says. “We want to make it fun and offer the best experience and the best options on the market.”
Freeman Clarke Principal Tony Tinnirello advised Chillisauce to transform the entire fulfilment activity. Tinnirello explains:
“We implemented a suite of new cloud-based systems. And we used sophisticated technology to link them all together. So the entire process is far less manual, far faster and less error-prone. Customers can create their event online, book, and then check the status of each element as it takes shape. Critically, we generate prices dynamically so customers can see the price right in front of them—that’s very rare in this market.”
The system now also provides Chillisauce with a wealth of data. They can check revenue and margins on every product, ensure they are meeting service targets, and deal with any issues rapidly.
“In particular,” says Tinnirello, “this has been a huge time saver for the accounts department.”
Digital Transformation can transform a business by addressing risk management. By understanding risk in specific contracts, products or customers, you can price more accurately and competitively. Provision for risk can be applied more specifically, perhaps by more sophisticated analysis of a company’s own existing data, or by combining data from multiple systems, and potentially third-party data as well.
In some cases, the transformation may be achieved via a more timely application of existing risk processes. For example, real-time calculation may allow more accurate pricing for sales people on the phone or for online customers. Prices can be adjusted dynamically to reflect customer credit risk.
Accurate risk reporting also frees up time at the executive level. If simple risk data is available in real-time, then the Board can take measures to adjust as a routine activity. Automated rules engines or AI can pick out patterns or raise alerts when thresholds are near or are breached. Simply having hard facts readily available reduces the level of anxiety!
For companies heavily reliant on IT, well-structured systems ensure resiliency when disaster strikes.
Employees of the British Retail Consortium were once locked out of the offices for three weeks after a fire. Thus, with good reason, their transformation project included business continuity plans. The tragic London Bridge terror attack in June 2017 put this to the test, as their office was again unavailable for several days. But this time they were able to continue working without interruption.
How to Start Your Digital Transformation
In our experience mid-sized businesses often have a huge advantage over their larger competitors in this kind of transformation. Larger businesses have layers of managers who are deeply entrenched in existing ways of working, and the changing their ways of working can be a huge task.
For ambitious mid-market businesses, the Board can personally see and hear what is happening with customers, and the company is small enough to make rapid decisions and changes. Of course, a major change is never simple, but the scale of effort increases greatly for larger companies.
The best way for ambitious mid-market businesses is to start with a blank sheet of paper and design the framework you really want. The following questions are a great way to kick start a Board workshop:
- How much of your cost is not directly related to winning customers and fulfilling their needs?
- How many experts do you have locked into swivel-chair roles where they simply manage systems and data, and help other people around the business to do the same?
- How could you integrate with your customers’ activities?
- How could you remove waste from your business by integrating with your suppliers or partners?
- How much is it worth to you to correctly quantify risk at a supplier, customer or product level?
- How much would it be worth if you were able to reduce the risk of a major outage affecting your business?
- How can you remove the barriers to enable you to lead this transformation?