Digital Transformation - who transforms the transformers?

23.06.20 09:43 AM By Matt Koopmans

The last decade was filled with the term: Digital Transformation. The "Cloud" was going to bring the "fourth industrial revolution". There certainly have been some changes in the last decade, but a revolution? - Far from it. A much larger and faster transformation occurred during the unfortunate events of the COVID-19 lock-down. And more importantly - how have the software vendors and system integrators transformed themselves?

The fourth industrial revolution will not be like this

The fourth industrial revolution? - a recap

If Digital is supposed to bring the fourth industrial revolution, what would it look like? Is it really a "revolution" we should expect, or more an "evolution"? Let's mirror this against the other three industrial revolutions:

  1. Local power - the industrialisation of manufacturing and transport, which was initiated with the access of mechanical  steam driven power, provided an option for people to "make a living" outside of the land where they "belonged" - it heralded the age of "serfdom" for many with opportunities by working as a labourer in a factory. It also enabled inter-provincial transport via steam powered trains - a cheap and reliable land transport method.
  2. Transportable power - with the replacement of steam-power with electric power came the ability to distribute the power across large distances. Where a steam-engine could only power a single plant, with limited machines, electric power provided the ability to power almost anything, large and small, at any place accessible to power lines. The other, much more revolutionary effect came from the invention of the light bulb. The productive time of a day has increased to include twilight and darkness (a major addition of productivity in winter-months in areas removed from the equator) - and not only productivity, but also learning, as books could be read in evening hours.
  3. ICT - the global information and communication revolution changed the way where we work, how we work, and at what speed. Especially decision time has decreased, while the data available to make a decision as increased (whether this has led to better decisions remains to be seen). One may argue we are not yet out of this stage of industrial revolution, but area at the tail-end of the changes.

That leads us to the fourth industrial revolution - it has been talked about, even announced, as at our doorsteps. In this revolution, we are expected to see ubiquitous computing power, AI, robotics, 3D printing, and neuro-electronic interfaces providing low cost, high productivity to all. In this revolution, we would be expected to see many elements of creation and production shifted from humans to "intelligent machines". For a good background on these predictions, it is good to read the thoughts of Klaus Schwab.

Transformation? Really?

This article is not a critique on the vision of the fourth industrial revolution - predictions of the future are always a prediction. Eventually, parts of the (educated) prediction will come true, and other parts will have completely missed the mark. As such, one should be very careful not to fall into the hype of what could be, and deliver small increments of what can be achieved today. Revolution is nothing but a culmination of multiple incremental changes implemented in succession and with positive outcome (at least, if you want your revolution to last).

The transformation is not something you buy off the shelf. It is not a "sign here for your digital revolution" - no matter how much software and service vendors would love you to buy into that notion (with your hard earned cash). Cloud and AI in itself are enablers, not the drivers. And this brings us to the topic at hand: can you truly transform your business if those in charge haven't fully transformed themselves?


Case in point - the "digital transformation program"

The digital transformation program is more often than not "executed" by the same implementation team as the ERP, CRM, or other ICT driven project of a decade ago. The processes are quite similar to those of the '90's. A large group of people (consultants, business analysts, developers, project managers) that would not be around in your day-to-day operations, spend time with people in your business designing, building, testing, and deploying a new system. These projects tend to be large. With the successful move of software vendors from on-premise perpetual licence models to the cloud where software is licensed via subscriptions, there is more often than not still a significant investment up-front to implement the software. This investment is large enough to be considered a capital expenditure, and not an operational expense. An analogy: renting a car, and replacing the stock stereo with a $10.000 custom audiophile grade custom car stereo - the moment your rental agreement expires, your custom car stereo is useless.

The result of these transformational projects is statistically still disastrous - a failure rate of around 70% is still the norm. The reason is that the size of the change is too large. Too many things altered in a process make the outcome unpredictable. If you want to tweak a system, you change one variable at the time, and measure the result. Change too many variables, and the outcome is unpredictable, but also the causality is difficult (if not impossible) to unravel. One may ask "if the success rate is so low, why is this model still prevalent as the model sold?" - The answer is simple: inertia. If you have a significantly sized team of implementation experts, and your business model is to sell their time - then that is what you are going to do. The Key Performance Indicators of a services practice have very little to you with your outcome - it is measured in KPI's such as billable utilisation, bench time, new work sold, revenue.

Turning the Fail into Forwards

Humans as a species do not like change. Regardless of culture and background, we simply abhor large changes. However, we are very adaptable to small incremental changes. We event thrive in it. The above described Industrial Revolutions may have happened like "over night" on the scale of human history, the changes were much more gradual. One assembly line at the time.

If you want to successfully transform your business, the best way to do that is one element at the time, one improvement after the next. A large team driving massive changes (which take months, if not years, to implement - after which your business conditions have changed and the delivered system is out of date the moment you turn it on) has no place in incremental evolutionary processes.

Aurelian Group offers customers the option of combining the service and the software into a single subscription - covering licensing, implementation, support, maintenance, and enhancements into an operational expense is the answer to combat the failure rate of transformational programs. Not only is the investment much smaller overall - the changes are easier to absorb by the organisation, and with a continuous cycle of small incremental changes it is possible to measure the results of these changes individually. Furthermore, the Aurelian Group Affiliate Partner Program enables customers to add operational services to the subscription, such as Accounts Receivable Management with Paycepaid, or Payroll Processing with CloudPayroll. The plans are paced based on the size of the organisation - the velocity of change is scaled to what your business can absorb.

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