Digital transformation about people not tech - David Loseby

The digital transformation of business – being driven by Industry 4.0 technologies such as artificial intelligence (AI) and machine learning – is, by its very nature, a complex affair.

Technically complex, yes, but also complex in terms of what such vast programmes of change demand of people, particularly regarding old skills they no longer need and new skills they must acquire. 

Digital transformation is sometimes seen as a panacea to every contemporary corporate challenge, which it, of course, is not. Many managers across the supply chain – in manufacturing, logistics and procurement – have a first- or second-hand war story to tell of at least one tech project that has failed.

“Most digital implementations have a success rate of about 30-40%, in terms of adoption,” says David Loseby, the noted procurement advisor who also boasts a doctorate in behavioural science. 

'Mindset failure' behind many failed digital transformations

Loseby says the failure rate is so eye-wateringly high because of a “mindset failure” on the part of organisations. “Digital transformations are not technology-change projects,” he says. “They are people-change projects. If you don't involve the people that are going to be impacted, and suddenly impose it upon them, guess what? You get lots of rejection.”

For Loseby, re-skilling employees and clearly demarcating their changing roles is an inviolable step in any technology change project.

He warns: “You’re pulling them into the fear of the unknown. You’ve got to balance the equation by making sure there’s something in the change process for them. If I’m an employee and you want me to give you my heart and soul, my knowledge and IP, then don’t leave me fearing I might be shunted somewhere else at the end of it all.”

Loseby stresses that the common thread running through successful digital transformations is the people-centred nature of such processes, as opposed to being tool-centred. To work, he says that AI and ML programmes must be mindful of all stakeholders – staff, suppliers and also customers. 

Few in the world of supply chains have a stronger sense of what people want, and expect, from their jobs in today’s uncertain, ever-changing world than managers working in recruitment.

One such person is Jeremiah Kaltz, VP of operations at Talascend, an industrial recruitment agency. Kaltz says that, at the lower end of the supply skills spectrum – warehouse material handlers, for example – many see such roles as a short-term means to an end, but by no means all. “Some view such opportunities as the start-point to their career and their long-term development,” he says, adding that developing specialised skills “is motivating to most”.

On automation, firms must take staff with them

Kaltz echoes Loseby’s view that, when it comes to automation, companies must take employees of all levels along with them. “It’s a candidate-driven market,” he says. “But once a material handler trusts and respects their employer, you’ll see a very high level of commitment.”

Loseby believes that every digital transformation has a “sweet spot”, where tech and humans work in harmony.

Sam Slater, senior VP of global operations at Crane Worldwide Logistics, agrees, saying that many supply chain workers see technology as a means for their employer to compete in a tough market, and that this gives them a sense of security.

“People want to be assured their organisation is positioned to compete,” he says. “They see technology as a key component of that competitiveness.”

Slater offers examples of where Crane has achieved a synergy between people and tech – Loseby’s elusive ‘sweet spot’.

He says the company has an automated online learning management system that can be used for personal development plans, as well as a global reporting system that can be accessed by any Crane employee, at any time, from their smartphone.

Slater continues: “In fleet management, automation has reduced wait-times and the matching of loads. The more the wheel turns, the more money people make – and this contributes significantly to their retention.

When it comes to automation, Slater believes the key to success is always leadership: “The worst thing is to make the process more complex than necessary. This will always be an industry built and run by people. Technology does not replace leadership.”

Digital transformation cannot be rushed - Loseby

Successfully rolling out automation in white-collar supply environments, such as procurement, is arguably more nuanced and layered than in blue collar settings, such as warehouses. Yet, says Loseby, this doesn’t stop many companies from trying to run before they can walk. 

“Typically, organisations don't assess their digital maturity,” he says. “If you want to go straight from a paper-based procurement system to an all-singing, all-dancing automated system, the best advice I can give you is: don't, because you'll kill your organisation.

“They need to plan their journey through several stages of development to reach digital maturity, and it’s a journey that has to take into account customers and suppliers, but most importantly, the workforce. Firms have to start by understanding their level of readiness for cutting-edge technology, in terms of management, organisational structures and skills.” 

In Loseby’s experience, the problem is often that senior managers “start from the wrong place”. 

“More often than not, the original business case for digital transformation will be that there will be a loss of headcount,” he says. “But, usually, this is not true.”

He says that, although AI and ML do take over what were once labour intensive tasks – such as contract renewals – this frees up those who once performed such tasks to be more strategic in their roles.

“So rather than cutting headcount, automation increases value, by allowing people to focus on tasks involving ESG, and partner and customer relations,” says Loseby.

He adds: “The key is to acknowledge your workers’ stake in the change process, and to give them opportunities to acquire new skills and to progress alongside the technical sophistication of the firm.

“With AI and ML, the skill sets you'll need on that journey will change, so involve the people that are going to be impacted early in the process, because they will need to take ownership of whatever the end-solution might look like.”