Why businesses may need to work like startups to succeed in digital transformation

This article discusses why digital transformations fail and what can businesses do about it (explained using a synthetic example from construction equipment industry) following successful startups. This is in continuation of my last article where I have recommended digital initiatives for OEMs of CE industry.)

Sometime back, during a conversation, one of the eminent leaders in Construction Equipment industry in India mentioned that despite developing an advanced sales management system, the utility is low. Other leaders praise the effort but don't use it. Naturally 'reportees' also do not give it a priority. Does this kind of issue sound familiar?
This is not an uncommon phenomenon. Digital and analytics may be the buzz word today but more than 70% of digital initiatives fail.¹ Even in highly reputed companies. Companies like GE, Ford and many others have tried digital transformation and invested heavily at one point in time. But when the returns were not quick enough, the stock prices kept dipping and in some cases, managements were changed.²

The reason(s) is(are) not technical. Technical aspects of digital transformation is the easier part. More so, because of the evolved cloud infrastructure and machine learning platforms provided by the giants.
There are several reasons why these initiatives fail. Two HBR articles ^{3 4} discuss these reasons, primary of which are as follows

1. Leadership lacks clear and defined goals of the digital initiative or transformation. This results in lack of focus and creates confusion. The reason perhaps, is lack of awareness of the benefit that the initiative brings. Or reluctance to mention why the initiative is not beneficial. 
2. Managers expect digital initiatives to be game changers when it is not. These initiatives are means to achieve the goals and are not goal themselves. For e.g. an advanced telematics will not be a game changer for a farm equipment or construction equipment OEM. What matters more is the acceptability of products they manufacture or after sales support they provide. Digital initiatives can only increase efficiency or add further value, but is not a game changer.
3. Investor expect faster return and result. Digital initiatives are not plug and play tools. Investing in an advanced software package is not enough. It also requires investment in skills and infrastructure and improvements in processes and IT systems. Hence, the investment is huge. It is natural for investor to expect returns. But returns are not as quick as expected.
4. Users and customers may not be ready to accept the technology or may not value it enough to pay additional sum for the initiative. For e.g.  a recent practice is to provide telematic data to the customer without any additional cost. But now, the OEMs expect to monetise this. But the customers are not willing to pay. They do not value the data enough to pay for it. Another example could be reluctance of sales team to use the sales management platform simply because it is a hassle. Even if the usage is made compulsory it may effect the quality of data.

To summarise, the challenges are multidimensional. To solve this problem, there may be several ways. Some consulting firms recommend a large scale transformation that takes care of everything - starting from skill development to infrastructure.⁵ But, when investors seek quick returns and investments are risky (esp. at times like this due to pandemic), a large scale transformation is not feasible or advisable. The need is to do things like a startup in an agile manner, by failing fast and growing faster.

I will try to explain the process using an imaginary case of a Construction Equipment (CE) OEM that is trying to improve sales. If one wants to improve sales, they can do it in repeat sales or in new sales. Assuming the goal is to increase new sales, it can be done by increasing number of prospects or increasing conversion rate. Increasing prospects is a matter of marketing. Hence, the goal can be to increase conversion rate. Conversion rate can be increased by identifying the step(s) in sales process where there is a scope of improvement. For e.g. most of the prospects are being lost in step 1. Once identified, the next step is to find reason(s) and act upon it. Perhaps the sales officer need training. Or perhaps, the prospect wants to see some machine running in his vicinity. There could be several reason. However, the challenge is to gather meaningful data to analyse this.

The solution that comes to mind is a sales management process. The traditional approach is to hire a consultant get it implemented. But, it needs substantial investment, will require skill improvement and leaders need to be convinced. Last, but not the least, the sales officers (users) should be keen to use it. Hence, the risks are substantial.

Facing similar situation, a startup will take a different approach. (Some success stories). It will not go for substantial investment. It will hire a very small team (may be 2 members). They will talk to the field sales team and ask what are some of the repetitive tasks that 'sucks'. Let us assume that the task is collecting initial documents and giving it to different NBFCs for initial evaluation. The team goes back and develops a tool so that the sales officer can click photographs of the documents and send it in a chatbot. This tool would do the following tasks:

1. Send the documents to predefined destinations (NBFCs)
2. Read customer details using image recognition and update database

This not only creates convenience for the sales officer, but it is now easier for management to check how many leads are in this particular step and which NBFCs are involved. There are further application(s) possible which are beyond the scope of this discussion.*

Once this initiative succeeds, the team will go back to the field to identify next tasks which can be built on this existing tool. May be, ability to create quotations automatically. It is possible that some initiatives will fail. But, the scale of damage will be low because the scale of initiatives are low. And every failure will provide learning opportunity to come back stronger and with better initiative. With every success, investor confidence will increase s/he will be happy to invest further. And when it is suitable, these tools can be integrated with state of art CRM and sales management tools.

This was just a speculative example to explain the way of working. Real life scenario is complex and different and hence, more interesting. Nonetheless, the concept of starting small in agile manner is the key to success. The steps and initiatives will differ for every company and every function.

If you are interested to know more the possibilities or want to find out which steps can help in your specific case, feel free to invite me for a cup of coffee.