Paolo Arcangelo:
The best definition I've got so far is digital transformation is a rethink of how an organisation uses technology, people and processes to fundamentally change their business performance. I think actually, it means lots and lots of different things to lots of different businesses dependent on where you are on that journey to change. So you know, for some people who are right at the beginning of that digital transformation journey, it might be that they're at the planning stage, they're looking at all of these possibilities and all the things that they could do. For other people, it might be that they've already started down the road, you know, and they're navigating to the next thing that they want to tackle in their digital transformation journey.
Tim Purcell:
I always tend to try and put that technical spin on it as well. So I tend to look at more of a process-based transformation as well. So looking at those processes that can be involved, that might be traditional manual-based processes or processes that have been around for quite a long time that could be improved and sped up almost for one of a better phrase. To a degree, Amazon have set the bar for a lot of this and with things like you know, the ease of which you can trade with Amazon. So the ease of which you buy stuff through Amazon, that digitalization that happened with those guys about well 5/10 years ago, I think is constantly driving the agenda actually, for a lot of businesses. So speed of interaction, speed of engagement, making it just really easy to do business with people, I think is driving a lot of this.
Paolo Arcangelo:
Yeah and I think the social platforms, you know, the Facebook, suppose LinkedIn to a certain extent as well, has enabled smaller businesses actually, as well to extend their reach across different industries, across different countries almost as well. So I think that's where that digital transformation really comes in for those sorts of businesses. It's made the world accessible to businesses of all sizes.
Emma Pownall:
And so do we think that digital transformation is generally led by the need to have better customer service? Or is it competitive advantage led? What is it that's driving this agenda forward for businesses?
Tim Purcell:
I think it's all of that Emma, to be honest. Younger generations are growing up on digital platforms that their primary mode of communication is digital. People would rather research what they need online, without speaking to anybody. They've got that level of confidence in terms of what they're buying and selection of services as well. So I think there's a lot of things converging on digitalization at the same time.
Paolo Arcangelo:
It doesn't just encompass the customers either does it, it's all of the stakeholders in the business. So your customers want to see you know that you're easy to communicate with, easy to trade with, that the services that you offer are efficient. But also your employees want the same sorts of things as well, you know, your employees want to interact with things like HR systems, in a very, very intuitive and simple way. Your suppliers want to talk to you electronically now. Your suppliers don't want to talk to you with bits of paper, necessarily, or you know, they want to talk to you electronically. So it's all of the different stakeholders and all of those inputs to your business. Everybody wants to ease the communication methods.
Tim Purcell:
For me, the big piece is that ease of trade really, so the desire for customers to want to get access to information that your systems have regularly. So what's your current stock levels like? What if I place an order now what's my lead time? They don't want that traditional picking up a phone and trying to find this information out. Because now if they're having to go through a whole heap of money or processes to try and find that out, they'll find another supplier, they'll look to find other businesses that are easy to trade with. I think we're almost moving away from some of those bigger traditional brands as well as anybody that's agile enough, anybody that's flexible enough, anybody they can present information and make it very, very easy to trade with. I think the generations that are coming through into business now, it's not an issue for those guys to go outside of their traditional brands to find people that are just very easy to turn on a service and work with.
Paolo Arcangelo:
It's a mirror of your own experiences, really. I think Apple revolutionised the world with the iPhone, the ease of navigation, the intuitive design of the software. And what that's led to really is, you've only got a few minutes at best if somebody's interacting with your business, with your website or with your app to actually get them and keep them engaged. And if you don't do that, or you haven't got that level of access, people will turn off from you very, very quickly. It's as important as the products that you have, the experience that you give to your consumers. You know, we're now moving towards people wanting to consume information in the most efficient way possible.
Emma Pownall:
Everything we're talking about here has been amplified and accelerated by the experience in the last six months that COVID has brought to businesses. How do you think it's changed digital transformation, as a concept, and as an agenda item for business leaders?
Tim Purcell:
For me, I think this period marks a bit of a step change, really, for digitalization. I think with physical offices and physical contact being less lively, businesses are looking for ways to engage to make themselves stand out. And to me, there's kind of two elements to it. One is going to be business survival, and then there's going to be the growth elements of it. So for the last six months, it's been a case of battening down the hatches and protecting your business. And then looking at things like reducing of costs as well. So all of those are applicable from a digital transformation point of view. So the ability to focus on some of those areas of their business that have traditionally taken a lot of time and a lot of costs and a lot of people maybe to achieve, businesses are looking at ways of simplifying that, speeding those processes up and again, making themselves just easier to try and win.
Paolo Arcangelo:
I would probably say that COVID has kicked off a digital revolution rather than a digital transformation. You know, the effects of it have just been incredible. I think if you'd have asked many businesses before COVID, and said, right, okay, you will need to work from home, most businesses would have said that would be impossible, or it would take us two to three years to even contemplate having to do that. At the advent of COVID, or when we went into lockdown, every single business that was going to survive needed to find a way to get their workers all working from home, and the digital revolution at that point happened. And to our astonishment and surprise, the UK's fiber network held up to that level of demand.
And now, workers are saying we want to continue to work in this environment. We've reassessed our approach to working you know, we've decided that we want to increase our work-life balance. And you know, maybe spending time travelling or commuting to and from our office is not really time well spent. We have done some internal questionnaires, and we found that only 3% of our employees want a permanent return back to the office, with the vast majority of them wanting to reassess and maybe spend some time in the office and some time at home, when that's possible.
What we've also found from our customers is that they actually prefer working with us over that means of Microsoft Teams or Zoom, because the way that we work with our customers now is in smaller, targeted chunks of time. So instead of working in day-long chunks now we're tending to work in hours or even half days, which our customers are telling us is more a more productive way of working. Just one of the points on this as well, I've seen on the news lately that Germany are looking at introducing new legislation giving all employees the right to work from home in the wake of the coronavirus pandemic. So that is just a you know, it's a massive change,
Tim Purcell:
It's not going to go back to traditional, the world has woken up to dealing with each other digitally. And yet, there's a little bit of adjustment and a bit of agility in terms of how you deal with some of the challenges that come up, but none of them are appearing to be insurmountable. So I think a lot of businesses now have just switched on to the fact that actually it doesn't need to be the old traditional way of working. And what this has done is present an opportunity now for businesses to move forward in a different level of engagement and a different set of circumstances and ultimately a different way of trading. I mean, I'm certainly seeing it that the focus during online meetings actually and the quality that comes out of them is a lot better it's much improved, because people are almost using the travel time that they would have had previously to prepare for sessions. And also the time that they would have to travel back from a meeting that they're utilising that time to almost reflect and review what's been discussed.
Paolo Arcangelo:
It's synonymous in our own business, really, it's hardware trading, whereby rather than going out to see our customers physically, as we were doing previously, you might only be able to get one of those two meetings a day, you can now maybe get five or six of those same meetings, because you're not travelling to and from. And that's happening right the way throughout our customer base as well, those customers that we have who we're in regular contact physically with their customer base, they've moved to it being more of a remote sell, and selling means that you can do more of those meetings throughout your working day. And again, it's proving to be as or more productive than it was previously. I think it's lessons from the past.
So, you know, we've got customers now who have been on multiple implementations of various different software packages. And I think, you know, still maybe have the scars of having implemented a big monolithic piece of software in the past, and, you know, having to spend lots and lots of time on that. And what I would say is actually, the place to start with digital transformation is to look at the investments that you already have, within the business, you know, most businesses now have ERP systems that they've implemented, or reporting solutions they've implemented or CRM solutions that they've implemented previously. And now is a good time really to look back at all those investments that you've made and say, well, how can I get more out of this? You know, are there any extra modules that I can implement? Is there anything that we put on the back burner when we were first implementing it, which we could start to bring forward now?
So it's more about implementing changes in the business in smaller, more manageable chunks, rather than implementing a big piece of software. The path towards digital transformation isn't an end goal, it isn't something that finishes, it's just a journey now that you continue on. And it's part of continuous business improvement.
Tim Purcell:
Absolutely. To be honest, you've picked a couple of phrases I think that I've got in my head, actually, before you started speaking with bite-size is really a key point here, that digital transformation can be done in pieces. So looking at individual systems, looking at what you can get out of systems that you've already got in place. I think data is a key bit here. I mean, how many businesses out there thoroughly know what their data is, you know, and then there'll be a whole heap of information, a whole heap of improvements that they can get out of existing systems by utilising the data they've already got, or bringing additional modules, as you said, into play, to leverage some of that information and make themselves a lot more sophisticated, a lot more easy to do business with.
You know, you have to look at what's important to the business, identify what changes have the biggest impact and address them. It might be processing orders more quickly, providing more data to your customers, it might be faster updates on products and services that you provide. And I think it's a case of just being agile enough to accept the fact that yes, you might make mistakes as well. So you could implement small changes, that might not be the best solution in the world, but it might solve yourself an immediate problem. And then you might rip it up and throw it away and replace it with another one in six to twelve months' time. So I think it's a case of that taking almost an agile process into transformation and as you said looking at continuous improvement.
Paolo Arcangelo:
And what you'll find is as you embark upon the road, new opportunities will present themselves as you go there. So you know, as you implement a new business process, you'll find that oh, well, now that we've done that all of these things have opened up to us now all of these possibilities have opened up to us. Now you might find that you can communicate with your customers better. Or you might find that you know, a customer asks you for something that by implementing your changes, that you could then offer that out to multiples of your customers. So the path to digital transformation, actually will present more opportunities, once you embark upon that journey. Your time to value is much shorter by implementing things in a smaller, bite-sized way. So all the way along the path, you actually generate value from the investments that you make.
Emma Pownall:
Yeah. We've seen loads of examples within the customer base of businesses that have had to totally shift in terms of digital transformation. So an example of one of our customers, a large garden furniture and supplies retailer, they went from 80% retail to 80% home delivery overnight. And with it came all the COVID secure complications that we're having to live by and so they had to totally transform from being paper-based delivery notes to a fully automated system so that they knew where their stock was, and how it had got to the customers.
Paolo Arcangelo:
Yeah, I think, you know, in the same sort of way, I've experienced customers recently who looked at the COVID crisis and said, well, we either let this come and hit us, or we come out fighting. So one of the customers I know very well, who were a large manufacturer and distributor of cosmetics into retail, just flipped around their business model and started to develop PPE and hand sanitizer during that period and did very well as a result of that.
Emma Pownall:
I think it's been an incredible period of innovation, the last six/seven months, and it will be really interesting to see how digital transformation can influence and affect innovation going forward from here as well.
Paolo Arcangelo:
We're seeing a response, which I think was similar to the response of business back in 2008, that we were hit with that crisis, you know, we went into a dip, and then businesses understood that the way out of it was, I suppose, invest or die, really. And I think businesses looked at it and thought, right, well, we need to invest our way out of this problem. And this will no longer be a digital transformation, it will be a digital revolution. What we're seeing is people are now looking at a digital future, and all organisations that they need to communicate within an electronic or digital way.
Tim Purcell:
The invest or die section is actually so pertinent as well, because I think if we get through the business protection phase of this, and as businesses start to think about short/medium-term plans as to how to build and grow out of this, I think that investment area is something that we're going to hear more and more about. I'm certainly experiencing it with a number of customers that I've been dealing with where they are now looking to invest out of us. So look at the things that they've learned, look at how they've utilised technology over the last six months, and actually how can they use that how can they maximise some of those communications, some of that technology experience that they've gained, you know, they might be looking at diversifying into different areas where maybe they didn't consider it before, but opportunity has presented this to them. And I think we will start to see a lot more investment in some of this top technology now as businesses do grow out of the situation.
Paolo Arcangelo:
Yeah, I think one of the things I'm seeing as well is with some of the larger businesses that we work with, where they might have had a strategy for consolidation, they've accelerated that move now to get consolidation of process, to centralising services, to get shared resources across multiple different businesses. I'm seeing that a lot in larger businesses now.
Emma Pownall:
So if transformation is on the agenda for the business leaders listening, where would you advise that they focus first?
Paolo Arcangelo:
I would say, look at what you've already got. So look at all the investment that you've already got in the business, you know, all those systems that you've been working with for a number of years, have a look at them and say, is there anything more that I can get out of this particular investment that I've already made? You know, I might be able to implement something as simple as you know, a new module, I might be able to implement a reporting solution that goes around it, you know, how can I work towards satisfying the objectives now that my employees might have of wanting to work remotely? You know, and how can I facilitate that, to give my employees that benefit, as well as achieving more productivity out of them?
Tim Purcell:
I think some of the areas that businesses had looked at actually prior to the pandemic are also still relevant now, so looking at things like automation and what's already in place, look at improvements across relationships between yourself and your business partners as well so how can you make it easier for yourselves to trade with or to be traded with? So looking at those integrations of external systems and working with those partners to make sure that you're maximising it that you know, throughput of information. And also something again Paolo said around reporting, actually, we've touched on this already, but so many businesses have so much data now that they capture that they're probably not even aware of 80% of the value of some of that information. So looking at how they can leverage some of that to drive business decisions going forward.
Emma Pownall:
And so how would you recommend to a business to sort of take that long term view, while on this path of short term wins that are gonna help create that value for them?
Paolo Arcangelo:
Well the two aren't mutually exclusive, so the long term strategy, and the path to the long term strategy for me are the same thing. You know, ones the aspirational, it's where do we want to get to, and then it's all about extracting the value as you go along. Because once you do that, you reduce your time to value, you reduce your cost, and you're able to start monetizing your investments much much sooner. So the long term vision and then the short term ways in which to release the value are part of the same strategy.
Tim Purcell:
I think you've got to understand what the long term ambition is. So businesses traditionally will have a longer term growth plan. So how are they going to improve revenue? How are they going to reduce costs? And some of the basic fundamentals, it's important not to lose track of that. But actually also, as part of that implementation is to look at some of those quicker wins. Some of those opportunities as Paolo was saying would come throughout the life of that longer term piece. And also, I think one of the challenges for businesses is also trying to understand how they can implement such a plan as well, certainly from a digitalization point of view. Traditionally, businesses will have a reasonably small incumbent IT team and for those teams to understand how to implement best practice, how to implement fundamental digitalization changes, I think it's going to be a challenge, because IT in technology is moving at such a fast pace. And I think that's where a lot of businesses will need help.
Paolo Arcangelo:
I think you're absolutely right. To have that in house expertise, to have that understanding internally, is becoming more and more difficult, because you know, the world of technology is becoming increasingly diverse. So if you've got questions around, you know, ways to improve your customer journey, or improve your customers' experiences, then it's worthwhile going out to speak to people who are specifically dedicated to that area of your evolution. You know, get in expertise from the outside, where you can be sharing not just one person's perspective, but you can be sharing 100 people's perspectives. Because what these businesses can do is they can bring to you all the experience that they have of dealing with, you know, multiple different businesses of their own.
Tim Purcell:
Businesses are coming to us and asking is, what's our experience of these areas? Do we know how to join these types of systems together? And whilst we might not have a like we say a specific solution in the kitbag, I think it's a case of understanding how all of these different solutions can be brought to bear and looking at things like common API strategies, for example, and how do you bring open systems together? So I think it's a case of with that fairly broad experience, how we can apply that information back to enable customers to make that kind of decision.
Emma Pownall:
Let's talk for a minute about cloud and how that's changed digital transformation over the last few years, because it certainly moved a lot of spend conversations for a big cap expert and to more operational spend, how do you see it affecting digital transformation generally?
Tim Purcell:
Well software has almost become a utility, hasn't it? We've moved away from the traditional upfront purchases of software into purchasing software as a service. And you can very quickly enable a software service, utilise it, if it doesn't work well for the business, you throw it away, and you move on to another one.
Paolo Arcangelo:
Yeah, I think COVID has amplified this some what. Companies are looking at cash that they have in the business and saying we don't want the large CAPEX outlay of a software solution and what we'd prefer to have is actually just that monthly operational cost hitting the P&L. So you've not got a large capital investment, it's just a flat line entry onto your profit and loss every month, whereby you're just paying for your software, in the same way, you know, that you would pay for any other utility that you might have. What we're also seeing with cloud services, is customers are wanting more and more for their software to be automatically kept up to date.
Tim Purcell:
I think you're absolutely right. I think the expectation then that the software will grow with the business that as you move potentially platforms, as you move different environments, the software will grow and evolve with that as different releases are brought out. I think businesses are moving away from the old traditional mechanism of costly long running upgrade processes. They're wanting to be able to just allow the software to grow with them.
Paolo Arcangelo:
One of our customers who is a very, very large internet retailer used to have huge server farms that they used to manage internally. And when it came to the peak of business processing during that Black Friday time, they used to have real issues coping with the volume and influx of orders because you can't size your infrastructure based upon two or three days in November. But now with cloud computing technology, you know, they're able to dial up their need for hardware and resources during that Black Friday, that peak of business demand, they're able to dial up the hardware, backing that up. And then when they come out of those busy periods they're able to dial that hardware down once again. So the way that their costs of hardware and infrastructure follow the way that their revenues occur in their profit and loss is absoutely huge for their business. And I think there are more and more retailers that are like this, you know, as and when their business demands it.
Emma Pownall:
This really brings a lot of agility and flexibility to every size of business, doesn't it? So it's not just the big players now that can work with these technologies and can harness the ability within these technologies. So it's no longer a barrier for the SME market.
Tim Purcell:
No I think you're spot on actually I think a couple of the major players, certainly on the cloud side of things, your Microsoft, your Amazons, and your Googles, I think what they've done is they've reduced the barriers for entry to this type of technology. So they've made it a lot more widespread, easier to access. So again, I'll come back to the points I made about Amazon before that they have set the bar repeatedly for customer service and ease of trade. I think everybody aspires to have that same level of service, that same level of engagement. And what some of this cloud infrastructure has done is actually reduce the barriers for accessing that type of technology. So it is available now to pretty much every SME.
And cost again coming back to the point Paolo made before because as you can scale up and scale down, those massive infrastructure costs, aren't that big an impact now, because you can scale these things in and out, you can scale the costs up and down based upon results, based upon demand. So technology is becoming quite a key enabler for SMEs to be able to achieve some of those levels of interaction, some of those levels of engagement, some of those levels of improved trading that was typically reserved for some of the bigger brands in the past.
Paolo Arcangelo:
Yeah, I think you're absolutely right. I think the cloud computing effectively has been a great business leveler. It's enabled the smaller businesses to compete with the larger organisations.
Emma Pownall:
It's opened up competition, which is great for consumers. But there's also a challenge in that technology always changes the way people work. The rush to remote working this year has shown that perfectly. Some people love it, some people find it very problematic.
Paolo Arcangelo:
What one person sees as a threat, another person sees as an opportunity don't they. You know, I think one of the things that we've certainly seen, as we've headed more towards a remote working environment, there has been an absolute necessity to digitalize some of these processes, you know, you can't have big piles of paper passing between people whilst they're sat at their homes. So we've had to make electronic, all of those things that were previously manual processes. You know, you've got people who were out there dealing with customers face to face, where you used to get signed bits of paper, that's no longer happening, you know, you're getting things like electronic signature processes in technology, such as DocuSign. Some people look at that and say, well you're taking my job away, whereas others would look at that and say, well, that gives me more time to do all of the other things that I really struggled with during the day.
Tim Purcell:
I think there's definitely an emphasis on businesses from a couple of perspectives, actually, one is to give their staff the right level of support to help them look for those opportunities. If they're not going to be spending five hours every week travelling, actually, where can they get the most opportunity to utilise their time better and look at how they can support the businesses. A couple of customers that I've spoken to recently, actually, they've been working with their staff to try and look at how they can better engage with different teams, how they can better engage with partners, suppliers and other customers to utilise the technology available to them actually, and to see the opportunities. And so I think there's definitely an educational piece that businesses have to go through with their staff to neutralise some of that threat and also then to help them to see those opportunities.
Emma Pownall:
Thanks, Tim. And thanks also to Paolo Arcangelo, both colleagues of mine here at Datel with a fresh perspective on the opportunities of digital transformation.
We'll be back very soon with more guests at the cutting edge of British business strategy, including some of the issues uppermost in today's environment, like looking after your cash flow and running a business with purpose. Meanwhile, thanks for listening to Datel's Business Futures podcast.
My guests were Tim Purcell, Datel's R&D Director, and Paolo Arcangelo, Datel's Sage X3 Services Director. See you next time on Business Futures.
This podcast was produced by ModComms, a full-service marketing agency offering innovative approaches to client challenges. www.modcommslimited.com