How To Think Backward For A Winning Digital Strategy
Keith LaBotz - January 19, 2023
One of the most difficult challenges supply chains face with digital transformation is knowing how to get there.
Roughly half of the companies Gartner surveyed are unsure of where they’re headed with digitalization, yet the effort is intensifying:
80% of CEOs are increasing digital technology investments to counter current economic pressures
53% of organizations are uncertain about their digital transformation efforts.
While the level of investment appears mismatched with the confidence, more concerning is the optimistic outlook - it doesn’t reflect findings from other studies.
Studies by McKinsey, BCG, KPMG, and Bain & Company, 70% to 95% of digital transformations fail. There is no reason to think these odds changed over the past few months. That suggests the majority of respondents in Gartner’s survey are overconfident.
How can your company stay on the right track with digitalization? By thinking backward. Once you learn to think backward, you’ll never see the supply chain the same way.
Step 1: Think Differently to Create a Vision
Thinking backward epitomizes the idea of thinking differently, and we’ll get to it in a moment. The first step of digital transformation is to think differently. Why?
You must think differently to create a different vision.
Creating a new vision of the supply chain process is a mental exercise: rearranging supply chain functions and resources for greater effectiveness.
Digital transformation transforms the new vision of the supply chain into reality.
Using a supply chain model can enhance creativity and communication of ideas.
The vision should be detailed enough to describe the future process and allow you to answer these questions clearly:
What does the future digital supply chain process look like?
What will be different, and why is it superior?
Step 2: A Digital Strategy to Transform Vision Into Reality
- A digital strategy guides the implementation of digital solutions to ensure each process improvement aligns with the end goal.
- It identifies mission-critical steps and objectives.
- Without a digital strategy, there’s no way to know if digitalization is heading in the right direction.
Most Companies Fail the First Step
It's not a lack of technology, capable vendors, or competence causing the failure of digital transformations. Many need help with the first step in their thinking - they cannot create a viable vision. Here are a few pitfalls to be aware of:
Confusing digitalization with digital transformation. Every digital solution is a step closer to the goal, and visualizing the new functionality is equated to a new vision.
An inability to envision a supply chain process that looks different. After all, the legacy supply chain taught most of us everything we know.
Needing help figuring out where to start. Supply chains are very complex, and without a starting point and a sense of direction, reimagining the process it’s too overwhelming. Areas of the supply chain may transform while other functions remain unchanged.
Think Backwards to Digital Success
A previous post proposed restructuring the supply chain around last-mile logistics, and this is the crux of thinking backward. Approaching digital transformation from the point of final delivery epitomizes thinking differently: it requires you to examine the process in reverse.
Customer delivery is the final event and the best place to begin a digital transformation.
Analysis can only move in reverse upstream from delivery.
You will understand supply chain processes from the customer’s perspective.
Decisions for process improvements, business strategy, and tactical choices work backward from delivery.
Digital solutions are evaluated for their impact on last-mile logistics.
The Last Mile Prioritizes Digitalization
Focusing on the last mile ensures that a supply chain's primary mission is to deliver customer satisfaction at maximum profit.
The success of every business depends on how well it meets customer expectations, and customers render their final judgment upon final delivery.
Whether a company realizes it or not, it is on trial with every shipment, and the mission of every supply chain is to satisfy these expectations.
Effective last-mile logistics is vital to accomplishing the mission, making it mission-critical.
Excelling in logistics execution and planning is synonymous with excelling at the delivery experience.
The Last Mile Logistics Aligns Digitalization
Concentrating on last-mile logistics ensures process improvements stay aligned with the mission, regardless of changing requirements.
As customer demands continue to increase, companies will push logistics performance to higher levels and require process improvements across the business enterprise.
To summarize, a supply chain fulfills its mission of satisfying customer expectations upon delivery, which drives enterprise-wide improvements. With the last mile leading a business, the entire enterprise aligns to support it.
The Last Mile is the Ultimate Challenge to Legacy Thinking
Shipping and warehousing were an afterthought for legacy supply chains, making the last mile susceptible to competitive disruption. Supply chain improvements prioritized upstream activities like production, demand, and fulfillment.
With most competitors continuing to view transportation as secondary to the enterprise, making it the primary focus can reveal multiple opportunities that outflank competitors who just don’t get it. That’s what Amazon did.
The Last Mile Taps Transportation’s Potential
Transportation represents an untapped goldmine of savings, with many new opportunities emerging as cloud solutions and intermediaries multiply, but those are small potatoes.
The big breakthrough awaits companies that understand the secret behind Amazon’s success - building the supply chain around the last mile. That alone might be a reason to put the last mile first.
Thinking backward about the supply chain process resolves multiple challenges with digital transformation and creates opportunities. Focusing on customer delivery by putting the last mile first is the key to digital success.
flexis AG can provide digital solutions that allow companies to create and execute a digital strategy. Let us know if we can help your organization with the solutions discussed in this article.
If you want to learn more get your Guide to Logistics 4.0
In this Guide you will learn:
Why a strategic process in transportation planning is a top priority for digitalization
What megatrends will increase supply chain volatility
How to manage it
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