Much has been said about the importance of digitalisation. It is already evident that businesses with a digital presence have fared better than those that had to scramble to set up online stores or work-from-home systems when caught out by the pandemic.
But how does one go about implementing a digital transformation and what are the pitfalls to avoid? Digital Edge speaks to Alvin Gan, who heads the IT-enabled transformation practice at KPMG in Malaysia.
Digital Edge: What questions should business leaders ask themselves before embarking on digital transformation?
Gan: IT strategies must be guided by business strategies. When we go to an organisation, I ask for its business strategy first. You need to understand where the business is heading. For instance, do you want to set up more retail outlets? Or do you want to provide more services online?
Don’t look at technology in isolation. Understand your business needs, the industry’s opportunities for digital disruption and your customers’ preferences first before deciding what technology or digital transformation you want.
Once you understand those elements, look at the organisation from three perspectives: the front, middle and back offices. Inefficiencies in the middle and back offices can be your weakest point.
You can’t just increase the use of technology in the front office but still use legacy financial systems that cannot compute fast enough or provide you with relevant information in the middle or back offices.
Who should be in charge?
The digital transformation plan is a blueprint that guides the organisation through the next three to five years. Based on this roadmap, the organisation will come up with initiatives, like introducing a mobile-focused technology product or Internet-of-Things-driven solution.
If it’s a business-focused initiative, we will sit down with the management team and say that we want the chief business officer to lead it with the support of the IT department.
Previously, the IT department was expected to lead anything to do with technology. But it may not know the business as well as the other departments, so the business units have to play a role in digital transformation as well.
Also, if technology adoption is on the agenda of the CEO and board, it’s good because they can drive the discussion.
Additionally, a lot of people used think of the IT department as a support department. But today, the IT department needs to play a partner role.
It needs to work together with the business department to set the direction for the transformation. This means the IT department also needs to elevate its skills and contribute to the organisation instead of just staying in the back office.
What are some common challenges businesses face?
One of the challenges we see is that the IT department is very traditional. There is a high demand for the IT department to play a big role in digital transformation but a lot of the staff don’t have the right skills. Today, everything is on the cloud and people are using new programming languages.
Secondly, the whole organisation has to be ready for digital transformation, not just the IT department. If there is no buy-in from people in the organisation, that’s a problem.
Thirdly, a common problem we see is data or systems that are sitting in silos, so the business doesn’t have a full perspective of its customers. If the information is sitting in different databases, how can the business cross-sell or understand the customers’ buying patterns? This is [an] important [point] to address since customer experience is emphasised nowadays.
Another challenge is data availability and reliability. How accurate is the data in your system? Oftentimes, data is all over the place and the quality is questionable owing to manual intervention in the systems.
Lastly, IT governance and controls are a problem. Do you have enough security and controls to make sure people cannot manipulate the information in the system?
How much should businesses budget for digital transformation?
The budget needs to be aligned with where the business is heading. Our perspective is to prioritise the business’ needs and target the low-hanging fruits. What can you do quickly because you have business challenges to solve, like improving efficiency or having better engagement with customers?
I also help businesses look at alternatives. Typically, they look at bigger players in the market that are more established technology providers. But some businesses have also asked me to look at services by start-ups, which may not have as much track record but are more agile.
We need to go into discussions on how to prioritise solutions on a limited budget, and it has to involve the business and technology teams.
What are some other things businesses need to pay attention to?
Data management and governance is very important. The quality of data is still a problem in many organisations, which have siloed systems and legacy problems. If you want to go for deeper tech like artificial intelligence and machine learning, lack of high-quality data is going to be a problem.
Other areas to look at include how you can personalise services to your customers. This again boils down to data. Customers are becoming more demanding. How can you put your business together to understand your customers better?
Digital trust is also important. There are five areas under this topic, comprising transparency, where consumers are demanding greater visibility on how their data is being used; credibility, security, reliability and integrity.