When making the case for digital transformation within your source to pay organization, too many organizations focus on the tactical pains that users experience. A well built business plan will outline the existing issues in quantifiable metrics, and align the proposed solution to these problems, highlighting the benefits the organization will see in measurable terms. To build a successful business case for your digital transformation initiative, make sure to follow the following 5 steps:
Following on from our blog post – [5 Signs Your Source to Pay Organization Needs to Undergo a Digital Transformation] – the next step in your journey is to make the business case for digital transformation within your procurement organization.
Businesses across the globe are utilizing digital technologies ranging from software, AI and workflow streamlining, to robotic and mechanical automation, to transform their businesses in a number of ways – improving productivity, profitability, security, regulatory compliance and cycle times, as well as mitigating risks and improving the visibility of performance related data.
Within Source-To-Pay (S2P), digital transformation focuses on one or more of the following business functions:
There are huge gains to be achieved in addressing the key issues in these areas through digital transformation, but taking the correct approach is vital to avoiding pitfalls. According to Gartner, “91% of organizations are engaged in some form of digital initiative”, yet they also report that only “40% have reached scale for their digital initiatives”. [Digitalization Strategy for Business Transformation | Gartner]
Common reasons cited for digital transformation initiatives stalling:
In this post, we’ll guide you in making a case for the digital transformation that avoids these pitfalls.
Communication is key. High-level stakeholders within an organization are more amenable to ideas they’ve been actively involved in. Surprises are rarely welcomed! So, communicate your ideas to them early and ensure they understand what is being proposed and what’s in it for them. Explain the approach and ask for any and all input they are willing to contribute. Part of your overall strategy should be to keep them informed and to seek their feedback as you progress. You should have their support to be successful, so communicate early and often.
To make a good business case for change, first clearly define your current problems in a measurable way.
Assess the current state of each business process using clearly defined metrics. Data makes the strongest argument, so analyze your data carefully in a quantifiable way in order to illustrate the problem areas. You must be able to answer questions like; “what is this costing us” and “what are the benefits of this change.”
Gather data about your processes. Some common examples of key metrics include:
This all helps to paint an objective picture that can inform the correct approach and make your case for change.
Talking to those involved in each business area provides key insights and fills gaps that raw data alone doesn’t show, answering the “why” and the “how” questions relating to your data. Use the data gathered to drive discussions with your teams to glean further information.
The following questions can help uncover details into where process inefficiencies can be found, and the root causes:
Your qualitative and quantitative analysis may uncover several areas for optimization across your source-to-pay function. It is important to prioritize the opportunities based on value to the organization, as well as by the expected effort. In many cases, starting with lower value opportunities that are easily addressed can build value, support, and momentum for future optimization. If there is support and available resources to tackle a high value, high complexity opportunity, it might make sense to make it the top priority.
In any case, it is critical that each opportunity is evaluated and prioritized. This results in an improvement roadmap for your organization.
Understanding the depth and scale of your areas for opportunity, it’s equally important to quantify what addressing them will look like in realistic, measurable terms. This will guide your strategy on whether to acquire new S2P solution(s) or invest in your existing technology. Within in S2P, digital solutions excel at addressing such issues as data capture, data transmission, data visibility, workflow automation, exception handling, risk mitigation, compliance tracking and systems integration. The extent to which these issues can be addressed by a digital solution will depend on numerous factors:
Digital solutions can now be assessed on how well their capabilities stack up against your problems. This is a key step. There is no “one size fits all” system out there. Some solutions will score better in certain S2P business functions than others. You need to find the solution that is a best fit for your business and your problems. So, carrying out careful research is time well spent. You should, once again, come up with a scoring system based on both ROI provided by each solution as well as alignment with the vision and goals of the organization.
Once you’ve done this research, compile a shortlist, listing strengths and weaknesses. Then, go a step further and ask for customer referrals. Ask probing questions:
These are just some examples but asking good questions of people who have been through the process will give you key insights not available from online reviews and rankings alone.
At the end of this process, a clear front-runner should emerge. In the unlikely event that there are multiple solutions with a difference between them that’s too close to call, then seek further customer testimonials or reach out to high-level stakeholders for their feedback to help you reach a decision. Try to avoid having suppliers bid against one another if possible. They may not be willing to do this and a supplier forced to lower their price too much may be less forgiving when you need them to go the extra mile.
With a solution selected, you’re ready to outline a strategy for digital transformation.
Armed with your data, your user and stakeholder feedback and your solution scoring metrics, the next step is to outline a strategy for implementation.
By the end of your implementation, you should be able to clearly measure the success of the project. So, define your success criteria clearly, make sure they are reasonable in line with the solution capabilities and the other factors considered during your solution assessment.
Sticking with the theme of “communicate early and often”, ensure your overall strategy includes communication with the stakeholders both within the business and external. Not just senior management and department heads but all those either involved in the implementation itself or affected by the changes being implemented. Stakeholders should understand what’s coming, when, how they will be impacted and what will be expected of them.
Provide a detailed, realistic, cost breakdown including:
Whether you opt for “big bang” or a phased implementation, you should have a high-level project plan outlined which includes milestones and stage reviews with a project board. Make sure this aligns with the implementation methodology employed by the solution supplier as much as possible.
Spend time preparing a presentation to the board. You should now have all the information required to walk them through the entire digital transformation journey:
When an organization’s people, processes, and technology are not optimized and aligned, the result will often be a long list of manual processes and tasks that users must complete on a regular basis. This activity is a clear signal that the company could benefit from a digital transformation. However, these inefficiencies by them self do not make a compelling business case.
To build a compelling business case, there must first be internal alignment from management that there may be issues that warrant investigation (alignment). Once this is in place, the current state inefficiencies need to be defined in measurable terms. For example, “John spends a lot of his time entering invoices to ERP” is not nearly compelling as “We invest 20 hours a month entering invoices to ERP, and another 30 reprocessing invoices due to data entry errors. With a fully burdened rate of $X/ hour, this costs our company $Y per month”.
Once the problem has been thoroughly defined, align your proposed solution with the problem using hard numbers. How much time will be saved that can be used for more strategic work? How much growth would the proposed solution allow the department(s) to absorb without adding headcount?
Finally, before you present your business case, make sure that you have a well-thought-out plan. Highlight the project strategy, and include conservative cost estimates that include the known hard dollar costs, contingencies, as well as internal resources that will need to be utilized.
Most digital transformation initiatives that are not approved are not due to a lack of need within the organization. In most cases, the steps outlined above were not followed, and while the business felt real pain, the problem, benefit, and strategic value were not well conveyed to leadership. If the business case is not well constructed and presented, then the status quo will be around for years to come.