Digitisation: Strategy, not just action for its own sake

Part 1 of our series on Corporate Performance Management and Digitisation in the SME Sector

Business Process Management, Internet of Things, Virtual Reality or Robotic Process Automation – are you aware of the benefits or the competitive advantages these digital technologies have to offer you as a medium-sized business? Should you invest in them? Yes? No? Perhaps? The competition with major corporations, which have been driving their digitisation forward for years, is putting the SME sector under pressure, as are the buzzwords circulating in the media and in politics.

Some in the SME sector respond with a categorical rejection. Others can see the advantages in principle and launch themselves into projects even though they cannot apply technologies to their business without adapting them. Thomas Sauer of CA controller akademie explains: “SMEs often feel compelled to jump onto the digitisation bandwagon even if the associated challenges are not yet fully understood and an integrated approach is lacking.”

Driven by the market environment or a vague sense of urgency, many a company will initiate a digitisation project. But let’s get things straight.

Digitisation ≠ IT

What happens today when the staff in a department in a medium-sized business which is not specialised in IT, such as Finance and Administration, groan under the burden of the many recurring tasks and unannounced ad-hoc queries from the management?

Thomas Sauer knows from experience that companies often think directly from the problem to the software: “These companies hope that the introduction of a tool will achieve the desired efficiency gains. After only a brief evaluation of the market, they start implementing their first initiatives. In doing so, they frequently fail to consider the subject matter in its entirety. A further challenge is finding the right project setup.”

For instance, the question arises as to who should take on the project management. Should it be the overworked finance staff, the IT staff, who are not all that familiar with the requirements and processes in accounting and corporate performance management, or external contractors?

If the project is chiefly to be implemented with internal resources, cuts will be unavoidable in most medium-sized companies. Under pressure to succeed on time and within budget, people are soon willing to adopt pragmatic approaches. Instead of defining the objectives of their corporate performance management from a company-wide point of view, they immediately focus on the software as the solution: the Finance and Administration staff make a list of their most pressing day-to-day requirements, the IT department evaluates three software products from the CPM or BI environment, the executive management approves the acquisition costs, and off they go.

First the “what”, then the “how”

This pattern seems familiar to Thomas Sauer: “Many companies pick up on catchwords and trends and expect the introduction of software tools to be a panacea for their problems. But those who evaluate software products at the outset must ultimately submit to the software instead of benefiting from it. One of the typical mistakes is for the analogue world, with all its faults, to be digitally modelled. When they go on to notice that the envisaged improvements and leverage effects have failed to materialise, this is all the more frustrating as the problems are now firmly cemented into a digital solution.”

What does this mean for medium-sized companies? Instead of proceeding straight to the software selection, a results-driven approach would involve first finding out about the tasks and the associated workflows and then, from that point of departure, defining an optimum as the goal. Once the strategy is in place as to the future purpose of corporate performance management, attention can be focused on the supporting technologies. In other words: the “what” comes first, then the “how”.

“New technologies are the tools with which humans can work more efficiently and more easily. It’s not the other way round. For digitisation projects to succeed, it is important to locate the approaches in the analogue world as well as in the digital world,” says Thomas Sauer.

Lessons learned

Digitisation is only ever one part of the solution: the second part. The first part takes place in the analogue world and is concerned with how the corporate performance management process is designed.

Even if this is not exactly the line of least resistance, digitisation projects in corporate performance management begin by looking at the existing processes and asking what direction the business management will take in future. In particular, the complex field of corporate performance management requires a clear BI strategy that should on no account be rushed.