Digital transformation brings significant changes to today’s business landscape. The technology revolution is disrupting many industries, causing changes in customer behavior, organizational design, and business models. Procurement and supply chain are not exempt from these market dynamics.
The statistics would indicate the chances of successful digital transformation are quite low. As noted by Harry Robinson, senior partner at McKinsey, 70% of transformations fail (https://www.mckinsey.com/capabilities/transformation/our-insights/why-do-most-transformations-fail-a…). Poor governance can be a significant barrier. But success is possible. In this blog post, we discuss how poor governance can impact digital transformation results and what procurement leaders can do to overcome this challenge and ensure a successful digital transformation.
Identifying the problem
Governance refers to the processes and systems put in place to manage how decisions are made and how work gets done within an organization. When it comes to digital transformation, governance is crucial to ensure that the right technology investments are made, business goals are met, processes are improved, and data is properly utilized.
Procurement leaders need to identify poor governance within their digital transformation efforts in order to address it early. There may be early signs that indicate an underlying governance issue such as: inadequate communication, lack of defined roles and responsibilities, misaligned priorities, insufficient stakeholder engagement, inefficient use of resources, and a weak business case.
Establishing an effective governance model
Digital transformation requires a change in mindset, processes, technology, organizational design, and people. Incorporating a sound governance model to support this change is essential. Effective governance should encourage collaboration and communication, ensure alignment with the strategy, prioritize initiatives, identify and manage risks and opportunities, and establish decision-making processes.
Here are a few steps to consider:
- Creating a governance framework: Developing a governance framework that outlines the key roles, responsibilities, and decision-making processes is essential. This should involve identifying who will be responsible for key decisions, how they will be made, who will be informed, and how progress will be monitored. Determining an executive sponsor for the initiative, and how and when this person will be involved, is crucial.
- Managing expectations and obtaining insights: Part of effective governance includes managing expectations, which is an important part of managing change. Procurement leaders should set realistic goals, ensure that everyone involved in the digital transformation understands the overall strategy and purpose, as well as possible risks and challenges. Part of managing expectations is having good data and insights into what works and what doesn’t. Procurement leaders need to have tools in place to gather and analyze the data to help them make informed decisions, and then lead stakeholders based on those decisions.
- Developing a communication plan: When organizations pursue digital transformation without a clear governance structure, teams involved might not be operating with a shared purpose or understanding of the project. Communication suffers, leading to delays, misunderstandings, or conflicts that impede digital transformation efforts. Procurement leaders need to have a well-planned communication framework, and the necessary resources, tools, and team members. Collaboration and open communication can become a critical success factor.
- Investing in the end user and partner experience: Engagement of employees and established partners is essential to digital transformation success. Procurement leaders have an opportunity to impact a part of the digital transformation process that is often overlooked – the experience of the stakeholder and supplier partners. From the very beginning of the change, procurement can engage stakeholders and partners by providing them with a forum to contribute to the process, gathering an understanding of their challenges, concerns, and experience level with technology, and providing the guidance and support needed to meet them where they are.
- Defining and measuring success: Creating a vision of the future state will help rally the organization around the change. Equally as important is defining that vision. Success metrics is another important step in improving governance. This should involve identifying key performance indicators (KPIs) that will be used to measure the success of the initiative to ensure everyone is on the same page when it comes to the specific goals and objectives.
In conclusion, successful digital transformation requires effective governance and procurement leaders play a key role in ensuring good governance is achieved. Poor governance can be a significant barrier to success and it is important for procurement to leaders to identify and address governance issues early. By establishing a well-structured governance model, managing expectations, developing a communication plan, investing in the end user and partner experience, and defining and measuring success, procurement leaders can overcome the impact of poor governance. With a focused and well-planned approach, procurement leaders have a great opportunity to influence the way organizations navigate market dynamics and emerge as leaders in the digital age. It is working with those types of leaders that drives us every day to be the resource they choose to partner with them on the path to change and innovation. If you’re interested in partnering with Wonder Services, we’d love to hear from you.