Digital transformation can help enhance collaboration, provide a better customer experience and create efficiencies, all of which can create value.

Global spending on digital transformation is expected to top $2.3 trillion by 2023 according to IDC. However, research from McKinsey showed that 70 per cent of all digital transformation initiatives do not reach their goals. While businesses are clearly willing to invest, knowing how to avoid the pitfalls is crucial to success. Management teams need to think about culture, strategy, and customers at the outset of any project.

Case Studies

TKC is a specialist distributor of doors and other components to the fitted furniture industry.

A key part of their value creation plan has been to widen the target addressable market – to do this they have introduced a complete kitchens offering (“Jigsaw”) and developed a proprietary market-disruptive technology solution – making it easier for customers to design, sell and order kitchens for their consumers.

The technology has allowed TKC to win new contracts with strategic partners, even where they do not have a full kitchen display in their branch/store. One of TKC’s partners now uses this technology exclusively to design, sell and order kitchens – proving the value of the technology and enabling TKC to win additional new business, expand existing business and widen the target addressable market.

Cutwel is a specialist distributor of cutting tools and accessories to the engineering sector. Headquartered in Cleckheaton, West Yorkshire, Cutwel sells a range of over 25,000 product lines including cutting, milling, threading and measuring tools and accessories.

Since our investment in 2018, the business has been focussed on expanding its outbound sales team to capitalise on demand from its core SME customer base in the UK engineering sector – this has resulted in a strong track record of year on year growth.

To further enhance the effectiveness of the outbound sales team the business has recently launched an upgraded B2B e-commerce platform. This will allow Cutwel to:

  • Take advantage of the rapid shift to e-commerce, which grew year on year by 18.2% in 2019* before the impact of the Covid-19 pandemic on purchasing behaviour
  • Free up capacity in the sales team for larger, more complex, and technical sales
  • Utilise data to inform marketing campaigns – dialling up digital marketing activity, maximising sales effectiveness and reducing customer acquisition cost
  • Deliver an effortless and personalised customer experience – which in turn should increase repeat orders and mitigate any risk of customer churn

* 2020 B2B Ecommerce Market Report

Learning to transform

The way businesses operate constantly faces disruption either because of new emerging technologies, changing customer demands or different market conditions. Digital transformation needs to be a priority for management teams as a result.

Every case for transformation is different and as a starting point, management teams should clearly define what they want to achieve. This helps avoid situations where firms find themselves in a long process that ultimately doesn’t achieve objectives.

Digital transformation is not just about technology, that is only one part of the puzzle. One way of approaching projects to avoid pitfalls is to ensure transformation efforts are centred around the customer. This could involve anything from the way products and services are provided to customers to the way that your team interacts with them.

By doing so, management teams can easily identify objectives and lay out a transformation strategy that the entire business can get behind.

Brett Thornton, co-founder of digital transformation specialists Loomery, explained: “For many businesses the concept of digital transformation appears either unwieldy or opaque – or both. And at the start of major digital transformation initiatives, it is true that it is not always straightforward.

“The issue is that many firms try to tackle every area of their business at once rather than define how transformation in one area of the business can lead to change elsewhere. We think this starting point should always centre around the customer. Digitisation of the product to make it more customer centric, if done correctly, is the best starting point since it creates a pull effect through a faster and more focussed approach.”

By starting this process at the customer offering it sets a direction of travel for the broader business and makes it much easier to define next steps for further transformation initiatives too.

Organisations expect digital initiatives to deliver annual growth and cost efficiencies of 5 to 10 per cent or more in the next three to five years

McKinsey

Common barriers and new technologies

Barriers to digital transformation initiatives generally fall into one of two categories. Issues in the hard infrastructure of the business, for instance legacy technology and silos between teams, or in the soft infrastructure, including culture and training.

Legacy technology estates are often viewed as the most significant challenge. An entirely new infrastructure can be quite an investment. Luckily, for most businesses, old infrastructure doesn’t necessarily prohibit transformation. Early on, management teams should assess the limitations of their existing infrastructure and any investment needed to either upgrade systems or find ways of working around them.

From a technology standpoint, cloud computing is incredibly valuable in that it is much more flexible than on-premise IT estates and enables future change within the business as it grows. During the COVID-19 pandemic, allowing employees to safely work from home when required has been critical for many businesses. Having access to data wherever you are has never been more important. Additionally, it can also act as a renewed way of storing, analysing and drawing insight from data – which is fundamental to a successful transformation project.

James Doggart, chief executive at Cloud Technology Solutions – a cloud specialist and NorthEdge portfolio company, explains: “Migration to the cloud can lead to a series of benefits for businesses as they transform. For instance, using Google’s platforms can enhance collaboration between teams – helping to break down silos.

“The use of cloud systems also prepares the business to use disruptive technology like AI or Machine Learning (ML) – which can analyse data quickly and efficiently. Because data can be analysed in real time it helps management teams make better decisions faster.”

Thinking about the soft infrastructure – culture, training and change management – that comes with transformation efforts, management teams should think of the best ways of bringing everyone in the business along the journey at the outset of projects. Focussing on customer-led transformation is something everyone in the business can get behind and makes this much easier to achieve successfully.

Transformation will forever be on the agenda for businesses as customer habits evolve, employees demand new ways of working and market conditions fluctuate. Businesses that can familiarise themselves with transformation while avoiding the pitfalls will prime themselves for ongoing value creation for years to come.

94 per cent of enterprises use at least one cloud service as part of their organisation

Impact Networking

The role of private equity in delivering digital transformation

As well as supporting firms through investment and active partnership, we can also bring different perspectives on how businesses can evolve to meet the needs of customers and employees, as well as achieving scale.

We support management teams deliver meaningful change, through connecting people in our portfolio with other businesses who’ve been through similar transformation projects and supporting firms in selecting the right partner to help drive change in the business.

57 per cent of organisations struggle with data silos that act as a barrier to meeting business objectives.

Impact Networking

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