Digital Transformation: 2019 Report Finds Operational Disruptions Are Costly

Announcements, Opinion | February 7, 2019 By:

One of my favorite aspects of being in the digital transformation space for over 20 years is not just the experience we get working with clients each day, but the ability to study and analyze a broad sample of initiatives each year.

Our latest 2019 Digital Transformation, HCM (human capital management), and ERP (enterprise resource planning) report reveals some invaluable lessons for those about to embark on digital transformations. This year’s study is a much deeper dive into both quantitative and qualitative data from organizations in the study. Most importantly, this is the first study that digs deep into the correlations and drivers underlying the quantitative data.

Here are just a few of the most important lessons and findings from this year’s 2019 Digital Transformation, HCM, and ERP Report (which you can download here):

“Average” numbers don’t tell a meaningful story – but the statistical root causes behind them do

Past studies tended to focus on average numbers, such as “average implementation cost” or “average benefits realized.” We found that these numbers on their own aren’t of much value for three reasons:

1. Most transformations struggle to deliver expected results, so “average” numbers aren’t meaningful benchmarks to strive for
2. They don’t take into account company size, industry, complexity, etc.
3. These numbers don’t provide any insights as to why the numbers are what they are or what can be done to most effectively influence those numbers

When we reviewed the data in this study, we dug deep into the correlations, qualitative drivers, and other insights that deliver actionable and meaningful analysis to give more meaning to the numbers. Some of these findings are summarized below.

Operational disruptions are the costliest aspects of digital transformation, HCM, and ERP initiatives

Our study shows that just over 50% of organizations experience at least one material operational disruption at the time of go cost graphlive. In other words, they are unable to ship product, close the books, and/or run payroll in a timely fashion. These disruptions vary in severity from extreme examples like the SAP failure at Lidl or the SAP transformation problems at Haribo, to less severe – but still very costly – and lesser-publicized examples.

While most CXOs are hyper-focused on containing implementation costs, many fail to realize that the longer-term costs associated with operational disruptions can be the highest costs associated with your transformation. These added costs range from 50% to 300% of the initial implementation costs. Organizations that invest the time and money in doing things right actually experience lower costs in the longer-term.

Organizational change management has the single largest correlation with digital transformation success vs. failure

When we look at the root causes of what drive implementation time, cost, and overall results, organizational change management – or lack thereof – has the largest correlation with other data in the study. Simply put, those with more comprehensive and well-executed organizational change strategies spent less time and money on their overall transformations (and vice versa).

On the surface, many assume that organizational change management is a line-item that can be reduced to save time and money. This may be true in the short-term, but our data and analysis shows that it actually increases the overall cost and undermines business benefits in the long-term. Organizational change management is clearly the #1 key to digital transformation success.

Our data reveals trends that every CXO and project team should be aware of

When analyzing data over the course of time, we identified a number of emerging trends and forward-looking findings that help provide direction to CXOs and project teams about to embark on their digital transformations. Here are a few examples of the trends we saw in the data over time:

These and other trends identified within the data are explained in more detail within the report.

Our study shows that the top ERP systems aren’t necessarily the ones you think they are

We were able to determine the top ERP systems rankings based on data in the study. We considered variables such as average implementation duration, cost, product maturity, and functional fit when comparing the systems to one another.

The rankings reveal that the top systems aren’t necessarily the ones you think they are. For example, Workday made the list of top solutions, and we identified some interesting comparison points in the SAP S/4HANA vs. Microsoft Dynamics 365 and NetSuite vs. Microsoft Dynamics 365debates. The rankings also reveal that the lines between ERP, CRM, HCM, and other technologies are blurring.

Conclusion: The digital transformation, HCM, and ERP industry is changing – are you prepared?

The bottom-line results from this study show that the industry has changed significantly in recent years. The way we analyze and learn from other digital transformations needs to evolve accordingly. This latest round of research from Third Stage Consulting is intended to provide you the data, tools, and knowledge to make your digital transformation more successful for the future.

Download the full 2019 ERP Report and analysis here.