[Part 2] Your supply chains…

…the real cost of new technologies

Just how do you calculate the true digital transformation cost? And how do we overcome the uncertainty surrounding new technology implementations?

Previously, we discussed companies’ fear of new technologies and implementations. Tamping down fear of the unknown is the first step to correctly analyzing your tech requirements.

If you remain fearful, you never get to the analysis and requirements part – instead, it becomes very easy to rationalize doing nothing, or just poking around the edges without serious intent to understand the full potential of what new digital technologies could do for you and your business – as well as which tech you should be looking at in the first place.

Granted, there is good reason for caution. We all have stories of tech promises not achieved – with budget busting costs to wrangle the tech into something reasonable and useful. Typically, the reason for the wrangling is not having created a solid set of requirements before listening to marketing pitches or before buying the same thing another company uses.

But there is much more than the budget busting “fixing” costs and the original product/service price to look at.

First, as said before and which can’t be stated enough, create realistic requirements for how the tech will be used, what users expect from the experience, and what integrations are essential for working with your existing systems.

Second, get a real price quote.

  • What are other companies in your industry using? What do they expect a specific technology to provide to their companies? On average, how much over and above the product/service quote did they pay to get the performance they require?
  • From your list of required integrations, determine which one are not supported by the tech you are investigating. Ask how much more it will cost to get not a quick patch for each integration, but fully tested code you can trust.
  • Ask what the average service costs for the first year and for the following 2 years are for companies similar in size, using the technology similarly, and with at least some of the same integration needs you have.
  • If the service/product goes down, who is responsible for finding, fixing, and paying for the costs of the underlying problem?
  • Gather your team, cross-functional is best, and determine the risks of using the new technology. In general, what capacities and user experiences will the tech enable? Ask the tech firms being reviewed how they and their tech solution handle your critical risk elements – and how much it costs.

While this certainly adds to the normal purchasing cost, better to know these costs up front than to use your budget later trying to patch things up.

You’re looking for total costs – but you’re not done yet.

Third, how much will it cost if you don’t add the technology?

This is the part where hand waiving opinion generally occurs. You have talented people in your company, get some data behind the opinions and uncover facts you need to know. For example:

  • Is there a regulatory requirement coming up that will force you to quickly implement automation or verification or…whatever…that would be better met with careful requirements building up front instead of hair-on-fire reactions and a just-get-something-fast quick buy that you usually are sorry about purchasing later. Add up the time for everyone involved (this human time cost number alone will show a huge opportunity loss/money wasted), unit cost, and your company’s average cost of fixing problems resulting from a rush choice and integration job. These are part of the costs of not adding tech in a timely manner.
  • Check the market. Are the bell weather companies that affect your business heading in the direction of using, and making customers used to, the performance of a specific type of technology? If so, it is best to begin slowly building competence over time and adding performance carefully instead of the hair-on-fire reaction and swallowing costs associated with it. Furthermore, you’ll need to add in the cost of losing customers who expect specific performance as well as the cost of finding new customers who don’t. Warning, this gets more difficult, and more expensive, over time.
  • Take a look at the real economic outlook. Covid19 has forced a lot of virtual activity that could have been planned for and structured prior to the pandemic. The tech, the need, the want, and the capability were all present. But most companies didn’t perform the implementation due to the “cost”. What did you lose not being ready?
  • Look strategically. Would your customers be pulled in tighter if you began using specific technology to enhance performance before your competitors catch on? Again, the slow but steady build is cheaper than the mad dash to get something – anything – onboard to make you competitive. How many customers, and their average purchase per year, will you attract if this strategic cost is accepted?
  • Untether your innovation. By bringing in a digital technology to help solve a problem, reduce errors, provide visibility across supply chains, are you also opening up innovative offerings you can profit from? Is the cost of putting in what seems to be an operational piece of technology actually offering so much more for your money?

With today’s digital technologies, when you cannot enunciate the cost of not having specific technology performance, you lose the ability to master the easy to see applications on your terms. You lose the ability to transform your business in ways you didn’t understand and couldn’t imaging at the beginning due to the capabilities and options each technology, and the synergy of multiple, carefully planned technology implementations and integrations, provides. It may be similar to other business options, but will definitely be unique to yours. You are creating value no one can copy.

For example: who would have thought a digital twin in maintenance could make your maintenance team a profit center? Seem impossibly big for your company? Not anymore.

Who would have thought your business, large or small, would be considered part of a customer value chain instead of the supplier of a product or service? Customers buy because you have something that provides value – it solves a problem. The value is in the problem solving, not the business name.

Gone are the days you could never go wrong if you just purchased IBM. IBM offers specific value to specific customers. What is your value?

What would it cost to be the value provider the customers you want are looking for?

Cost considerations have to advance with the advancement of technology. Gone are the days a single number is enough to make a buy or don’t buy decision.

Look closely and carefully: see the possibilities.

Then work the real costs.

Find out how to be the value provider customers are willing to spend money on   Click here

Keywords and concepts: cost, digital technology, tech, advanced technology, supply chain, performance, digital transformation, strategy, innovation

Cynthia Kalina-Kaminsky is the President of Process & Strategy Solutions which helps businesses and supply chains of all sizes and varieties grow, optimize, and digitally transform Kickstart your reliable digital transformation – to learn how – click here



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