Challenges of digital transformation: 5 lessons on organizational learning and competitiveness

The implementation of enterprise resource planning systems (ERPs) has been one of the common aspects of organizations to carry out their digital transformation experiences in recent years. Unfortunately, it has been a paradigmatic case of the difficulties of success in technological investments. Not surprisingly, failure rates of over 60% continue to be reported. Regardless of how tight this figure is, it is nothing more than a reflection of the concern that the result of technological investments, in terms of organizational performance, continues to generate in the C-suites of all types of companies.

Despite having learned a lot about this challenge, the main problem is that not enough has been learned to address new investment cases in technology implementation with the security of being able to reliably estimate an acceptable return on investment. Along these lines, the Innova Institute de La Salle-URL proposes that a company's ability to learn (or not) —also known as “Organizational Learning” capacity - significantly conditions success in digital transformation. Five lessons have been extracted that expose the role, almost always hidden, that the ability to learn that a company exhibits, be it large, medium, or small, can play in the success of digital transformation initiatives.

The article takes the examples of four real cases of ERP implementation, of a group of companies whose fictitious names are Alimentos s.a, Maquinarias s.a., Medicamentos s.a., and Productos Masivos s.a., all of them, subsidiaries of multinationals established in the same country. In each of the cases, the companies experienced a situation of change, between before and after the implementation. The ability to learn, to cope with change, is the factor that provides the value of these lessons learned.

Lesson I. In digital transformation, the ability to learn matters

Alimentos s.a., a global distributor of food products, had distinguished itself by not taking technological risks. He always implemented proven technology and this had given him good results and a leadership position in many areas of the world. The implementation of the ERP turned out to be the most important digital transformation project in many years and was linked, according to the Strategic Plan, to the business demands of redesigning its processes.

It seemed like a difficult goal to achieve. Good practices establish that digital transformation requires that technology management must accompany business objectives. In Alimentos s.a. it seemed that the previous story did not presage that this could happen. From this perspective, a new failure in the history of ERP implementations was predicted. Despite all this, Alimentos was successful in implementing the ERP. Why was this so?

Everything was possible when from the IT unit they took the responsibility of breaking their starting rules and learning new rules derived from the demands of the business. They went from learning how to apply technology to learning how to meet business needs by implementing technology. In other words, the success of Alimentos is explained not by the way of managing technology, not by the way the Strategic Plan was proposed, but by the learning process that was derived from the implementation of the ERP.

Learning matters. A digital transformation project supposes an organizational change and the action in Alimentos s.a. explains that the ability to learn from the organization conditions the success of the technological implementation, since they made the effort to learn to adapt to the needs of the users. It may seem obvious, but it is not easy if you take into account the previous history and inertias that all organizations have and the difficulties of carrying out changes in organizations.

The La Salle-URL Innova Institute studies in companies such as Alimentos propose that the ability to learn intervenes in the effect that technology implementation has on business performance. Specifically, it can be said that how the organization learns or can learn, creates a differential factor in the success of the digital transformation. Therefore, digital transformation managers, including the C-suite, must consider how the organization learns to ensure success in digital transformation actions.

Lesson II. Learn to synchronize goals in digital transformation

If in digital transformation the ability to learn matters, is it enough just to learn? The case of Alimentos serves to illustrate that without looking at the learning that took place in the IT unit, it would not have been possible to understand the success of the ERP implementation. However, was learning enough? Besides, in Alimentos, the IT unit was synchronized with the aspirations of the Strategic Plan. That is to say, in Alimentos s.a., the learning carried out also served to force synchronization. Without this, there would have been no progress in implementation.

Maquinarias s.a. is another example of a study by the Innova Institute in the implementation of ERPs. Maquinarias s.a. s.a. is a multinational manufacturing and distribution of vehicles and other instruments for agricultural work. The Maquinarias s.a. IT unit, contrary to the Alimentos s.a. case, has always been a pioneer in the use of new technologies for the treatment and management of information. When implementing the ERP, the organizational units of Maquinarias s.a. did not consider any significant change in their ways of operating. According to the manuals on digital transformation, the success of the implementation was more than questioned. Despite this, the implementation of ERP in Maquinarias s.a. was, as in Alimentos, a success.

Why are there companies that without strategic coherence between IT units and organizational units can achieve success in digital transformation? In the case of Maquinarias s.a. or Alimentos s.a., it has been possible to evolve from initial situations of strategic incoherence to final situations where said incoherence has been minimized. This has been possible due to the learning effort that was made to synchronize the implementation perspective and the organizational perspective. From the Innova Institute of La Salle-URL, this action is called the “synchronizing role” of organizational learning. In other words, the learning activity also explains the effort to align the strategic challenges. In this way, through learning actions, the strategic synchronization of the implementation objectives and the organizational objectives are achieved and the potential initial incoherence is resolved, at least in a temporary manner.

In Maquinarias s.a., the IT units' commitment to technological innovation helped the organizational units to find a way to solve their challenges in warehouse management, for example. With this, it appears that, according to the results of these studies, those responsible for digital transformation projects can use learning actions, either from IT units or organizational units or both, to overcome potential coherence gaps between the systems involved in digital transformation.

Lesson III. Of the low predictability of causality between technological implementation, organizational changes, and learning

From the previous lessons, the Innova Institute de La Salle-URL intends to take into account the ability of organizations to learn when analyzing the success of digital transformation actions. That is, the result of the digital transformation must take into account how the technological implementation is carried out, the responsibility of the IT units, how the organization adapts, the responsibility of the organizational units. Also, how the organization learns, its learning capacity, that is, organizational learning, should be added, both in IT units and in organizational units.

Taking the cases mentioned so far, Alimentos established a Strategic Plan that entailed an organizational change and this organizational change caused, as mentioned before, the IT units to learn to adapt the implementation to these requirements. However, taking the other example, Maquinarias, an innovative company in technological implementation, learned the need for organizational units to adhere to the postulates of the ERP implementation plan and it was this adherence that caused the implementation to be successful.

In summary, from the Innova Institute, the question is: in what way are the implementation, organizational change, and learning systems related? It is not clear. When it is said that how they are related is not clear, it means that it is not known if it is the technological implementation that produces organizational impact effects or if it is the organizational changes that determine the success of technological investments. This same paradox occurs when analyzing the relationship between organizational learning and the two other systems.

It is also illustrated with the case Medicamentos, a company in the pharmaceutical sector, where its main activities come from the marketing and distribution of pharmaceutical and other related products, such as medical equipment and accessories nationwide. For the implementation of the ERP system, it was decided to follow the best practices suggested by the consultants trying to keep the ERP in its natural form with minimal customizations. However, there was a problem with the data: it was not used to carry out the initial load to the software and a new database had to be built from scratch. The omens couldn't be worse. To this end, a team was formed with administrative personnel and pharmaceutical chemists, among others.

When analyzing the Medicamentos s.a. case, it is not clear what motivated what. When you learned to implement the EPR, did you realize that you needed a new definition of the data? By defining the data when they learned that they needed to change the implementation? Or the opposite: did they learn that they needed new implementation strategies by being aware of the need to redefine the data?

In short, when an ERP is implemented there are changes in the organization, people must adapt to new tasks and objectives. But at the same time, as these changes take place, an adaptation of the initial implementation project is required. The ERP implementation itself requires an adaptation of the organization's structure, as well as new changes in the implementation system. Furthermore, you cannot predict when you will learn or how this learning will be applied in deployment and organizational changes.

Business managers, when considering the effects of the implementation, should avoid assuming basic and linear cause-effect relationships and focus on finding those management options that, arising from the interaction of the proposed systems, should allow the success of the implantation.

Lesson IV. The social generative character of IT in VUCA environments

Organizations must develop their digital transformation processes in environments characterized by volatility, uncertainty, complexity, and ambiguity (VUCA environments). The constant digitization of social processes with the emergence of social networks for interaction between companies, between communities, and between other interest groups, implies for companies to understand the scope of their developments in terms of their articulation with other participants, the need to be inclusive and align the changing processes of this environment in your strategy. The cases studied by the Innova Institute are not far from this perspective.

An example of this is Productos Masivos, a company dedicated to the manufacture and commercialization of industrial products for mass consumption and animal nutrition. The success of the ERP implementation was mainly due to matching decisions to invest in technology with the need to manage change and align its expansion strategies with the use of technology in an inclusive manner. The Mass Products implementation project began by giving the managers and decision-makers involved in the ERP implementation the opportunity to propose and try to implement process improvements and innovation proposals in the implementation process. For this, a multidisciplinary team was formed, a human team of 40 full-time users. The production, commercial, RRHH team was formed and the administrative team, each team is led by an area manager respectively.

Technology makes it possible to coordinate actions efficiently and work synchronously with suppliers, distributors, and companies with which it cooperates so that their actions have the desired implications and can rely on conditions that only arise from collaborative work. Similarly, the possibility offered by technology to access data from the social network arouses the interest of other participants, such as governments and control entities that are finding in digitization a way of approaching communities, well with processes of government online, well with real information on their behavior and social dynamics, which they take as the basis for decision-making.

This expanded challenge implies for organizations a design that is agile and easy to understand, that is supported by the capabilities that users have or can develop in mutual learning processes, and that has an inclusive design that exceeds the limits of access and connectivity, generating processes of effective use and benefit for the community.

Lesson V. Leadership as a course for learning. Is there digital leadership?

In this first block of lessons, the Innova Institute's studies on digital transformation lead to sustaining that for the success of any design and technological implementation, or digital transformation of a company, the leadership of the management has a fundamental role. There is talk, many times, of convincing employees to change the way they think and work and even of acquiring new knowledge and developing new skills. In short, hope they can step out of their comfort zone. Studies show that this is possible under strong leadership from management.

In the reference cases of the study, Alimentos demonstrates its leadership by betting, first, on a Strategic Plan that would guide how the organization should be by action of the digital transformation and, later, on leadership in promoting the learning of the IT unit to take on new challenges in implementation. Alimentos carries out a transformational, conscious, and also digital leadership style, in which the leading person guides, inspires, and clarifies the vision of digital transformation.

Maquinarias expresses its leadership through its commitment to technological innovation in its IT unit and the combined effect of the C-suite's commitment to this technological innovation and the sponsorship of learning by organizational units. This was not in vain, the organizational units had to adhere to this innovation action and, with this, labor relations were improved and employee satisfaction increased, focusing on the personal development of their team.

In Medicamentos, leadership is manifested in the strategic coherence derived from the implementation project and in the way in which the units had to overcome the learning actions that were emerging to respond to this leadership. With this, through the empowerment of the participants, it is achieved that they can face difficulties by aligning with business objectives and with the success of the digital transformation.

In Productos masivos, leadership is manifested broadly and comprehensively in the actions derived from the ERP implementation to carry out the strategic challenges derived from the implementation objectives. Ultimately, leadership becomes a driver of change and organizational innovation in the company.

With all this, the leader has to start by knowing their weaknesses and strengths, to assume their role of generating trust and inspiring others. Therefore, you have to be the first person to understand and absorb the concept of the digital strategy that the company intends; It must adapt to the organizational culture and the reluctance that technological change may generate, to be a multiplier agent for the objectives of the digital transformation process, such as an ERP implementation. In this sense, digital leadership must involve all the units of the organization in the strategic challenge, to transform, then, the culture of the company towards new and more effective ways of thinking and acting.

Author: Francesc Miralles 

francesc.miralles@salle.url.edu​