In this episode, Rich Pierle discusses how to Prepare for Digital Transformation. Rich also introduces a resource tool for business leaders – Pier Digital Digital Transformation Guide PDF – which includes a Process and Technology Matrix.

• Instant Access to the Pier Digital Transformation Guide can also be found here: https://pierdigital.com/wp-content/uploads/2020/07/Pier-Digital-Preparing-for-Digital-Transformation-Rich-Pierle.pdf.

Today we’ll be going over the next steps in our series. How do we move from the COVID 19 conversation and start focusing on those activities that you need to do from a transformation standpoint. Whether you’re a senior leader or in middle management, there are things you can do right now, to get ready. In my conversations with senior leaders, they’re looking at their existing business models and their processes and realizing, this doesn’t fit what we’re trying to do.

Some of those process changes may be:

• Changing a physical process to a technological process
• Moving a process from one location to another

The framework I’m about to share with you will work for any of those scenarios. Let’s walk through some of those steps, including the Call To Action and how you can make all of this work for you. I’ve done this in the past with different processes, even before I became the CIO of Becton Dickinson.

My first job after I got my masters degree was working for UPS in accounts payable as a supervisor. Those were the days of receiving invoices from regular physical postal mail. Then we’d ensure that the invoices were matched up with the physical goods or a receipt of services. Then make sure that once we had all that information, they were put into the system in batches and processed for payment. Back during that time, nearly 30 years ago in the early 90s, we used a mainframe system.

For some organizations, that hasn’t changed, they’re still receiving mail and many other things in a physical nature.

At that point, you have to ask:

1. “Should you still be doing it that way?”
2. “How do you get away from it?”
3. “How can you reimagine the work that you do today?

We’ve spent some time going over COVID 19 as a catalyst to helping organizations start that process. The process of how to reimagine how work gets done. In their front or back office, so that you can do it more efficiently, improve cycle time and reduce costs.

When I’ve done this with other organizations, it’s really all about focusing on the things that matter. It may not be important to process bills or to receive cash.

There are certain processes that you want to work just like breathing air. Those processes could be processing bills, receiving cash, or getting everybody paid appropriately and in a timely manner. All those processes are really important, and we want them to just happen, to work, and to work every time. When those processes work in that way, we can focus on other things that may provide more value to our organizations.

Those other more important, value-adding activities that should take precedence, such as innovation. If you’re a pharmaceutical company, it could be new drug discovery.

How do you start to look at those things in the back office, and organize them in a way that you can start the process of either moving them to digital or to shared services, or to a third party to do them on your behalf.

I’m not going to focus so much on the How as much as I am on the organizing of the information so that you can process it and get it ready to make the right How selection. Whether it’s shared services or sourcing, some have very hard beliefs, and conversing on those topics can be like arguing religious or political views. Those topics can be important, but not for this step.

Before we get to the details, a couple of caveats – Any attempt at organizational process changes must start with the desire to change from within your organization. The change is more likely to be successful, the closer to the CEO that it originates. From the top, down. Most of the times that I’ve worked with companies that attempted to implement change from the middle of the organization, it wasn’t lasting.

When management takes the reins of change, and it’s driven throughout the organization, everybody does their part. In order to drive change of this magnitude, you need that level of support. No one wants to invest the time and money, and not provide value for the organization. Once you have employees raising their hands and wanting to implement change, then it becomes more about setting a strategy.

All of this stretches back to your overarching business strategy: What are you trying to accomplish? Are reduction of cost or improvement of cycle time some of your expected outcomes? Those are realistic goals to get out of the transformation.

In many cases, when I’m brought onto a project, much of that work is already done. An organization may have brought in someone to give them a view that aligns with their overall goals and objectives. Then, they’ll need a consultant like me, to help drive that down into the organization.

Many of the templates that I’m going to share with you are simply drawing 2 x 2 squares, so we can start thinking about these things. These tools are going to help you organize and tie this into your organization and your specific process.

We’ll cover Procure-to-Pay, and how that process gets done.

It’s all about the journey.

Over time, I’ve developed a sixth sense for knowing what the answer will be for most organizations. And if I come in and fill everything out for you, and give you the answer, it’ll be within a +/- 10% margin of error. But the art is in walking you through the actual process, not in giving you the answers. When all of the right stakeholders are aligned, then owning all of the outcomes in driving this for your organization.

Companies have requested that I just give them the templates, or fill them out on their behalf and it doesn’t work like that. This doesn’t happen over a day, or a week or even a month, this is over a period of time. By the end of the process, we’ll have defined the change, aligned the change, and have gotten the people of the organization to own the change. In that manner, the change will have the highest likelihood of success. It takes work, and telling people the answer doesn’t accomplish that.

If you’ve been in the industry for a while, you’ve probably seen different flavors of 2x2s.

Let’s walk through one of the templates It starts with process. When I was CIO for a very large organization, I would always say, “you don’t start with the technology, you always start with the process.”

The process drives the technology, which is becoming more and more intertwined. We’ll talk about the technology, but we always want to start with the process. This is all about being honest with yourself on where things currently stand on the heading of process maturity, what we want to understand is your process as it stands.

The 2 x 2 matrix is simple.

• X-Axis: Standardized & Documented vs. Nonstandard & Ad Hoc
• Y-Axis: Digital vs Physical

Certain work that you’re going to have to do depends on different How’s that we have in order to move this and begin the process of transformation. Going back to our accounts payable example; are you still receiving mail or physical invoices? In reality, it’s probably a mix, some may still come by mail and some may have already gone virtual. As you think about the end of the process, when you disburse payment, how much is via Electronic Funds Transfer (EFT), or through American Clearing House (ACH) or by physical check.

This is how things are now and the questions that we need to ask in order to understand what we need to change from a process standpoint. You’ll start to see how the technology is coming into play and what we do is start with one of the many different process models out there. Sometimes companies will go through a matrix where they define all their processes, because many times, by the time I’ve come in and see them they’ve already got it all defined.

For procurement, it could be:

• What’s my category strategy?
• How do I deal with sourcing?
• Contracts
• Contract administration
• Requisitioning
• Putting a Purchase Order (PO) in place
• Invoicing with 3 or 4 way matching
• Payment and distribution

The next phase is to go through all those level 2 processes and discover the tasks and activities in those processes.

Start by mapping out those processes, and ask yourself, is this something done today physically or with technology.

When I was with Becton Dickinson, one of the tools that we used, which was a good exercise, was with a piece of software called Celonis, which is a process mining tool, that shot through our SAP (Systems Application Products) system. When we went through this exercise, we learned that what we thought was our process, wasn’t actually our process, and there was a lot of variation that we brought in the system. As we started to work through all this, and take away and pull back, we found that each business aspect had different additions to the process. At the time, we had five different businesses, and each had introduced some uniqueness to the process, which had multiplied. As part of this simplification, we found that in some process areas, this was unnecessary uniqueness as it didn’t add any value to the transaction, to the company, to the customer experience or even to the vendor. But it also depended on the situation.

This type of scenario becomes compounded with companies that are 40, 50 or even 100 years old, some of these processes have not been touched in a long period of time. What’s then required, is to look at the process and try to understand what can change.

By asking questions like:

• How can we make it easier
• How can we digitize it
• What aspects of labor can be eliminated or moved to a low cost option
• What labor needs to be delegated to higher value staff that know how to do process and focus on and minimize exceptions

When a consultant like me is brought in to start with the outcome of the strategy work and also drive the assessment, staring down the path of filling out these 2×2 matrices for everyone being evaluated, it could be procure-to-pay, quote to cash and this also applies to IT.

Basically you can do this type of exercise, for any type of process inside your organization. This matrix framework can also be the basis for making other decisions, such as whether you want to implement shared services, or sourcing or the ultimate goal of digital transformation.

The value is in discovering how to take some physical processes and apply technology to perform activities in a more streamlined manner, or perhaps with a different labor mix.

From my time at Becton Dickinson, we had taken a few processes, which were already very tight aspects of a process, but had some very significant cycle time improvements. One of which was in the R&D department that we supported. They had a process that was taking 6 months from start to finish. The leader was able to take that down to less than 45 days.

It’s a combination of reevaluating the process, applying technology and coming out with something transformed that’s supported by the organization. Decreasing costs and cycle times with digital transformation doesn’t always involve taking labor out.

In my experience, a lot of the value was in material cycle time improvement for some of these processes that was able to bring value back to these organizations.

The matrix and the process is the starting point for the conversation. What you’ll end up with is a completed matrix for a process that breaks down an activity by task:

• Here are the things we do physically with some level of documentation
• Here are the things that are not standard, that we may need to create some process and documentation

Once you have that information, then we can start to talk about what’s being done with technology and that gives you what’s traditionally called your current state. That’ll give you the basis on the specific process. Maybe it’s procure-to-pay.

• How do I go and talk to leadership about the changes that we think we should make?
• How far can we push this?
• Do we want to push everything through technology?
• What challenges are we going to have with our customer base?

As I mentioned with the Becton Dickinson example, we talked about being able to take customer information, which at one time was done with faxes. With faxes, come challenges in the quality of the information, where you can’t consistently get an outcome through Optical Character Recognition (OCR) technologies. You can ingest the information into your Enterprise Resource Planning (ERP) system effectively with manual error checking. At this point, this is no longer just a back office issue. Now we need to pose the question of whether or not we’re comfortable enough with our relationship with the customer to start changing the process.

We can actually impact the customer, which was historically off the table.

COVID 19 has brought a new normal, which I know people I talk with on social media absolutely abhor that term, but we still need to bring it up because right now nobody wants to touch an invoice, nobody wants to touch a fax.

How do we start to digitize some of this stuff?

These matrices are the basis to that conversation, first with ourselves, then with all the different stakeholders. Both outside of your function but even outside of your company. This’ll give you the opportunity to move some of these things and maybe do work that you wanted to change differently.

The second matrix is starting to talk about your technology stack. As time has gone on the lines between process and technology have gotten more blurred. If you’re going to go through with these changes, you don’t want to put your 2020 process on a 1980 technology.

At the time you’re looking at your processes, you should look at your technology stack and understand if it’s able to support your change goals. Are you on a very old version of SAP or Oracle, determine if you have some of the RPA (Robotic Process Automation) tools needed to address holes you may have in your systems. You have to do these two things together, so when you get to the end and start to implement those process changes, you’re putting them on a good foundation to move forward with a sustainable solution.

What you don’t want to do is build a solution that becomes obsolete in just one year. But at the same time, you want to balance obsolescence with expedience. No one wants a technology solution ten years from now. That’s the annoyance of many IT organizations.

How do you do these changes rapidly and sustainably while providing value to the business leaders?

Something that I’ve said many times, to many different business leaders is, “ITs role is to serve the business, it’s not about IT serving IT.” Too often, technologists forget that, and when they do is usually when they get in trouble. We need to support going fast in a way that is secure from an information standpoint, and that protects the organization.

Similar to what we were doing with process, the 2×2 will have:

• X-Axis: Cloud On-Premises vs Legacy On-prem
• Y-Axis: Future vs Legacy

The question to ask here is whether this will be part of your future road map. We’re just trying to get a sense of your current standings, to be fair, you’re probably not going to have many things in the cloud legacy quadrant.

Some digitally native companies may already be moving to a more Gen 2 and 3 solution, but they’ll probably still have a lot of legacy on prem. Moving to the cloud should be a part of your future roadmap.

As many companies are trying to minimize what’s on premises, they don’t want a large physical footprint, but they want to do it in a way that’ll add value to the organization. This should be done for every process, so you’re going to have a technology matrix by process and a process matrix by process.

Then, you’ll start marrying this up, for some processes, you may end up with SAPR4 across your future road map. For three different process areas, that wouldn’t be uncommon and there may be some supporting technologies that would be bundled with that. This’ll give you the basis for moving forward with your organization and to start to apply this to where you want to go.

I’ve done this for IT functions and across all of the process areas. It’s methodical, it’s tried and true, and it produces tangible results. This isn’t a theoretical topic, it’s something that I’m passionate about and is probably more on the tactical side. We want to be able to provide you with thoughtful direction and leadership so that you can do this yourself or with someone that has been there and done that, who can help you along the way on your journey.

I think a lot of companies are going to be going through this and it’s not the technology that trips them up, it’s not even the processes, it’s how to manage the change within the organization.

Everybody is supportive of change, as long as the change doesn’t impact them. That’s where someone like me comes in. Not just because we know technology and process, but by being able to help a senior leadership team navigate this so they can be successful in driving the change and ultimately, their customers, in a positive way.

In closing, if you’re a leader in your organization, whether you’re a business unit head, CIO, head of global business services or a functional leader, this is something that if you’re not looking at it you need to.

It’s happening, and I’m seeing many companies reach out to me. They want me to look at this process, and that process. What we’ve laid out here is a roadmap and a game plan, that’s repeatable, that you can take back to your CEO, and say, this is how we’re going to do it. This is a measurable value that we’re going to get, an outcome of the assessment, and this is how we’re going to make the change stick in the organization, and here’s what I need. If you want to learn more, please reach out to me at richard.pierle@pierdigital.com.