Better Together – Why Supplier Management will be vital to Digital Transformation success
Research by prestigious organisations, such as McKinsey and Forbes, shows that Digital Transformation is considered very high priority for most large organisations in the coming years. The failure and return rates from digital transformation are shocking; with under 20% of transformations delivering any sustained improvement and projects spending 45% more than intended, with less than 45% of promised returns being realised.
Build or Buy
“Digital Transformation” can seem a bit vague and is a catch all term. In reality, it just means improving your business with the aid of Information Communications Technology (ICT). Transformation by its very nature means you are not yet where you need to be. This means your organisation is very unlikely to be skilled in what is needed, to improve the business at the start of any Digital Transformation. Given the speed of progress in technology fields, any skills the organisation does develop are likely to quickly become outdated.
The dilemma for many organisations when undertaking a transformation is whether to build (using in house skills to develop and change) or buy (bring in external skills and suppliers to deliver). Transformation programmes have new, unique and niche skill sets that are not often found in ready supply within organisations. It can be attempted to go it alone and develop the skills that you think you need in house, but this is likely to be a long, arduous and costly journey fraught with mistakes. If you do not have the expertise to deliver the programme, you will not have the expertise to know when it is going wrong and how to remedy it.
Therefore the majority of transformation programmes are likely to contain large elements of outsourcing to specialist technology suppliers and suppliers of technical expertise in future. The route to success in digital transformation for most large organisations will be a combination of business needs analysis, project management and supplier management.
Outsourcing provides the organisations with the opportunity to buy in the mix of skills and experts required to deliver their transformation. There are many compelling reasons to do so – extra / specialist resource only when they are required allowing flexibility and scalability of teams when they are required, reduction of the risk profile through bringing in the experts – saving both time and money while providing additional capabilities.
In theory, this would ease the way for a smooth transformational experience; combining the right blend of internal knowledge with external expertise at the right time to transform the way that the organisation is delivering services. A company with a good understanding of their business needs and some reasonable overarching project management skills should be able to succeed in this type of outsourced transformation. There is one very significant pain point here though, the contract. The contract locks things in stone, reduces agility and provides excellent scope for ignorance, misinterpretation and / or working to rule.
Contract and Supplier Management at the heart of Digital Transformation
When the delivery of a large project is considered, a team of project managers, PMO support staff and engineers clutching project plans, reports and design documents is the image that most frequently springs to mind. The role of contract and supplier management is often understated or considered as an aside to this with the contract being treated as a record of decision made; a fundamentally flawed approach.
The base of all procured services is a contract. In the case of large-scale digital transformation, this is likely to be a large complex contract with multiple schedules, thousands of clauses and one or more suppliers. This contract ultimately dictates what is being delivered, by who and when. Deviation from the contract leaves the deviating party with no legal / financial leg to stand on when transformation fails, and the wrong contract will ensure the transformation fails.
The contract is the cornerstone on which all the project activities should be built; understanding the requirements, the obligations, the dependencies. The best laid plans can quickly head towards disaster if they are not implemented properly; understanding of the contract enables an understanding of what is being delivered. It should be a single source of truth, always up to date and able to be accessed by both the customer and the supplier.
Contract Change Management for Success
The reason contracts often swiftly fall out of use, is their inability to reflect and keep up with what the customer needs. Possibly the most important skill in Contract and Supplier Management for Digital Transformation to succeed is Contract Change Management; being able to update the contract and keep it relevant.
An ability to handle contract change and drive this into ongoing project work is vital; without this there is very little chance of clearing up misunderstandings, adapting to changes in the wider environment or getting a better fit for what the business needs.
If the customer and their suppliers can have an open, joint relationship around the contract and keeping it up to date, this can really drive Digital Transformation success.
Better Together – Joint Working with Suppliers
By making the contract and the supplier relationship the heart of the transformation programme, the customer and supplier are always able to have an agreed single source of information that dictates what should be delivered. It is frequently likely to be the only document that both parties have in common, with customer and supplier often running their own sets of requirements matrices and plans. Utilising the contract together provides both parties with sets of requirements, dependencies and commitments that they can bring together into plans, design and build, what is needed to deliver and do this on time and within budget. Things really are better together.
- The Difficulty with Dependencies
- New Year’s Resolution and Digital Transformation – Journeys of Change… Or Not
- Better Together – Why Supplier Management will be vital to Digital Transformation success
- Future Gazing – It’s not the what but the how that makes Digital Transformation a success
- Why should embracing Digital Transformation terrify large organisations?
Connect with us to know the next move
We help global leaders with their organization's most critical issues and opportunities. Together, we create enduring change and results in digital format.