It is a well-known fact that consultancies are an expensive resource particularly for SMB’s. However, due to SMB’s being by their very own nature ‘small’ companies they generally lack the expertise or knowledge to undertake such a project. From an initial viewpoint, it may appear that implementing a shiny new ERP system may be like loading a piece of software such as windows onto a computer, but this is simply not the case. It is at precisely this point that certain SME’s already begin to fail their digital transformation project.
Need for Assessment
It is important for SMB’s to be able to identify their own strengths and weaknesses when implementing a digital transformation. Supporting areas of weakness is where you will get the most value from a consultancy. However, identifying weaknesses can be a challenge in itself, especially if it’s something that has never been done before, so how can these areas be identified?
One option would be to engage with a consultancy at the start of a digital transformation. Discussing the reasons for the digital transformation and approaches can be beneficial at this stage. By letting the consultancy explain their methodology and framework to approach a transformation can help you identify areas of weakness. It is also a good opportunity to get a feeling of the consultancy firm. If the approach is clear, logical, and covers all areas of the change program then this is a good sign. At this point, a decision may be made to engage with the consultancy on either a light touch (advisory only) basis or a more engaged approach.
An alternative option is to perform an internal analysis or readiness assessment using your own framework. The final result should give you a clear picture of which software providers to engage. There are however risks to this approach as key requirements or risks may have been overlooked, resulting in the wrong vendor selection. An example of this is highlighted in the below case study. Having an initial consultation at this stage to talk through your plans can highlight areas of risk or missed requirements not initially identified through your own self-assessment. It may be at this stage engagement with a consultancy is the right time.
Start with a Business Case
It is important for SMB’s to understand the benefits and expertise that a consultancy offers. There are multiple ‘digital transformation consultants’ on the market but few have the required experience and depth of knowledge to implement such a project from inception to go-live. One skillset is the ability to filter out a handful of software providers from the many 100’s of options. This step in itself is enough to put anyone off such a project. Some good questions to ask a consultancy prior to engaging are:
- “how much combined experience does the company have?”
- “how many successful implementations have you worked on, similar to ours?”
- “can we meet the consultants that would work on our project?”
A digital transformation can be broken down into two high-level components: business case and implementation. The importance of a business case cannot be emphasized enough. It is an artifact that should, amongst other topics, explain the driving forces behind the investment of a digital transformation, how you arrived at the selected vendor, and contain detailed documentation of the integration.
The business case should also contain areas such as process inefficiencies and how these will be addressed, ROI, cost benefits of each software vendor, etc. One further area that is often overlooked is human capital management. This is a key risk that is often overlooked and only comes into a scope once the digital transformation comes to a close. Planning in advance will avoid chose further down the road when people impacted by the transformation start to perform their new roles.
Case Study: Manufacturing PLC
Manufacturing PLC identified that they had many manual processes, particularly around their manufacturing process. The need for a Manufacturing Resource Planning (MRP) software to assist with their heavily manual manufacturing processes was therefore identified. The analysis was performed to document current processes and identify areas that could be automated. Market research of MRP provides was carried out and 2 were selected for an in-depth review.
Based on the current processes and areas to be automated (to-be) that had been captured in the integration document, the shortlisted MRP’s reviewed the requirements and confirmed where and how they could automate such processes.
A final comparison was performed, and a decision was made on an MRP. The system was integrated, and it performed to the specified requirements. At this stage, the digital transformation was labeled a success.
The success however was short-lived. When the focus shifted towards a Client Relationship Management (CRM) implementation it became clear that the MRP system could not interact with any CRM as it had no APIs except for a handful of account software’s. This was a disaster from both a reporting aspect and Manufacturing PLC’s strategy to automate processes where possible.
Because critical data could not be sent in or out of the MRP system, manual processes were added back into the manufacturing process to manage such deficiencies. As the company grew so did the manual processes and costs. Eventually, the MRP system had to be ripped out and replaced with a new MRP system, undoing the time and costs spent on the original MRP implementation.
Key Take-Aways
The moral of this story is that any digital implementation is a costly investment that carries significant risk. Whilst cost can be reduced by doing everything in house, the risk of not having digital transformation expertise needs to be weighed up. Can a company afford or even survive a failed digital transformation? There are many stories of companies collapsing because of a failed digital transformation.
Whilst consultant costs can be difficult to justify if they are viewed as a way to reduce risk, the real question is: can an SMB afford NOT to lean on the support of a consultancy? There is no right or wrong answer to this question, it simply boils down to how much appetite for risk a company is willing to accept.
If you are considering or are already underway with a digital transformation and would like to discuss ideas or how Third Stage Consulting can help in your successful implementation, then we would be happy to have a no-obligation and completely confidential discussion. Please feel free to reach out.
Daniel Bedford
Senior Consultant
Third Stage Consulting
