Being Digital: Plan, Move, Win!

By Dr. Nick McGaughey, CPA

Being digital refers to technology connections, integrations, and interactions between people, processes and data, functions, and products/services (things). Being digital is about gaining a visible edge in the war game with competitors to capture as much time, attention, and money from the marketplace as possible. This article explores some aspects of being digital.

Being digital is much more than adopting or changing technology. Digitization is small change and impact from new technology. Being digital is big change and impact from new processes and data, culture and talent, business model, and infrastructure.

Chess involves planning the moves, making the moves, and using the moves to win. Chess is a strategy game; Being digital is a strategy game. Like chess, the endgame in digital begins with the right moves. A robust digital strategy helps ensure that the dealer gets the most from its people and digital investments by aligning them with the critical moves driving superior results. Avoid moves that are slow, bumpy, and no-win.

The right moves for a dealership are contingent on each dealer’s unique situation or circumstances. One digital transformation framework does not fit all dealers. All machinery organizations have different technology starting points, different business models, plus different capabilities and destinations. Each dealer is affected by local trends, the competitive landscape, and their equipment vendor strategies and offerings. Alternative technology options are not self-evident and must be identified through research, exploration, and, sometimes, experimentation. Consequently, options have different infrastructures, features, benefits, costs, risks, and time needs. Recognize that the business operations may need to be modified to fit the technology. Many times, the technology is rigid and cannot easily or will not fit the unique business details.

Transform Agenda

An agenda is a list of items to be considered or done. This section covers some transition items that should be top of mind for every organization.

Buyer beware – There should be no surprises about the procurement! Sourcing technology is a complex matter with many choices. The technology solutions and their providers must be fully investigated and understood. At a minimum, be skeptical (or paranoid) and verify everything. Also, have an exit plan from the purchase should abandonment be necessary.

To cloud or not to cloud is a gigantic, up-front consideration. The ‘cloud’ is a term used to describe a third-party network of remote global servers connected via the Internet. These off-premise servers store, process, and protect data. This data can be accessed anytime from any internet-connected device. There is a fast migration to cloud computing, which offers an advantage of spreading out costs through ongoing subscriptions. Cloud computing, along with cybersecurity and data analytics, are top spending areas. A dealer could have no cloud, cloud mix (both on-site and remote), or all cloud. A cloud mix example could have ERP (Enterprise Resource Planning) running on internal servers and CRM (Customer Relationship Management) running on external servers.

How much to spend on being digital? Spending rates of at least 3% of net revenues are needed every period to deliver high results and rapid paybacks. Those who have been underspending in the recent past may need to spend more in the near future. A common critical factor is the expected and actual payback period for digital investments. Aim to deliver faster payback, within as little as one year for most projects.

Usually, focusing on the two or three most valuable use cases lends greater clarity and delivers the best results. It is important to manage priority initiatives as a portfolio and roll out the ones with short-term impact first. This helps fund the journey by freeing up capital and releasing resources needed for more strategic, high-impact priorities down the road. A portfolio approach also makes it possible to demonstrate progress.

Remember the 80/20 rule! It gives a view into where there is real value. (The rule is simple – 80% of outcomes result from 20% of efforts.) Ask the key value questions; What value will be delivered; where will value be delivered; who will deliver value; when will value be delivered; and finally, how will value be delivered are key starting points to focus initial efforts.

Digital technology has changed how customers search, buy and interact with dealers. Technology moves to the front office will support better customer outcomes and lower the cost-to-sell and serve. A digital path should start in the front office with digital innovation to achieve real customer value.

Digital Strategy

The essence of a digital strategy is choosing what to do (and what not to do), plus how to do it (and how not to do it). The digital strategy will serve as the hub of a customer centric, technology-enabled dealership.

Strategy, not technology, drives digital transformation and optimization. Thereby, every dealer needs its digital strategy and supporting technology roadmap for the identification, justification, migration, and orchestration of technologies to elevate business performance and achieve sustainable change. A digital strategy must be created, documented, communicated, and updated. A digital strategy should be created within ninety days and updated or refreshed every ninety days.

There is no doubt that technology will be at the center of a digital strategy to improve existing day-to-day operations and business profit models. However, successful transformation often requires organizational culture shifts to make the improvements and to have them stick. A supportive culture means new ways of thinking, working, and leading. Existing employees must be upskilled and new talent hired to fill knowledge gaps.

Companies trying to digitally transform to be agile and future-ready must change employees: why they do their work, how they see their work, and how they do their work. Leaders and employees often feel overwhelmed by the adaptations required of them individually and collectively in the digital journey. Leaders must be empathic about the stress employees feel as they grapple with the complexity and revolution that comes with digital transformation. Over time, the opportunity to deliver on a shared purpose (plus rewards) helps align and motivate people.

An organization’s digital ambition and strategy – the amount of digital change they would like to pursue and how they expect to accomplish it – should be contained in a brief strategy document. Exhibit 1 (Below) provides a strategy document outline. Exhibit 1: Strategy Document Outline.

Exhibit 1: Strategy Document Outline

1Summary statement of strategy and outcomes to achieve. Addresses the vision, evolution, priorities, resources, responsibilities, and timeline.
2Levers for change to be implemented with discipline.
3Barriers to achievement, such as funding, investment governance, and talent.
Funding goes where it is most needed and most productive.
4Scoreboard for measuring progress and outcomes. Enterprise-wide
measures could include revenue growth, return on invested capital (ROIC),
increased operating margin, and gross margin return on inventory (GMROI).

A strategy document presents the ‘Big Picture.’ The document should be concise at 5-6 pages.

Here – There – Everywhere

Digital is here, there, and everywhere in the business world. Machinery dealers can accomplish this status by:

• Assessing the strategic impact of being digital on customers and operations;
• Setting being-digital ambitions high to have a sense of importance and urgency;
• Placing big being-digital bets and priorities on high-value projects;
• Investing where the impact (benefits) greatly exceeds the spend (costs);
• Building new strategic strengths by adding capabilities and changing culture at a fast pace; and
• Managing the transition for both adoption and adaptation.

This article highlights the importance of a strong digital strategy and how to accomplish it. Exhibit 2 (Below) lists 10 top success factors for tech projects. The factors are not given in any order of importance, since the importance will change over the project’s life.

Exhibit 2: Top success factors for tech projects

1Executive support
2User involvement
3Experienced project manager
4Clear business objectives
5Minimized scope
6Standard software infrastructure
7Fixed basic requirements
8Formal methodology
9Reliable estimates
10Sufficient resources

Three realities for tech projects are: over budget, missed schedule, and many unhappy! Paying attention to the success factors can change these events.

Stay targeted: Ignore the Metaverse (a virtual world) until 2030. Metaverse is touted as the next version of the Internet.

Dr. Nick McGaughey, CPA is a member of the Board of Advisors at The McDonald Group, Inc.