Digital transformation: smart adaptation and seizing opportunities in uncertain times

In uncertain, troubled times, the need for innovation is stronger than ever, according to Michiel Elshof, Head of SAP Services and partner at KPMG. In the article below, Michiel elaborates on the challenges and necessity of leadership, vision and next-generation technology – especially now.

War in Ukraine and in the Middle East. Inflation, major social contradictions, and climate and energy transition challenges. We live, in short, in uncertain times. "The only constant is uncertainty," Michiel argues. "Yes, the world is very turbulent at the moment, but we have known uncertain times before and the world just kept on turning. Challenges are of all times."

Organizations are therefore currently facing the challenge of transforming and investing in modern technologies to stay competitive. The role of next-generation technology (NGT) in these turbulent times is therefore crucial. By next-generation technology, we should think of AI trust, risk and security management, and sustainable technology. ERP systems are crucial in this: they streamline business processes and improve data analysis, leading to better decision-making. Integrating technological innovations such as artificial intelligence (AI) and machine learning increases efficiency and drives innovation, which is essential for companies to stay competitive.

The pressure to innovate

Delaying innovation can lead to exponential delays and even irreparable backlogs. In recent months, we have seen several organizations topple over, where a combination of outdated technology, inefficient procurement practices, and a failure to match customer demand, among others, led to significant losses and operational inefficiencies. "This illustrates not only a business problem, but also how technology can provide different companies with the insight needed to avoid such mistakes," Michiel states. 

Challenges in digital transformation

Of course, moving to NGT is not without its challenges. Companies often struggle in uncertain times with hurdles such as:

• Outdated systems: legacy systems can be an obstacle to NGT implementation due to their outdated architecture and technologies, which are often incompatible with modern software and standards. This can lead to integration problems, limited flexibility and higher maintenance costs. Moreover, these systems are less likely to adapt to new business needs or market trends.
• Budget constraints: the higher cost of NGT can be a barrier for small and medium-sized companies. Investment can be hefty for these parties, who then might decide to put off making the decision to proceed with digital transformation.
• Resistance to change: people are naturally afraid of change, and this can hinder the implementation of NGT. Especially in turbulent times, people tend to stick with what they know and not change things (much). This gets in the way of innovation and digital transformation.

Vision and leadership in times of instability

How do organizations face such challenges? The key to successful transformation lies in clear vision and decisive leadership. Companies must be willing to rethink established practices and invest in NGT, regardless of economic conditions. The focus should be on the 'how' of investing, even when economic uncertainty prevails. This requires:

1. Thorough Evaluation: analyse which digital initiatives add the most value to your business. Focus on technologies that improve operational efficiency, enrich customer experience and create new market opportunities.
2. Flexible Planning: implement a flexible strategy that allows for adjustments in response to changing market conditions.
3. Culture of Innovation: create a corporate culture that ensures that you move with the times as an organization, making employees want to keep working for you. Suppose you give employees a Nokia 8210 and a laptop running on Windows 95 as business devices – how would that come across and what impact would it have?
4. Value-Based Financing: it is important to understand where the value for your organization lies and possibly think about smart financing. For example, consider applying cost- or revenue-neutral strategies.
5. Stakeholder engagement across the board: involve stakeholders from both business and IT to increase support and understanding of the need for digital transformation.

NGT offers numerous benefits, including:

• More efficient processes: NGT can automate and streamline processes, saving time and money.
• Better decisions: NGT can use data analytics and machine learning to make better decisions.
• Increased competitiveness: NGT can help companies stay innovative and ahead of the competition.

The previously outlined obstacles can be overcome by focusing on the 'how' from a vision and leadership perspective, as indicated above. It is about finding the right balance between managing risks and seizing opportunities for growth and innovation.

Finding that right balance is essential for modern companies. It means carefully weighing which risks are acceptable and which opportunities are worth exploring, even if that means sometimes stepping outside their comfort zone.

Finding this dynamic balance requires an open attitude to change and a willingness to invest in new ideas and technologies that can create long-term value. By proactively managing risk while embracing innovation, companies can adapt and thrive in an ever-changing world.

The impact of NGT on various sectors ranges far and wide. At best, organizations have a robust, modern ERP system specifically designed to help them manage their operations more effectively, improve their overall efficiency, gain greater control over their supply chain, reduce costs and waste, and ultimately deliver better products and services to their customers.

One of the most significant benefits of today's technological innovations is the ability to provide real-time visibility into the entire production and manufacturing process. This enables companies to immediately identify any problems or bottlenecks in the supply chain as well as take proactive steps to address them. The ability to react quickly keeps production lines running smoothly, ultimately leading to more efficient production and reduced downtime.

In addition to improvements in the production process, these next-gen technological developments also provide companies with the tools to manage their customer relationships more effectively. By providing a centralised customer data management platform, companies gain valuable insights into their customers' needs and preferences. These insights enable companies to deliver more personalised and targeted marketing messages and product offers. This not only contributes to increased customer satisfaction, but can also boost sales and revenue. In an age where personalisation is king, the ability to provide tailored experiences can be a crucial competitive advantage.

Overall, the ERP system as NGT is an essential tool for any (high-tech) organization that wants to improve its operations, enhance customer experience and stay ahead of the competition.

Taking an illustrative look at some specific challenges and opportunities for sectors, we see, for example, the following: 

Retail

The retail sector is constantly evolving, and NGT can help companies meet the changing needs of consumers. For example, NGT can be used to:

• create omnichannel experiences;
• optimise the supply chain;
• create personalised offers.

Chemicals

The chemical industry has a landscape of strict regulations, while at the same time strives for innovation and sustainability. NGT plays a crucial role in this by providing opportunities for improved safety, efficiency and compliance with those strict regulations, such as:

• Integration of advanced monitoring systems: by using sensors and data analytics, companies can continuously monitor their processes, allowing them to identify and address potential risks early on.
• Automation and process optimisation: deploying automation technologies enables companies to make production processes more efficient, leading to higher productivity and cost savings.
• Strengthening regulatory compliance: NGT can help comply with strict environmental and safety regulations through better tracking and reporting of chemicals, as required by regulatory frameworks such as REACH, which stands for the registration, evaluation, authorisation and restriction of chemicals within the EU. 

Financial sector

The financial sector is also highly regulated and NGT can help banks with:  

• Regulatory compliance: next-generation technologies can support banks in automating complex reporting processes, which is essential for complying with financial regulations and meeting requirements as set by, for example, the Basel III, DORA, NIS2 and ESG Reporting regulations. Through advanced data analytics and AI, banks can gain real-time insight into their compliance status, making it easier to meet constantly changing requirements.
• Driving innovation: NGT opens the door for developing innovative financial products and services, such as personalised customer interfaces and automated advisory services. It also enables the implementation of blockchain technology for more secure transactions and better fraud prevention.
• Achieving competitive advantage: by automating processes and improving operational efficiency, NGT allows banks to speed up their services and increase customer satisfaction. This not only reduces operational costs, but also improves responsiveness and service to customers, which is crucial to remain competitive in the fast-changing financial sector.

"But the role of consultants is also changing," according to Michiel. "This is not only in advising on technology, but also in guiding change processes within the organization. Advisors can help organizations develop an NGT strategy, select the right technology, implement NGT and support in managing change." 

Michiel continues: "The importance of making decisions with an eye to the future, even in times of uncertainty, is greater than ever. Companies must not only respond to the challenges of the moment, but also proactively plan and invest in technologies and strategies that will allow them to thrive in the future, regardless of current economic conditions or technological constraints. It's about finding the right balance between managing risk and seizing opportunities for growth and innovation."

Moving, innovating, and not being afraid to invest in the future. These aspects are crucial for companies that want not only to survive, but also to succeed in a world characterised by constant change and technological evolution.

To deploy next-generation technology as well and efficiently as possible, you need experts who understand processes in an organization, the technology being used, and know how to implement complex technology. KPMG does that by defining a clear vision and business case, setting up and validating future target operating models, as well as designing, testing and actually implementing the technical design. With proven models such as KPMG Powered Enterprise, we unburden our clients throughout the implementation or optimisation. KPMG's SAP specialists help organizations transition to S/4HANA. This can ensure accelerated business transformations in the cloud, aimed at simplifying, unifying and standardising processes as well as faster and more risk-aware implementations.

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