I am always amazed by the frequency at which our industry changes and adjusts to buzz words. Sometimes I wonder what is more interesting, the frequency of changes to these buzz words or industry adjusting product names and acronyms to match them.
It seems like only yesterday the buzz word “modernization” was released and organizations jumped on the bandwagon. While many chose to ride the wave of modernization and quickly started defining what it meant for their organization, many were left on the sidelines, stuck on trying to figure out how to execute.
More recently, that hype has been replaced by the latest and greatest buzz around “Digital Transformation.” With that being said, let’s take a deep dive into how this paradigm shift differs from the previous “Modernization” trend.
Over the past couple of years I have been blessed to work with many organizations that have embarked on the path of modernization. They have adjusted financial structures for ease of better reporting; they have increased efficiency at order entry; and they have looked to improve in areas of “low hanging fruit” for quick win opportunities. In some cases, they had not made any changes to the system since they originally went live.
The reality is that business evolves and as it evolves we very often get caught in doing just what is necessary to keep the bus moving, or what is often referred to as production support. The release of “modernization” forced everyone to pause for a second and think about what they have done recently to update their system. What many did was look at their existing landscape, focus on their core competency, and then look to optimize something around that process. Many believed that they were going to make it easier for people in our organization to do business with.
In summary, some of the key characteristics of modernization include:
- Replacing legacy systems and processes with “modern” systems
- Updating or optimizing an existing process or a system
- Implementing new functionality based on organizational changes (ex: acquisition)
- Increasing end user satisfaction
The activities associated with maintaining and optimizing your system will never disappear. Our business processes will continue to evolve and we will continue to tweak our systems. For these investments, focus on getting the biggest bang for your buck. Look for ways to execute modernization in the most economical and fastest way possible. After all, it sure would be great to leverage some of the ROI to help fund the future of digital transformation.
While modernization is absolutely necessary for organizations to keep up with the maintenance of everyday business and the adjustments to the process, if one is truly looking to move the needle, they should start to digest the need for “digital transformation” and how this will impact their organization.
For digital transformation, I like to use the idea of a Transformer. If you ever played with a Transformer before, you know that you would change and adjust each limb one by one and in the end the object no longer looked like it did before. The one-time robot has now completely transformed to a car or dinosaur or some other completely new object. The fit, form, and function of this item has dynamically changed.
This is similar to how I view digital transformation. It is the platform that allows you to not only crunch big data, but will adjust the way that we know and do business today. Without going into too much detail, I view “digital transformation” as having one or all of these five characteristics:
- A change to the fit, form, or function of our business process
- Agile responsiveness to new business models, customer segments, and products
- Leveraging “bleeding edge” technologies to gain competitive advantage
- Employee empowerment through the push of data
- System and business alignment with social and cultural trends
While the investment for a digital transformation can far exceed what is typically consumed on a modernization effort, the benefits that can be achieved come at a magnitude that is both quantifiable and yet unimaginable. It is impossible to predict the future and full impact of the paradigm shift in which we are about to embark. However, if we plan and execute methodologically by transforming core and then adjusting one limb at a time, before you know it you may transform into a dinosaur. Not aged, but bigger and better than anyone else, eating the market and competition.
At the end of the day, both “modernization” and “digital transformation” are needed to adjust to our economy, our workforce, and our future as we know it. As far as how long this trend will last, I anticipate that it will outlive the projected end of life of ECC and far beyond the year of 2027. The net/net is that organizations will now be challenged to define what ratio of “modernization” and “digital transformation” they can bite off at one time, and what their overall roadmap looks like. These two buzz words will not be retired anytime soon.
When talking about digital transformation in an SAP environment, the conversation quickly turns to S/4HANA. To learn more about this connection and the future of SAP digital transformation, check out our Buyer’s Guide: Digital Transformation with SAP S/4HANA!