Tech Radar 7th Edition: Digital Transformation Guide

Discover the latest tech trends driving business resilience. Learn how leading organizations are leveraging AI and other technologies to stay agile and thrive in today’s dynamic landscape.

Key takeaways that will propel your business into a future of digital excellence and strategic advantage :

  • Stay Ahead of the Curve: Explore cutting-edge technologies such as AI, IoT, and blockchain
  • Adapt with Confidence: Gain insights into market shifts and emerging trends
  • Enhance Agility: Discover how digital transformation enables organizations to adapt quickly to disruptions and changes
  • Drive Growth: Learn how to leverage technology to fuel innovation and seize new opportunities

Discover how to anticipate market pressures and leverage technology to address them effectively.

Download the 7th Edition of Tech Radar and Build a Business that’s Future-Ready Now!


ESG: definition, criteria and their widespread corporate adoption

Breaking down ESG terminology  

Sustainable development, a term that first appeared in the 1980s in the report by the UN’s World Commission on Environment and Development, lay the groundwork for future environmental action. It is defined as “development meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Initially, sustainable development only dealt with preserving the planet. The definition later evolved to include environmental, social and economic categories.  

From an organizational and business standpoint, sustainable development is generally associated with the concept of corporate social responsibility (CSR). A term widely used in the 1990s, CSR can be seen as a company’s contribution to sustainable development. The rise of CSR may, in large part, be explained by modern society’s increased awareness of environmental and social problems. In addition to global warming and the soaring number of natural disasters, many populations are facing precarious situations. According to a 2018 report by the World Bank, about “143 million people could be displaced due to climate change, especially as a result of water shortages, poor harvests, flooding, etc. Social movements like Black Lives Matter and #MeToo have also raised awareness around certain social issues over the last decade. CSR is a method of governance that has emerged as a major investment factor. The concept, often referred to as the Triple Bottom Line (TPL), encourages businesses not only to focus on their financial performance, but also on their environmental and social impact. TPL states that a company must be concerned with not one, but three growth objectives: profits, people and the planet.  

But where do environmental, social and governance (ESG) criteria come in? Though the terms are often used interchangeably, CSR and ESG actually go hand in hand. ESG is an acronym referring to environmental, social and governance criteria. It is a tool for measuring a company’s commitment to social responsibility. In other words, ESG criteria comprise the totality of measures and principles for assessing companies’ non-financial performance data.” ESG criteria make it possible to assess the level of a company’s social responsibility for the purpose of attaining its sustainable development objectives.  

ESG criteria  

Although ESG is very important, it is not always well understood and is often perceived as having conflicting aims. Opinions on ESG factors vary even among experts, which further complicates how we assess a company’s ESG performance. Here are a few key elements of ESG criteria.  

E for Environment

The environmental category mainly covers decarbonization, pollution, biodiversity and natural resources. There is consensus that the environmental aspect should be the guiding priority for corporations. This is, among other things, the factor where investments are increasing the most. Companies feel the urgency to take climate change action and many have already set carbon neutrality objectives (e.g., Formula 1) for the coming years. However, these goals have programs that focus predominantly on Scope 1 and 2 (direct and indirect emissions), when they should be more focused on Scope 3 (emissions indirectly related to company activities). The latter account for up to 50% of a company’s total emissions 

 

S for Social

The social aspect is concerned with issues like diversity, inclusion, health, safety and human rights. It has been observed that some companies are including different aspects of diversity (e.g., sex, visible minorities, Indigenous peoples, the handicapped, veterans and LGBTQ2S) in their internal representation objectives. The notions of diversity and inclusion go even farther if we consider, for example, neurodiversity and digital inclusion 

 

G for Governance

Lastly, the governance aspect covers organizational structure, risk management and ethics. The governance method makes it possible to attain specific environmental and social objectives. However, it has been established that this is the least frequently addressed criterion among the ESG dimensions. According to a recent Canadian study, 64% of companies declared that ESG issues are considered within their corporate strategy, but only 25% say that their board has a solid understanding of the risks. The chance of actually attaining environmental and social objectives is low if companies do not establish sound governance practices. Companies must develop a firm understanding of and expertise in governance so that ESG actions and impacts are reflected in all of their activities.  

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Why is ESG becoming more popular?  

One of the main reasons for the widespread adoption of an ESG approach is all the pressure exerted on companies. According to a report by Gartner, clients (63%), investors (48%) and regulators (46%) are the three main stakeholders pushing companies to take action on sustainability. They are strongly influenced by disruptions and challenges occurring around the world.  

To begin with, we must consider the repercussions from the global pandemic, which played a significant role in accelerating companies’ adoption of ESG criteria. COVID-19 and its associated consequences prompted investors to pay much closer attention to problems related to ESG (specifically the social aspect). The pandemic forced companies to face new social and governance challenges. This exacerbated certain social problems, further pushing companies to take the lead on environmental, social and governance issues.  

The new wave of young investors may also contribute to the expansion of corporate ESG by introducing new values. According to a study, 80% of investors say they consider ESG as an important factor in their investment decisions. Here, we are referring to socially responsible investing(SRI), a term defined as “an investment approach that includes ESG criteria when selecting and managing placements and investments.”  

ESG progress also ramped up as a result of stricter norms and standards, especially with regard to the environment (COP26, international ISO standards, government plans, etc.), requiring companies to publish more credible ESG data. Take, for example, the creation of the International Sustainability Standards Board (ISSB), developed within the scope of COP26, which makes it possible to establish clear ESG standards for making environmental financial disclosures internationally. Third-party organizations (S&P Global, MSCI and Refinity) have finalized an ESG performance measurement tool.  

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Putting ESG at the heart of a company’s mission  

Over the next few years, we can expect a sharp increase in the number of companies considering ESG approaches. ESG will top the list of organizational priorities, be it to attract more investors, satisfy stakeholder requirements and/or have a positive social impact. More ESG data being published in company reports and the increased pressure on companies, there is a risk of greenwashing. Some are concerned that companies may project a false image to enjoy the benefits of being associated with CSR. The ESG criteria disclosed by companies must reflect real action and change. For this to be possible, companies must make ESG principles the very bedrock of their mission.  

To learn more, download the 2023 Tech Radar

Digital sobriety: a responsible corporate approach

Climate change is a major challenge facing modern society. Attaining carbon neutrality by 2050 has been an international objective to fight climate change since the release of the 2018 IPPC report. The need to take action is becoming more urgent than ever before, and several major players (countries, cities, companies, investors, etc.) have already taken steps toward carbon neutrality. To attain these sustainability objectives, we must take into account every factor that could directly or indirectly harm the planet. Although very few people are aware of its environmental impact, digital technology has significant repercussions that must be taken into consideration. Given that our world is becoming increasingly digitalized, it’s essential to form a better understanding of the impact of our digital use.  

The impacts of digital technology  

Environmental  

Despite often being eco-friendly technology still has a number of environmental drawbacks. Studies have shown that 4% of greenhouse gases in the world are a product of digital consumption. By 2025, this percentage is estimated to double to 8%. Digital carbon footprint refers to the amount of CO2e* emitted by information technology and communication (ITC) related activities. According to an ADEME report, digital emissions are produced by data centres (25%), network infrastructure (28%) and consumer devices (47%) such as computers, cellphones and tablets. To understand the digital pollution associated with electronic devices, everything from their life cycle and manufacturing to waste management must be considered. Many studies reveal the majority of CO2e is generated during the manufacturing phase. In 2020, an estimated 50 million tonnes of electrical and electronic waste was produced, of which less than 20% was recycled.  

*It’s important to understand the difference between CO2 and CO2e in order to understand its environmental impact. CO2e, or carbon dioxide equivalent, is an international norm for calculating all environmental impacts beyond just carbon dioxide emissions. In other words, it is an aggregate of pollution data that serves as a comparative indicator. 

The negative impacts notwithstanding, new technologies have been shown to have many benefits and boost efficiency gains while reducing many companies’ greenhouse gas emissions It is worthwhile to discuss the concept of rebound effects here. This describes the phenomenon by which any energy and material savings from technological advances are cancelled out by our tendency to consume more. The advent of 5G, for example, could have major consequences for the environment. Though more efficient than 4G, 5G does consume more energy. Ecologists are debating the rebound effect of widespread 5G deployment, which will increase data consumption and telecommunication use. Yes, technological advances (e.g., artificial intelligence) may have positive implications for the environment, but their negative impacts and the rebound effects shouldn’t be downplayed.  

Social  

In addition to having a considerable impact on the environment, digital technology has social repercussions. Hyperconnectivity is an issue that has been discussed for quite some time. The pervasiveness of technology can have negative consequences, especially on mental health. The coronavirus pandemic and multiple lockdowns have caused digital technology use to skyrocket. For example, COVID-19 has altered the way we work, forcing us to remain constantly connected through our electronic devices. The pandemic has contributed to increased awareness around digital overconsumption. To counter this hyperconnectivity and its repercussions on mental health, a new law has recently been adopted by the government of Ontario requiring employers to respect their employees’ right to disconnect. The pandemic has also highlighted social digital disparities. Certain groups, such as Indigenous peoples, low-income households, the elderly and new arrivals, do not enjoy full access to the economic, social and educational benefits of digital technology.  

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CDR: A new paradigm  

In an era when digital technology has led to major changes in our lives and created multiple business opportunities, new ethical questions and responsibilities have emerged regarding its use. These new responsibilities have recently led to the development of the concept of corporate digital responsibility (CDR). CDR isa set of practices and behaviours that help an organization use data and digital technologies in ways that are perceived as socially, economically, and environmentally responsible.” Just like corporate social responsibility (CSR), CDR is considered a type of governance. When placed at the core of a business’s values and mission, CDR governs all decision-making and extends beyond regulations to allow companies to have a positive impact on the planet and society.  

Digital sobriety: A simple solution  

Digital sobriety, a concept that emerged in the 2000s, proposes we reconsider our digital technology use in order to reduce its negative societal and environmental impacts. The concept itself is about technological tool use and involves a paradigm shift in our consumption habits. Although a relatively recent concept, digital sobriety is increasingly gaining traction in a world that’s ever more conscious of social and environmental causes. Digital sobriety is therefore an easy solution for both individuals and companies to adopt, as it is aimed primarily at modifying behaviour, unlike other aspects of CDR which often entail major changes. For example, using servers powered by clean energy requires substantial analyses and investment. It’s therefore not true that reducing our digital footprint is complex. We can take action by changing the way we use technology.  

Digital sobriety aligns with the “5 R’s” developed by the BureauVert group in France:  

Refuse

to accept the current consumption model for technological products, namely the frequent replacement of devices and planned obsolescence.  

Reduce

your Internet and electronic device use by disconnecting from sites you are not consulting and shutting off your devices at night. 

Reuse

available digital resources instead of charging them or creating new electronic documents. 

Recycle

old electronic devices at collection centres rather than keeping them at home or throwing them out in the regular trash. 

Reconnect

with nature by spending time without your electronic devices.  

 

There are already several concrete steps you can take to reduce your technological footprint. For example, extending the lifespan of your electronic devices. As our energy in Québec is, mostly, clean, 80% of greenhouse gas emissions are produced during manufacturing. If each of us slowed the rate at which we bought new devices by repairing or upgrading our existing devices, this would have major environmental benefits. Other habits such as shutting off devices at night and on the weekends would save significant amounts of kWh and extend the lifespan of these devices. Internet users can also include a link instead of adding large attachments to an e-mail and limit their video calls.  

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A responsible corporate approach 

While individuals do have a role to play in reducing their digital footprint, companies can play a larger one through digital sobriety, since 55% of carbon emissions from technology are associated with the use of electronic tools or data processing (e.g., terminals, data centres and networks). As Canadian companies are responsible for a significant amount of energy consumption (up to 84%) and over half of them have undergone digital transformation, it is crucial they address their digital footprint. It is predicted that over the next few years, green strategies and initiatives for digital footprint reduction will be seen as a differentiation factor for all industries.  

As the first B Corp certified consulting firm, Talsom has experience in helping others get certified. Thanks to our varied expertise, we can guide you through the audit phase so you can obtain or maintain your certification. We can also assist you with evaluating the amount of CO2e linked to your company’s digital technology use.  

Learn more by downloading the 2023 Tech Radar.

How do you make DEI sustainable within your organization?

With ESG criteria becoming more important in the business world and increased external pressure from investors, regulators and consumers to do more in this area, corporate management needs to do a lot of soul-searching. Of course when we talk about ESG, we often think of the environment, but we can’t overlook the social and governance aspects. A central theme of these two aspects is diversity, which is often referred to as DEI for a more encompassing definition: diversity, equity and inclusion.  

  • Equity means treating everyone fairly and respectfully through equitable processes that create equal outcomes.
  • Diversity is about representing society’s demographics, focusing on populations that require equity.
  • Inclusion involves creating an environment where everyone feels welcome, is treated with respect, and is encouraged to participate fully. 

DEI is a two-pronged approach. First, it means doing more to make sure everyone feels good at work. It’s also about eliminating cognitive biases that otherwise facilitate denigration, segregation, xenophobia, stereotyping and prejudice. It’s not enough to make your organization more representative and inclusive; you also need stakeholders to embrace DEI efforts with empathy and understanding.  

This duality in the DEI journey can pose many challenges. Writing up plans and policies and hiring and promoting more diverse employees through affirmative action is just the beginning. The process is far-reaching and requires many tools and skills.  

DEI: systemic challenges 

We know it’s discouraging to work on fostering equity, diversity, and inclusion only to be told that our efforts are futile. That’s why we’re instead looking at ways your organization can improve its existing programs.  

The core problem with implementing a DEI program is backlash from stakeholders. Employees may react in a number of different ways:  

“Young people aren’t reliable—they’re going to go to the competition anyways.”  

“Why should we consider someone’s identity—we just need the best person for the job! ” 

“We’re at the point where the more of a minority you are, the more power you have. ” 

This kind of backlash is common, and there are many reasons why. One is the social-desirability bias, which occurs when we want to present ourselves in a favourable light. As a result, some people may pretend to support the values of diversity, which fuels negative feelings about DEI. Others see affirmative action as a rejection of their skills and performance. These individuals fail to consider the systemic barriers that prevent minority employees from moving ahead in their careers.  

Another source of backlash is the instrumentalization of diversity in hiring. When diversity is given as a reason for hiring, people are less likely to effectively evaluate the qualifications and skills of a candidate from a marginalized group—even if they’re from that group themselves. Also, when their diversity is presented in terms of the organization’s bottom line, their sense of belonging and interest in joining the organization decreases.  

Management may also contribute to this backlash. Although many organizations have good programs, there can be issues when implementing them. It’s up to the organization’s leaders to make sure employees receive equitable development and mentorship so that they can access management positions. The incentive is clear: organizations that implement these development and mentoring programs have 34% higher employee retention than those that don’t. Of course, a major barrier to successfully implementing DEI in business is encouraging informal feedback, and hiring and promoting employees because cognitive biases aren’t being challenged. 

On another note, mandatory DEI training has been linked to lower representation in leadership positions for racialized individuals and white women due to resistance from the current leaders. A 2019 survey found that 19% of men were less willing to hire women perceived as attractive, 21% were less willing to hire them for jobs that involved interacting with others, and 27% avoid face-to-face meetings with female colleagues.  

DEI: a collective, ongoing process 

In order to achieve the culture shift necessary for an equitable, diverse, and inclusive organization, the program must be continuously improved. Programs should be auditable and based on collective needs.  

Continuity is critical to ensuring successful change. Knowing where your organization is at in its process helps you tailor your efforts. These stages can be divided into program maturity levels 

1. Aware

2. Compliant

3. Tactical

4. Integrated

5. Sustainable

 

While every organization will move between steps differently, the most important thing to recognize is that integrating DEI is a transformation in its own right. This journey usually begins with questioning the organization’s efforts to be more inclusive. Compliance is about meeting government obligations, so organizations typically have no issues there. Where organizations may fall short is in the other stages, as they gradually transition DEI from individual initiatives to true operational integration. 

There are several key themes that emerge when moving toward a sustainable DEI program: transparency, adaptability, cross-functionality and intersectionality.  

By transparency, we mean addressing an issue mentioned earlier: negative reactions to affirmative action. Explaining to everyone the rationale and process behind a promotion or hire debunks the myth that affirmative action is done with the goal of penalizing certain groups. Also, for leadership development, organizational transparency can look like clarifying opportunities, defining qualifications, communicating opportunities to everyone, and creating a formal selection process. 

Adaptability reiterates the idea that the DEI program must consider collective needs. As non-exhaustive examples, a company’s adaptability can take the form of mentoring programs for younger people so that employees can work together as pairs to deconstruct their cognitive biases. This mentoring can also be useful for neurodivergent employees: Mentors benefit from building their empathy for this group.  

The cross-sector aspect also focuses on community. In concrete terms, a cross-sector DEI approach is not limited to an DEI committee, but rather integrates DEI leaders into each team. In this way, DEI values are more likely to be conveyed from context to context within your operations. 

Finally, intersectionality is about including everyone, regardless of identity, in DEI efforts. This means not limiting the program to those who are already involved, and instead but opening it up in the future. It’s also about considering the whole population as a template for its DEI program. Everyone’s reality must be taken into account. 

Digital transformation: a vehicle for inclusiveness 

Studies have shown that organizations that recognize the importance of DEI and take steps to expand their programs will actually accelerate their digital transformation. Diversity helps employers expand their talent pool and meet the growing demand for digital skills needed to work with rapidly changing technology. 

The transformational process is one that’s done across all departments by a multidisciplinary team. We do not adopt a sequential, siloed transformation. Instead, we apply a holistic approach that brings all expertise types together from the start, providing a value-added consulting service.  

Download Tech Radar to better understand ESG and what you can do to be a competitive, more socially responsible organization.

ESG issues at the heart of human, technological and sustainable growth

Committing to social and environmental responsibility (ESG) is more important than ever and companies play an essential role when it comes to taking ESG considerations into account for commercial decisions and practices.  

Our eighth issue of Tech Radar on ESG was created to help organizations demystify and understand the issues, implement an integration plan, measure their progress and set long-term social and environmental responsibility objectives.  

ESG issues are more than just environmental: they also include social issues, corporate responsibility and good governance practices. By considering these aspects, companies can improve and optimize their performance and their relationships with stakeholders, including their employees, clients, suppliers and shareholders.  

Download Tech Radar to better understand your ESG responsibilities and how to integrate them into your activities.

By committing to sound governance, you can support and encourage ongoing performance improvement. Tech Radar also offers helpful advice on how to integrate ESG practices and processes and improve existing practices within an organization.  

By integrating ESG practices, companies can gain a competitive edge, guarantee employee and client satisfaction and ensure, in the long term, sustainable financial returns.  

Pressures for companies to make an ESG commitment  

The ongoing development of ESG is propelled by external pressures on companies to adopt a stricter approach to their commitments. Although they don’t push companies to take more ambitious ESG measures than what they have committed to in the short term, adopting such measures is inevitable in the long term.  

 1.Climate crisis 

The first pressuring factor is the climate crisis. The data is extensive and the conclusions are clear: at the current rate of production and overconsumption, the planet’s resources will be depleted. The consequences will include more frequent and severe natural catastrophes and a marked increase in temperatures, which will impact production. Achieving global targets for reduced greenhouse gas emissions is required to slow these trends. 

 2. New workplace expectations 

The pandemic was also an important driver of ESG development and its effects continue to be felt. Telework and generally more challenging working conditions have exacerbated cases of burnout, stress, anxiety and depression among workers, especially women and young employees. This trend has led to the “Great Resignation,” a massive wave of resignations, with 4.3 million across all sectors in the United States in August 2021 alone.  

 3. New regulations and consumer demands 

Pressure from stakeholders can no longer be ignored. Consumers, regulators, employees and investors now all expect a strong commitment to ESG. Delayed adoption of this new standard comes with a range of consequences, including loss of employees and government grants and reduced productivity and sales. That being said, the regulations are likely to only become stricter—acting now means not having to play catch-up in the future.  

Download Tech Radar to better understand the various pressures on companies and how your ESG commitments respond.

ESG: the key to competition 

Beyond responding to existing pressures, a sustainable transformation can create value at all levels within your organization. Not only can ESG create value for your organization, but non-inclusion of ESG criteria can undermine it. 

Allocating capital to sustainable initiatives improves return on investment. Even though the costs of major changes in the value chain can be high, they are offset by regulatory benefits that will make waste reduction and investment in renewable energies pay off in the long run.    

Added value from an environmental perspective continues to grow due to two complementary trends: the lower costs of environmentally responsible production and the increase in operating costs for raw materials, water and carbon.  

Download Tech Radar to better understand how ESG creates value for your business.

Higher social performance can also attract consumers who would not usually buy a company’s products. The comprehensive integration of ESG criteria also ensures much higher retention of quality employees. These employees report a more concrete sense of purpose and are generally more motivated to be more productive. What’s more, less regulatory pressure is placed on companies that thoroughly integrate ESG criteria, meaning they enjoy more strategic freedom and government support. The facts are clear: companies with the highest ESG commitment are considered the leaders of their respective industries.  

Technological solutions for measuring your carbon footprint 

An increasing number of businesses recognize the importance of measuring and reducing their carbon emissions, and technological solutions offer a practical and affordable way to do so. Companies can use technological tools such as emission management software or online platforms to calculate their carbon footprint and measure their progress. These tools can also help companies integrate ESG practices into their policy and take measures to improve their carbon footprint, share their progress with stakeholders and create communication tools for employees and shareholders.  

In sum, technological solutions can help companies simplify their ESG practices and will prepare them to take on future challenges. How do you know what tool to work with? To choose the right tool, companies need to understand their ESG objectives, scope of application and budget constraints. The tool’s features also need to be considered. Is there an integrated carbon emissions calculator? Is the tool ready to use or does it need to be configured? Is it easy to update and administer? We’ve made a list of key questions to guide your decision so you choose the right solution for your sector and objectives. 

Download the 2023 Tech Radar


10 reasons digital transformations fail

Digital transformation is currently a hot topic among companies looking to stay competitive in their markets. Although widespread in almost all industries at every level, integrating technology into business processes comes with risks and challenges that cannot be ignored. If organizations don’t give them enough consideration, these risks can translate into major losses.

These challenges are so difficult to overcome that 70% of companies don’t get a positive return on investment after making a digital transformation.  

There are a number of reasons why organizations are unable or only partially able to successfully integrate new technology. Here are 10 of the biggest ones: 

1. Insufficient integration into existing business processes 

The organizations who try to integrate technology simply to keep up with the competition often get stuck when it comes time to digitize their business processes. It’s important to realize that certain business models are not ready for this kind of transformation, or at least need extra preparation to be successful. Depending on their circumstances, some organizations need to integrate many kinds of technologies while others need to standardize their systems following multiple acquisitions. Planning for the transformation will vary with each organization’s context. 

2. Wrong timing 

Digital transformation can be highly disruptive for an organization. Organizations need to be able to model the risks and understand their business environment. A digital transformation will look different for a company with highly seasonal changes in consumer habits than it will for a company in a growth by acquisition phase. 

3. Lack of resources 

When investing in human and financial resources for a digital transformation, it’s important to take into account the risks that would come with failure. An unsuccessful implementation can easily cause the initial cost estimates to double or triple and disrupt an organization’s operations. 

4. Moving too slowly 

From another viewpoint, a digital transformation must also be planned over a reasonable timeline. Integrating various information processing systems into an organization too slowly can cause disruptive operational bottlenecks. The transformation might also fall by the wayside if it’s taking too long. 

5. Skill gaps in the team responsible for the transformation 

It’s important that you form an internal team that can manage the digital transformation and define objectives and monitor performance indicators. This team must have people with a good knowledge of the organization’s processes, who understand the technology they’re integrating as well as its impact on your future business model. 

6. Resistance to change 

One of the biggest obstacles to digital transformation is how resistant employees are to major changes in how they work and their daily routines. It’s important to understand how the changes will affect those involved and develop a transition plan for them so that the changes can be integrated deliberately.  

7. Lack of executive leadership 

An organization’s executives must all be on board with the digital transformation strategy and display leadership when integrating it. If executives are unable to align themselves with the objectives and changes brought on by the digital transformation, the process will suffer in the short and long term.  

8. Misalignment between the digital transformation strategy and business strategy 

Digital transformations also need to take into account any changes made to an organization’s business model and future processes. Poor alignment between the digital strategy and business strategy can hinder an organization’s operations and significantly diminish the transformation’s ability to optimize them. 

9. Expecting a quick return on investment 

When organizations expect returns on investment in the short term, the digital transformation plans don’t leave enough room to account for how many resources a project needs and how long they’re needed. Company transformations often fail when the company tries to stay within the constraints they initially set rather than adapting to changes that arise. 

10. Inability to manage operational disruptions 

Managing a digital transformation requires time and resources from all of an organization’s stakeholders. Employees must be aware of the projects related to the digital transformation to ensure operations continue to run smoothly. Poorly managing these disturbances could incur losses for the company and undermine the efforts involved in the transformation. 

Learn from past failures. 

Revlon 

Between 2017 and 2018, the cosmetics company Revlon wanted to change its ERP system to an SAP system in all its business units worldwide. After changing the system in North America all at once, it ran into operational problems, especially fulfilling client orders and paying suppliers.  

There were a number of reasons implementing their IT system failed. The company was already in the process of growing by acquiring a number of big competitors, including Elizabeth Arden ($870 M). Moreover, the company’s employees and executives had not been properly prepared for the system’s abrupt rollout and were unable to see the risks involved in SAP system errors, further exacerbating problems with orders. The teams responsible for change management were also unable to reconcile the projects to implement the system with their responsibilities for existing operations.  

The system changeover for Revlon was catastrophic. The company recorded nearly $300 million in losses during fiscal 2018 and experienced recurring problems in its operations management for years to come. 

The company should have mitigated the risks of such a large-scale operation by first completing its new acquisitions, by making sure they understood the new IT system’s structure and impact on its business model, preparing their employees and communicating the risks associated with SAP implementation to them, and rolling out the ERP system incrementally. 

Hertz 

In 2016, the car rental company Hertz hired an external consulting firm with the goal of validating and integrating its new digital strategy to modernize its online reservation and payment platform. Hertz made the firm responsible for managing the project to implement the new systems, selecting the software and establishing which processes in their business model would be transformed. Hertz did not supervise the project, which led to a number of problems in the delivery of the final platform, its compatibility with the different existing systems and delivery delays outside the established timeline. 

After a succession of delays and millions of dollars in fees and losses, Hertz decided to terminate the firm and asked another company to complete the system implementation, adding significant costs. 

Hertz trusted a company based on its reputation and did not have a selection process that took its particular needs and circumstances into account. They also left the management of the implementation project to the consulting firm’s discretion, and in doing so, lost control of its associated risks. 

Hertz could have mitigated the risks involved in its technology implementation by defining a clear strategy for its needs, choosing a firm that was more competent to customize a technology implementation solution and creating an internal transformation team and steering committee to maintain control of the process. 

Digital transformation success factors 

Digital transformations are complex and multifaceted operations that can only be achieved when the company is willing to dedicate the required resources and make a responsible commitment to its implementation. It is crucial to ensure that the organization’s strategic needs are aligned with its need for a digital transformation, which involves a well-defined process and vision of the company’s future. This is what allows the company to choose the appropriate software to integrate. It’s equally important to have the implementation managed by professionals who know how to customize the software features. It’s also important to consider the risks involved in losing control of the project how it would affect the organization’s resources. It is therefore a good idea to create a project management team that can allocate the necessary resources and ensure the different steps run smoothly within the set timeline. Finally, it is also necessary to offset human risk by preparing the stakeholders for the impacts this type of transformation can create. You need to prepare human resources by training them on the new processes, communicating the developments and changes caused by the digital transformation and establishing their roles in the organization’s future. 

You need to be able to rely on the right partner to ensure you understand and mitigate the risks involved in your digital transformation. Talsom offers services to align your technology strategy with your business strategy. We are specialized in managing digital transformation projects, which require careful attention and a highly professional approach. Our team of change management and human resources support professionals are equipped to help your organization develop properly during your technology implementation to ensure its success. 

Find out how our support can make your transformation a success.

Digital transformation: should you outsource the whole process?

Although the term “digital transformation” has been trending for decades, it has become even more ubiquitous due to the pandemic. According to a study conducted by BCG, more than 80% of the 5,000 managers and employees surveyed feel that digitalization has helped them cope with the economic downturn caused by the pandemic.

Economic downturns and other crises are, of course, not only caused by pandemics. Other recurring and, unfortunately, sometimes cyclical factors like war, stock market crashes, etc., can play a role. Such economic transformations offer opportunities with proven advantages for businesses.

Digital transformation is a complex process that begins with defining the project, implementing best practices to ensure its success, and finally, assessing resources.

Companies have a number of ways to access the key resources and skills for their projects. Whether to tackle the labour shortage, prepare for future technological changes, focus on their specialization, increase agility or enter new markets, many solutions and people can prove useful. It’s just not always easy to choose the right ones. Here are the pros and cons of the different solutions to help you make the best decision for your company.

 

Digital transformation and outsourcing: pros and cons

Since information technologies emerged, enterprises in all sectors (manufacturing, pharmaceuticals, digital, transport, agri-food, etc.) have relied on technology tools internally in their own organizations. Once these technologies reached critical mass, they started to be used to help run the very core of these businesses as well. Certain economic players have preferred to outsource the entirety of their IT functions to partners offering comprehensive services. This can mean the total outsourcing of specific services like accounting, payroll services, distribution, recruiting, logistics, marketing, etc. As this trend has proven to have its limits, an intermediate solution has emerged.

  1. Digital transformation without outsourcing

Some organizations continue to adopt this approach and choose to do their digital transformation internally, even when it is not their primary function. This means they must keep all functions operational, even if not part of the big 4 task types worth outsourcing: critical, complex, time-consuming, focused.

Pros:

  • Feeling of total control over the company structure
  • Not having to depend on external providers
  • Increased security
  • Minor strategic changes more quickly achievable

Cons:

  • High fixed costs
  • IT is very often not at the core of the organization’s business
  • Difficulty keeping up with changes in technology
  • High maintenance costs since external work is largely on an ad-hoc basis

Risks of relying on external providers: Low

Ability to adapt to market changes: Very low

  1. Fully outsourced digital transformation

In the last decade, some companies have tried to fully outsource all activities that are not part of their core functions, including IT. Some firms have started offering outsourced services for most functions (payroll, recruitment, human resource management, marketing and communications, IT services, logistics, etc.).

Pros:

  • Organization can focus on its core business
  • In the event of an economic crisis, risks transferred to the service provider(s)
  • Budget cuts easier to implement
  • Better control of operational costs, stability and predictability
  • Very effective for temporary solutions to manage needs that are likely short-lived

Cons:

  • Significant reliance on the outsourcing firms
  • Difficult to quickly cascade strategic changes
  • Higher cost to make changes (day-to-day operations are cheaper while new projects are costlier)
  • Once implemented, very hard to go back on this strategic decision
  • Very difficult to have an integrated system if all functions aren’t outsourced together e.g., if you outsource payroll systems and HR to two separate external firms, it will be difficult to then integrate both into a single system
  • Need good legal knowledge for managing contracts with external firms if opting for a service-level agreement (SLA)

Risks of relying on external providers: Very high

Ability to adapt to market changes: Very low

  1. Hybrid digital transformation: Partial outsourcing

This third option appears to be spreading more broadly across all industries (at different levels). Generally, it involves implementing enterprise resource planning (ERP) to integrate different company functions with the help of professionals for the implementation, configuration, change management and operationalization support.

Pros:

  • Organization maintains control of its IT systems without becoming fully dependent on external providers
  • Organization benefits from the expertise of external consultants for specific needs
  • Organization can focus on its core functions
  • Strategic decisions easier to implement and, above all, to quantify
  • Organization will mature in the following areas by making use of external expertise:
  • Easier to quantify business cases when working with external firms
  • New perspectives from experts with experience in similar industries (preventing any need to learn from failure and its potential high costs)
  • Mitigates risk of IT labour shortages
  • Keeps key resources for lengthy transformation programs within the company
  • Benefit from the expertise of external firms who are more up-to-date on technological changes

Cons:

  • Firm must be carefully selected to avoid unexpected delays and costs
  • Executives more involved than with other outsourcing models
  • Risk of failure shared between organization and external firms

Risks of relying on external providers: Moderate

Ability to adapt to market changes: Very high

The digital transition has become essential for companies who want to stay ahead of the curve and become market leaders. New technologies evolve so quickly that most internal IT teams don’t have the technological skills or professional expertise to determine the best solutions for their organization. For companies who are serious about using new technologies to transform themselves and having access to leading-edge expertise and new ways of thinking to map out a strategy for success, getting the most out of IT outsourcing and choosing the right model based on the risks they’re willing to take are the key factors to consider.

 

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