Uncovering the challenges of digital transformation

Over the past 12 months, virtually every client I have worked with is engaged in planning or implementing significant digital system transformations.

I’m not surprised to see that their top three challenges emerged as financial constraints (31%), lack of bandwidth (31%) and poor stakeholder alignment (30%). While it’s positive to see CFOs are eager to take on digital transformation initiatives, we often see them underestimate their complexity.

We see a lot of companies jump from concept and vendor selection directly into implementation, bypassing important preparatory discussions. This can turn projects of a moderate scale and risk into large-scale, high-risk ones as unforeseen issues arise.

We always recommend budgets with a strong level of contingency in them. There’s no way around it – if you don’t invest in the programme, you should expect it to underdeliver. One of the main reasons this is overlooked is the pressure to quickly demonstrate ROI, often leading to unrealistic business cases focused on immediate cost savings.

This prompts the choice of lower-quality implementation partners, causing problems during delivery, from budget overruns to diminished quality. The perceived value of digital transformation plummets, demotivating teams and creating a downward spiral of reduced expectations and enthusiasm.

Breaking the cycle

Breaking this cycle requires CFOs to step back and establish what good looks like for them.

We recommend establishing operational metrics directly related to the digital initiative that can show clear improvement. For example, if you implement an automated one touch procure-to-pay solution across the end-to-end cycle, you can track the processing speed, the number of exceptions, late payments, and more. You can start building a much more granular picture of the value it’s delivering.

Collaboration is key

Leadership alignment is crucial, but it can be challenging for smaller businesses with less formalised governance. Our survey found that ‘stakeholder alignment’ is one of mid-market finance leaders’ top three challenges, yet ranked only seventh among respondents from businesses with over £1 billion revenue.

Systems transformation requires strong collaboration between the function leading the programme, IT, and the wider organisation. Programmes have traditionally been led by IT, which can create some tensions.

We often see cracks start to appear when the function leading the programme pushes ahead, without the engagement of IT and the wider business. Everyone needs to understand their role and work towards the same goals from the get-go, and to ensure this alignment cascades throughout the organisation.

For more insight on this topic, reach out to Head of Technology and Digital Services Mark O'Sullivan.