Digital transformation process for SMEs
How to proceed?
The digital transformation is on the agenda of many companies. It is a continuous trend that is constantly being renewed by new generations of digital technologies. In almost every industry there are digital winners and losers. Many companies are currently working on new, innovative business models. A digital transformation process is now inevitable, irreversible, incredibly fast and clearly also fraught with uncertainty. This shows that digital transformation is a process that cannot be slowed down. Companies should use the opportunities offered by new technologies to pursue and exploit potential for the further development of existing business models.
However, digitalization is not just about installing software or putting a networked production system with a high level of automation into operation. The central questions that SMEs have to ask themselves are:
- Which technology should the company choose so that the corresponding benefits are generated, how can the technology be sensibly integrated into operational processes and also how the use and acceptance of employees can be ensured.
The introduction of new digital solutions is therefore more than just a technical question, it should be understood as an overall complex design task. Because technology alone never solves the problem. In addition to the technical level of the company, the organizational and social level or sphere is also influenced. The organizational sphere includes context-specific regulations such as laws, standards or company agreements, while the social level includes the regulation of communication and information exchange with employees, for example in the home office. On the technical level, in addition to the technology to be introduced, dependencies on existing systems and compatibility with hardware and software must also be taken into account. The interactions between the three spheres mentioned must be designed and taken into account accordingly. This is the only way to create the basis for digital transformation in the company.
In the process of digital transformation, two fundamental success factors for companies can be defined: “On the one hand, adequate material and resource equipment that makes change possible depending on the situation, and on the other hand, a structured approach in which all employees in the company are involved in the digital change .
Digitalization projects are therefore profound changes in companies, where connections between technical, organizational and employee-related aspects must be taken into account. This is with the aim of guaranteeing the effective use of the new technology and exploiting the full potential of the digitalization solution.
As a first step, the company must ask itself a few questions regarding the digital transformation process:
- How do existing processes and organizational procedures need to be further developed to make the best possible use of the technology?
- How can employees benefit from using the digitalization solution? Which training courses are useful?
- What contribution can the use of technology make to improving working conditions?
- Does digitalization offer the potential for new business models?
- When do we have to inform the works council about the planned change and how should we involve them further down the line?
SMEs usually lack the experience and clear selection criteria to select the right technology for the company.
Digital transformation process: The 5 phases
The transformation process with its five phases is crucial for the implementation of digitalization projects.
1st phase: inspiration phase
The inspiration phase is the starting phase in the digital transformation process. In this phase, those responsible find out about technologies and solutions. For this purpose, practical examples can be used, from your own or from other industries, in order to obtain input for specific challenges within the transformation process. The goal of the inspiration phase is to develop an image of the future or a vision for your own company. Opportunities and challenges arising from digital transformation should be identified and analyzed. This vision of the future should not only be viewed as a guideline within the company, but should also be communicated to customer and partner companies.
This first phase is about developing a vision and strategy for where you want to develop the company digitally. To put it simply, the ideal digital state of the company is worked out here, e.g. the paperless company.
2nd phase: Orientation phase
After developing the vision of the future, the second step is to determine the current situation of your own company. This is about using one Maturity model to recognize the digital maturity of the company. This also applies in comparison to other companies in the same or other industries. Based on this comparison, the fields of action within digital transformation are derived. The areas of action show the direction of development of digitalization.
Due to the establishment of the central areas of action for your own company, a digitalization strategy should be developed. This forms the basis for the implementation of the individual digital transformation processes. It defines long-term corporate goals and thus provokes an examination of the company's strengths, weaknesses, opportunities and risks.
Development of digitalization strategy
On the one hand, digitalization opens up many opportunities and possibilities for SMEs, but on the other hand, the costs incurred and the corresponding resulting benefits of future use of technology are difficult to overview and assess. Since they usually have a manageable budget for digitalization projects, bad investments should be avoided. It is therefore an urgent need to plan digital transformation processes carefully and thoughtfully. A clear vision or picture of the future is needed; the focus should be on opportunities and potential. Aligning the corporate strategy with digitalization issues is essential for SMEs and should be designed for the medium and long term.
By developing the digitalization strategy, SMEs gain a rough roadmap through which set goals or intermediate goals can be achieved.
As can be seen from the following illustration “Strategy House”, a strategy can be represented in a house shape:
This presentation is based on the overarching vision, then follows the mission, then the strategic goals are defined and finally the measures developed. The defined measures form the operational level of this model. They include the implementation or realization of strategic goals. Ultimately, they are achieved through the initially defined vision.
The development of the digitalization strategy should be viewed as a continuous process: You describe the initial situation, then weigh up the options, formulate the strategy based on this, and continuously implement and improve it with the help of strategy controlling. This is based on a new status quo or current analysis and then triggers the process again.
In order to set the starting point for implementing the digitalization strategy, it is important to plan follow-up activities, prioritize the measures and determine a chronological sequence. This can be done, for example, in the form of an action list of projects to implement the digitalization strategy. Urgent measures and those with the greatest impact should be taken first.
3rd phase: planning phase
In the third phase, the planning phase, the first pilot projects should be defined in order to be able to meet the set goals of the digitalization strategy on time. The goal of the third phase is to determine the target state. This can be determined based on the company’s digital vision and strategy. Determining the target state already provides initial indications of what measures will be necessary to move from the analyzed actual state of the orientation phase to the target state.
During the planning phase, the company should ask itself the following questions:
- What requirements do we place on the new technology to be introduced?
- What are the general conditions for the use of technology in the company?
- Which pilot projects do we want to implement?
- Which pilot project should be chosen to increase motivation for further implementation through rapid implementation and the generation of visible success?
- Which indicators should be used to monitor the projects?
4th phase: implementation phase
The planned measures are implemented in the implementation phase. The technical changes should always be implemented together with the organizational changes. The implementation of the measures processes should be designed to be participatory, because a lack of consent or involvement of employees can lead to the failure of a digitalization project. It is therefore important to involve employees in the processes at an early stage in order to increase acceptance of the new technology and change. But their integration is also essential, as they know and can assess their working environment and their activities best. Employees can therefore point out the central information on the functionalities and ways of using the new technology. Qualification measures must also be taken early on during the implementation phase. These should primarily include training. However, if these are missing, the new digital solutions cannot be used optimally and the potential of the digitalization project is therefore not implemented and exploited efficiently. In order to implement the implementation phase in a targeted manner, classic project management methods should be used.
This approach is because despite the goal, the realization and the defined vision, the path to get there is not always entirely clear. This is due to complex system landscapes within SMEs or technology that is not yet 100% mature or tested. Therefore, the target states must be broken down into intermediate goals, as several steps may be necessary to implement the defined vision.
The individual steps after the PDCA cycle are as follows:
Plan:
The target situation should be specified and the measures for implementation should be determined.
Do:
The measures are carried out or implemented.
Check:
The new current state is evaluated again.
Act:
Based on the evaluation from “check”, the next steps will be decided. It's about the decision to stabilize the transformation that has been carried out, initiate further steps and start again according to the PCDA cycle.
5th phase: evaluation and adjustment phase
The digital transformation process should only be ended after the evaluation and adaptation phase. The knowledge gained from the process steps of the previous phases can be used to establish potential for improvement and follow-up projects. Looking back at the planning phase, it can be noted how the company's digital maturity has developed and whether positive development trends can be derived based on a current industry comparison. It is also crucial whether the findings from the evaluation, inputs and changes result in the digitalization strategy and whether it needs to be adjusted accordingly. Basically, the corporate environment is changing: new competitors are entering the market, customer needs are changing, the legal framework is shifting and new technologies are emerging. It is therefore extremely important for a company to continually reflect on its visions and strategies and adapt them to these framework conditions.
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