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The Power of 1% in Digital Transformation

Posted on 11.19.2015

:: By Linda Taddonio, Insite Software ::

Many organizations are moving to adopt digital technologies, but the speed of adoption is ever increasing and most organizations need to move at a faster pace to avoid competitive disadvantage.

The challenge is that these same organizations are also still grounded in traditional budgeting models that are department driven with limited cross-department views and almost no customer-driven operational views. 

Proper investment must be in place to fully realize the benefits of digital transformation. Unfortunately, most organizations still utilize an annual “bottom-up” departmental budgeting and capex approach for their annual planning efforts. Isolating the acquisition and implementation of technology fails to recognize the company-wide interdependencies between technology, process, people, and programs and the impact of these interdependencies on the level of investment required. As well, annual planning cycles lack agility and hence are not effective in driving digital transformation momentum.

A new approach is needed where companies commit to an ongoing investment of one percent of revenue for digital transformation – that’s the Power of One Percent in digital transormation.

It’s an intentional, proactive, radically applied investment that views the investment from the top down as opportunistic, rather than as a sum of locally isolated budget initiatives. 

Below are three key steps to drive the results from the power of a one percent investment in digital transformation: 

Planting the Seeds

Laying a digital foundation requires the acquisition of commerce technologies and their integration to core applications to establish the right foundation, and be in a position to move information across a company’s expanded ecosystem with speed. ERP, CRM and business intelligence (BI) applications will play core roles in the ecosystem along with other adjacent technologies. The focus must be on the reinvention of core processes that are digitally enabled across these core systems. This becomes the foundation upon which all other technologies will be launched.  

In Phase 1 of laying the digital foundation, an organization should expect 40 percent or more of its investment to be spent on acquiring, implementing and integrating core digital technologies into its ecosystem. In subsequent phases, the percentage of investment on foundational digital technologies will likely drop into the 25 percent range, but the acquisition of technologies to build out the digital ecosystem over time will continue for several phases.

Compelling Product Content

Research shows 60-90 percent of buyers start their product search online, and search engines further dictate that this content must be differentiating for optimal SEO. Content now goes well beyond product-only information and must incorporate social content such as ratings and reviews, questions and answers, access to product experts, etc. For organizations with large SKU counts, it is imperative that the program to acquire content be phased and multi-faceted so as to not inhibit the speed of digital deployments. 

Depending on SKU count, approximately 25 percent of an organization’s Phase I investment will need to be allocated toward a product content creation program. To help prioritize content creation, it is recommended that companies utilize the 80/20 rule and focus on the 20 percent of products that generate 80 percent of the revenue. This will evolve over time as organizations will need to invest in the ongoing acquisition and required maintenance of their product content. 

Strategic Marketing

Investing in marketing is the third mandatory key component. In Phase I, the balance of the investment not spent on technology and content primarily should be allocated to marketing and digital resource development. In subsequent phases, technology and content investments may be reduced but investments in marketing will likely rise. 

Along with typical digital marketing investments, don’t overlook marketing and operational programs required to drive adoption. Continuous improvements must be intentionally sought out to achieve results that align with the goals driving the metric based returns established by an organization. Planning ahead to rapidly overcome objections to internal and external adoption as they arise will help companies gain momentum and drive success. 

Digital transformation is a huge undertaking for any business, but the Power of One Percent is designed to make that process a little less daunting by taking a fundamentally different approach to how a company invests for the future. It’s shifting away from what is the least expensive or easiest digital decisions to make to what are the best digital investments for customer-centric operations, and a shift from annual plans to agile plans, with a focus on speed. The Power of One Percent is the fuel to drive toward an agile, operational, and goal-oriented model that accepts a higher level of risk to generate a higher level of return.

About the Author

Linda Taddonio is the co-founder and eCommerce strategy officer of Insite Software. She co-founded Insite in 2004, bringing 25 years of experience in industries focusing on manufacturing and distribution. She brings a unique understanding of eCommerce initiatives, business process, and ERP knowledge, as well as an extensive financial background to Insite Software. She offers Insite's clients a unique blend of expertise, helping them to set and evolve their eCommerce strategy to deliver B2B or B2C commerce sites.

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