February 6, 2023 Common Digital Transformation Mistakes by Manufacturers

These are the three most common mistakes manufacturing companies make with digital transformation.

By Joe Gondek, Senior Director of Strategy, Shift7

With the current economic uncertainty, it can be tempting to put things like digital transformation on the back burner and prioritize other initiatives that bring about a more immediate ROI. After all, the time it takes to undergo a complete digital overhaul takes, on average, two to three years, which means your ROI won’t be fully realized until after that. Beware of anyone who gives you a shorter timeline – they are likely cutting corners to get your business.

It’s no secret that COVID rapidly accelerated the decision for many businesses to undergo digital transformation, which includes many manufacturing companies. Those who still have outdated systems likely feel pressure from their customers, staff, or both to make updates that ultimately provide a self-service purchasing option for their customers.

Manufacturing companies that have gone through digital transformation quickly realize that it is not a straightforward process, and the path can and should vary greatly from one business to the next. This is because many things must be considered, such as your current website features, online ordering capabilities, real-time chat options, and so much more. For manufacturing companies, in particular, the ability to provide customers with the option to order in mass quantities and choose from thousands of products (or build their own) means that their digital transformation journey will look very different than the ones other industries will take.

On the flip side, the benefits that come with digital transformation can result in massive revenue increases, so it’s well worth looking into if you haven’t already.

This brings us to three of the most common mistakes that manufacturers make and how to avoid them:

Assigning the project to a group

Once the decision to undergo digital transformation has been made, many matrixed companies assign multiple departments, such as IT, sales, and marketing, in hopes of gaining consensus with digital outcomes. However, in many cases, the reality of this model is that the project hops around between departments and gets “stuck.” Digital transformation ownership has become blurrier between functions in recent years, which can cause some issues with the project, and this is why: SaaS can now be managed without the help of IT because they are less reliant on backend IT to activate it. Which means you can easily end up with marketing teams that buy software and sometimes don’t even tell IT they did it as they used their functional budget and test the waters of corporate policy. This, in turn, causes more barriers to communication between functions, and decision-making can become frozen as most groups can only confidently offer their respective lens from their area of expertise and priorities. As a result, the project stalls or is deprioritized without a champion to bring its relevant value to the forefront. To avoid this, assign one leader to own the project so that they can manage situations, get consensus to prioritize the project properly, make important decisions, and bring it across the finish line. Being able to answer questions such as, “did you talk to Engineering or Sales for their buy-in?” will come in handy (and will undoubtedly happen at some point) when an executive or other employee starts to question the need for such a large undertaking, there is someone that is in place to answer in real-time.

Starting all over

A common misperception is that existing websites or aged product purchasing systems need to be wiped out in order to undergo a successful digital transformation. In reality, you rarely need to start from scratch – there are ways to isolate existing architecture and different approaches that manufacturing companies can use what they already have and build upon it. As an example, advancements in APIs and other connectors between system elements help keep pieces that may be working for certain divisions or departments. In another instance, marketing automation may work for communications and marketing, but the ownership of CRM with sales may have technology gaps and keep the sales funnel from being automated. At the same time, you don’t want to end up with a Frankenstein website by changing a bunch of little things, so there needs to be a happy medium. This is why it’s critical to work with an expert who not only has experience with digital transformation but who also has experience in your industry so that they know the ins and outs of critical features that your customers both want and need. Having someone that can “ruthlessly prioritize” will also help make large investments for marginal functionality in a particular area. It’s also worth mentioning that many times, the features you add and what actually gets used can differ greatly, so make sure you don’t waste time and money on things that aren’t going to be used.

Doing nothing for fear of change

Most clients we work with have employees or executives who have been with the company for many years and are understandably hesitant to change, especially when digital transformations see delayed ROIs. We often hear questions such as, “why would I undergo such a large undertaking that will cost money with no guaranteed outcome? or “the system we have in place works, so why change it?” Change can be hard, but the reality is that as technology has continued to evolve, so have customer expectations.

The change also has to be iterative. If companies need to invest in foundational systems like product information management, the ROI baselines will form over time. To help alleviate some of the fear or concerns, be sure to articulate the overall goal of the transformation project and use key performance indicators along the way. As an example, if your end goal is to make products available through e-commerce, then you need to clean up 10,000 SKUs and determine which ones will be available online. That, in and of itself, becomes the first KPI.

While many companies are in the midst of digging out from supply chain challenges and making sure their core customers receive their deliveries in a timely fashion, this can come at the cost of new customer acquisition. The reason being if the dollars and technology investments get delayed, it gives competitors an advantage as supply and manufacturing starts to level back out. Larger customers won’t feel the pinch right away as they have been able to invest in raw materials and other components to keep themselves ahead, but in the future, the balance will come back to small companies with a better overall customer experience and will look just as big as the larger companies. That competitor who is up-to-date on digital and has a seamless, easy process will be able to take away from others, much like the evolution of B2B was heading before Covid.

Moving forward with digital transformation

While many factors need to be considered, especially with executive leadership buy-in, if you can keep these common barriers in mind, your company will be on track to reap the benefits, as will your customers, ultimately leading to long-term success and an ROI that is beyond everyone’s expectations.

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