The Pitfalls in the Selection Phase of Enterprise Digital Transformation

[baoshi.rao]

In the process of enterprise digital transformation, selection is the most critical step. Poor or incorrect selection can directly lead to project failure or abandonment, so a good start begins with the right selection.

So, what issues should enterprises pay attention to during the selection process of digital transformation? What risks might they face?

Lao Yang believes that enterprises will encounter the following challenges during the selection process:

First, the challenge of requirements:
Unclear requirements and wishful thinking are very common in the early stages of selection for most traditional enterprises. Business departments often don’t know what they want, possibly offering only vague demands like, 'I’m not an expert in digitalization—IT department, handle it!' Business departments may assume that the software must solve all management problems. The result could be that the IT department selects something the business department doesn’t actually need, leading to the system being abandoned during implementation.

Second, the challenge of pain points:
With unclear requirements, it’s natural not to know what is truly needed. Although business departments have demands for digitalization, these demands might be 'false needs,' possibly exaggerating trivial issues—turning minor irritations into major pain points. The ultimate result is that the value of the system’s implementation becomes difficult to demonstrate.

Therefore, the primary issue enterprises must address before selecting a solution is: requirements must be clear, and pain points must be prominent. Otherwise, it will directly impact the cost investment and value realization during the later selection process. For example, the initial requirement from the business department might simply be a small boat to cross a river. However, due to unclear descriptions and blind demands, the small boat could turn into an aircraft carrier. After purchasing a system at the level of an aircraft carrier, the company may realize its actual operational management capabilities cannot handle such a system. Consequently, the aircraft carrier never sets sail and is declared mothballed, resulting in significant waste for the enterprise.

From the above, it is evident that challenges equate to risks, which originate internally. However, enterprises also face external risks that are highly uncertain—namely, the digital solution providers (software companies).

During the digital solution selection phase, enterprises often encounter external risks such as: "seller's showcase vs. buyer's reality"! Initially, software companies may present their products as all-encompassing solutions, seemingly capable of curing all ailments. However, during implementation, it becomes clear that the initial promises are nearly impossible to fulfill—unless additional funds are invested. Thus, evaluating the supplier's capabilities during the selection phase is crucial. This includes not only assessing the product's capabilities but also its implementation ability, software interface openness, and service quality. In reality, this is often difficult to achieve, primarily because the IT department is excluded from the entire selection process. When business departments bypass the IT department to pursue digital transformation independently, their lack of technical expertise makes them susceptible to persuasion or even deception by software companies. Some vendors deliberately avoid engaging with the IT department and instead target business leaders, who may impulsively sign contracts. The result is often a cycle of high hopes during contract signing, disappointment during implementation, reluctant acceptance during验收, and ultimately, painful system usage with unmet expectations. Hence, involving the IT department during the selection phase is vital to prevent implementation and application issues later.

Another risk in vendor selection is: relationship-driven risk! This occurs when a senior leader mandates or recommends a specific digital vendor. In such cases, relationships override all other considerations, and the vendor may refuse to cooperate at various stages, inevitably leading to project failure.

From the above, it is evident that the selection phase is fraught with both major and minor pitfalls. Failing to address the minor issues during selection can lead to significant problems during implementation. The pitfalls identified during the selection phase are as follows:

First, internal pitfalls include:

• Insufficient involvement from business departments
• Unclear requirements
• Leadership interference or favoritism in vendor selection

Second, external pitfalls include:

• Lack of industry expertise from software vendors
• Insufficient implementation capabilities
• Poor service quality
• Inadequate product functionality
• Limited product openness

How to address these issues during the selection phase?

First, clarify requirements. Business and IT departments must communicate thoroughly to identify pain points and reach a consensus. They should also agree on how to implement the requirements and resolve the pain points, documenting these in a requirements specification that both parties sign off on.

Second, business departments must fully participate in the entire selection process, comprehensively evaluating software vendors from an application perspective to identify product deficiencies and capability gaps.

Third, enterprises need to establish an evaluation system that assesses vendors through standardized criteria across dimensions like product functionality, implementation capability, and service quality.

Regarding relationship-based digital distributors, Lao Yang considers this a thorny issue with currently no effective solutions.

The journey of digital transformation begins with vendor selection. If business requirements are unclear, choices are made blindly, or IT departments are excluded, the digital initiative is doomed from the start. Enterprises require standardized guidance documents for digital selection - detailing what to do from requirement definition to implementation, how to execute, and evaluation methods. Clear division of responsibilities and strict adherence to selection processes are crucial, along with multidimensional vendor assessments, because digital transformation requires collaborative efforts across departments rather than isolated operations.