Get the facts on digital transformation, discover Harvard research on how to build a sustainable growth system that really works, and understand which KPIs help you foster long-term profitability.

In a recent article, McKinsey defined digital transformation as “the fundamental rewiring of how an organization operates.” They added that digital transformation should have the goal to “build a competitive advantage by continuously deploying tech…  to improve customer experience and lower costs.” Then they offered a stark warning: “If leaders can’t be clear about what a digital transformation is —and align their organization around a specific program— they can’t expect it to be successful.”

Wait. What?

The team at Accounting Business Solutions (ABS) has been in the ERP industry for decades and we are each personally committed to ensuring that companies succeed in their digital transformations. It seems to us that success simply isn’t going to happen if you’re trying to base your transformation on a vague definition like the one McKinsey provided.

So, let’s talk plainly about what digital transformation is, why it matters, the steps you should follow to institute your own transformational plan, and how you can use digital transformation to drive successful sustained growth year after year.

What Is Digital Transformation? (A Clearer Definition)

To us:

Digital transformation is a systematic, strategic approach for leveraging technology in a way that encourages sustainable business growth. It does this by empowering your staff with on-demand access to metrics they can directly use to increase your company’s profitability in real time.

Successful digital transformation typically requires a modern ERP solution that supports faster decision making through real-time data that is accessible from anywhere at any time. This data should have accurate, automated updates. It should not be siloed, and instead be securely available to cross-functional teams. Most importantly, it should allow users to easily build their own insights using code-free reporting, dashboards, widgets, and visualizations.

Don’t worry. We’ll explain this more deeply throughout the rest of this article.

How Successful Digital Transformation Leads to Sustained Growth

In a previous article, we quoted research from Harvard Business Review stating that “when inflation is taken into account, most companies barely grow.” As it turns out, sustained growth is even more difficult. As another HBR article stated, “delivering sustained growth is one of the hardest things a company can do.”

Worried? Don’t be. Digital transformation is designed to overcome challenges and maximize your opportunities for sustained business growth. However, a successful digital transformation must begin with a clear strategy.

While developing your strategy, make sure to fully address these 3 key points, recommended in an article by a professor at Harvard Business School:

1. How fast should your company grow?

To answer this question, you need to first consider the factors limiting your growth right now. Think beyond financial resources. Do you have the headcount to support increased production or service levels? Can your current technology meet the communication needs of a larger number of customers and vendors, handle exponentially increased order fulfillment activities, and maintain accurate inventory counts in a faster-paced and possibly decentralized selling environment?

Once you have answered these questions and honestly considered your current growth potential, you will be able to determine how quickly your company should really grow.

2. Where should you seek new sources of demand?

To grow, you can scale in your core market, expand into adjacent products and services, or diversify across a range of different industries. Determining which one is right for you requires deep yet timely insight into which unique offerings provide you with a competitive advantage, and which are most profitable to you.

Digital transformation provides the key to the puzzle here, by delivering on-time, on-demand, in-depth and flexible insight into every aspect of your company. By integrating the right technology with all your financial and non-financial business metrics and benchmarking, and then leveraging built-in AI and machine learning tools, you can easily identify trends, spot emerging opportunities, and understand where your organization is spinning its wheels.

3. How can you amass the resources you need to support your growth?

Once you have identified your current constraints and the right avenues for your expansion, it is time to develop what HBR refers to as your growth system.

Leverage Digital Transformation to Build Your Growth System

You are probably already familiar with a growth system. It is an iterative process, similar to what the Japanese call kaizen, and its basic steps are easy to follow (but require a lot of thinking).

We thought HBR expressed the steps elegantly:

1. See where you’re unique

To build sustainable growth, you must know your unique differentiator. The right technology solutions, such as a modern ERP integrated with CRM, can help you gain insight into what customers love about you, and why they keep coming back. This is your unique differentiator.

2. Refine your processes to leverage your “uniqueness”

In this instance, we fully agree with McKinsey’s recommendation to think big. Perhaps your customers love your product’s customization options. Before leaping to simply create more customization options (a small fix), try investigating the entire customization process end-to-end, including every companywide step connected to customization.

Once you do this, you should clearly understand how the full customization process works and have ideas on how to streamline and refine it (your big fix). Tackle this bigger opportunity to delight your customers and improve your competitive stance.   

3. Break siloes

Since the previous step required you to investigate every step, companywide, connected to a process, it’s clear that addressing the problem will require you to break down siloes and bring the whole company together under one outcome-oriented operating model.

This is where digital transformation truly turbocharges your success. The right technological system will deliver one, fully integrated, single source of truth for real-time data that empowers your entire company to work togetherand reach new heights.

4. Renew insights continuously

Amidst the uncertainty of the 2020s, savvy business leaders now realize that the historical perspective offered by traditional business intelligence (BI) isn’t quite enough to keep them agile. These days, organizations must also leverage real-time data capture, as well as forward-looking planning and forecasting tools, to sustain growth over the long term.

Clearly, only digital transformation can achieve this aim, as it would literally be impossible for a human to stay on top of real-time data, every second.

The best transformational solutions are the ones that deliver real-time data through customizable, interactive, actionable dashboards, widgets, and visualizations. To make these easy-to-understand insights uniquely relevant to each employee at your company, give them the power to build their own dashboards, widgets, and visualizations using code-free tools.

5. Measure your KPIs

Sustained growth results from sustained progress. By measuring your KPIs, your company can identify how each change impacts your company, so you know where to allocate funds to maximize your growth.

But, to do that, you need to measure the right KPIs.

Tying It All Together Using KPIs to Drive Digital Transformation Success

Since the most popular modern ERP solutions provide fully customizable insight for every team member, your company truly has unlimited options for KPIs. For the first time in human history, a company could actually measure absolutely everything.

Which is not helpful.

If you measure too much, you risk missing the forest for the trees.  If you measure too little, your numbers are likely to present a skewed perspective that leads you on wild goose chases.

To achieve a happy medium, best practices suggest that you should select and blend multiple types of KPIs, reports, and alerts, so you can gain multilayered insight into the metrics that truly matter to your company. Here are some ideas to start with.

One of the reasons we appreciate Acumatica’s cloud ERP so much is that it provides users with the best of all KPI worlds, including build-your-own code-free dashboards and widgets, customizable Generic Inquiries that make flexible and on-demand reporting a breeze, and the alerts and workflows you need for your staff to take timely, appropriate action.

But, as they say, with great power comes great responsibility. Before you start setting up your multilayered KPIs, you must craft a clear KPI strategy and understand the common mistakes to avoid.

To start, we recommend that you read the white paper, “Foster Long-Term Profitability with Must-Have KPIs.”

Access the White Paper Here

 Accounting Business Solutions is a respected accounting and business management software solution provider. We provide experienced sales, consulting, implementation, training and support services for small to medium-sized companies located in south central and southeast Texas. Our portfolio of solutions includes cloud based, hosted and on-premise options.

 

Sources: 

Harvard Business Review, “How Fast Should Your Company Really Grow?”, Gary P. Pisano. HBR vol. 102, issue 2 (March – April 2024), pgs. 39-45. Online source: https://hbr.org/2024/03/how-fast-should-your-company-really-grow

Harvard Business Review, “Create a System to Grow Consistently”, Paul Blase and Paul Leinwand. HBR vol. 102, issue 2 (March – April 2024), pgs. 47-52. Online source: https://hbr.org/2024/03/create-a-system-to-grow-consistently

McKinsey & Company, “What Is Digital Transformation?”, August 7, 2024. Online source: https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-digital-transformation