Industry Titans that Failed at Digital Transformation
January 13, 2023
Digital transformation can be a powerful change agent for organizations, but it can also fail, particularly when an organization hires the wrong tech partner, shortens the testing phase, and relies heavily on outdated systems and practices. This article examines the reasons behind the failure of the digital transformation efforts of two major companies namely Haribo and MillerCoors:
Failure to re-evaluate existing business processes to ensure alignment with their overarching operational model
Failure to develop a proper risk mitigation plan to address supply chain setbacks
Failure to perform system checks in a designated testing environment that would have had the bandwidth to simulate real-life operations.
Re-using outdated contracts to plan out their digital transformation project
Choosing the wrong technology partner to aid in their digital transformation initiative
Hiring an army of outside consultants to oversee the project instead of relying on employees to drive the digital transformation initiative
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Digital transformation can be considered as a series of sum of small yet disruptive changes that are meant to re-define the way an organization functions for the better. This can mean refining traditional processes by introducing technology that supports them; or instituting new work policies that require employees to function a certain way.
Whatever form digital transformation may take, the end goal is usually the same: improving productivity and efficiency, optimizing operations, and increasing profit. When done right, digital transformation brings both valuable and transformation changes for the organization. But when done wrong it bring disaster and ruin.
In this article we will be doing a deep dive into 2 companies that failed at digital transformation. So, without further ado let’s get started
Haribo, a German candy manufacturing company lost out more than 25% of their yearly sales due to a digital transformation initiative gone horribly wrong. How did this happen?
In 2018 Haribo decided that it was high time they began overhauling their supply chain systems and do away with their legacy enterprise resource planning systems. After some deliberation, they began transitioning to SAP HANA, converting 16 candy factories spread across 10 countries.
The transition from this decades-old technology required a great deal of manual effort to overhaul both the business processes and workflows that were specifically sculpted for the legacy systems of a long-gone era. The company understood that continuing to operate on legacy technology is not a viable strategy, but what they did not understand that attempting to modernize age old systems without having a proper plan in place can create a system rife with problems. This is what exactly happened and Haribo immediately began experiencing supply chain disruptions not long after the systems were in place. This ultimately led to the company facing production constraints and missed deliveries to supermarkets leading to the company’s revenue taking a big nosedive.
Unlike some of the more highly publicized and dramatic failures, the problems that led to Haribo’s failure are in some ways much more commonly faced by organizations all over. For this reason, here are the key lessons that resulted in the digital transformation failure of Haribo:
Failure to Re-Evaluate Existing Business Processes: The fact that business processes were broken after the company went live with their new ERP system meant that Haribo did not focus enough time and energy on revamping existing business processes. In order to avoid failure and ensure success, organizations need to clearly map their future state business processes to ensure alignment with their overarching operational model.
Plan for Operational Disruptions: In any digital transformation project, it is important to take a proactive approach towards mitigating significant operational disruptions. Haribo was unrealistic to expect every system component to perfectly function on day one resulting in their project becoming a resounding failure. Instead, if Haribo had developed a proper risk mitigation plan to address supply chain setbacks, it may have been able to weather the shaky initial rollout.
System testing was overlooked: Before going live with a new ERP system, it only makes logical sense to first test it to see everything runs as right as rain. For Haribo to only discover problems after the rollout suggests that there were major flaws in its ERP system testing strategy or lack thereof. Haribo should therefore have performed system checks in a designated testing environment that would have had the bandwidth to simulate real-life operations.
MillerCoors is a beer brewing company in the United States. In 2013, MillerCoors made an investment of $100 million on an ERP implementation that was supposed to speed up procurement and accounting while streamlining the company’s supply chain operations. They chose HCL as their technology partner to help see the project through.
However not long after the project was awarded, problems started to immediately arise as MillerCoors began to question the direction that HCL was taking on the project. There were concerns regarding the blueprint, as well as the assigned resources to the new project endeavor.
To address these concerns, HCL issued a new work order, which increased the total price of the ERP implementation to $62 million. However, despite the increased budget to rectify issues that may arise, the first rollout was marked by 8 “critical” severity defects, 47 high-severity defects, and thousands of additional problems were recorded
By March 2017 the project had gone so far south that MillerCoors attempted to sue HCL for $100 million claiming HCL had inadequately staffed the project and failed to live up to its promises. The lawsuit was settled out of court in 2018.
Why did everything fall apart?
Re-using existing contracts: The leadership team of Millet Coor should have thoroughly researched to discover exactly what they wanted out of an ERP system instead of simply publishing a request for proposal. MillerCoors and HCL used an existing master services agreement to define the terms of the new contract. While this might have been convenient at first, it ultimately complicated efforts and ended in a lawsuit.
Choosing the Wrong Technology Partner: Secondly, it appears Millet Coors made a mistake in their choice of an implementation partner that failed to carry them a sense of commitment to ensure that the project became a resounding success. Millet Coors should have more carefully evaluated their requirements and should have partnered with an organization that adopts a product centric mindset to their craft.
Letting Outsiders Drive the Project and Not Employees: Thirdly, it’s important to have employees drive the change, no matter the degree. A company of Millet Coor’s size should have taken feedback from its employees to better assess the organizations needs and requirements before hiring an army of outside consultants to oversee the project and expect them to deliver something which they cannot truly comprehend.
How Adtech will ensure the success of your digital transformation initiatives:
Adtech can help you succeed in your digital transformation endeavors by accurately assessing the process and taking ownership of all stages of the project to ensure its success. To improve the chance of digital transformation success, the team at Adtech will:
Ensure skills and resources are properly allocated and all roles are clearly defined.
Ensure all stakeholders understands the project outcomes.
Future-proof and protect project outcomes using our product mindset
Ensure agility throughout the project’s lifespan.
Ensure best practices are put in place.
Consistently monitor and effectively manage the digital transformation points