The Significance of Subject Matter Expertise in Digital Transformation: A Lesson from Warren Buffett

Warren Buffett is a well-known and highly respected American business magnate, investor, and philanthropist. For over sixty years, he has been using his extraordinary skill set to make wise investments and incredible business decisions. His sound investment strategies have earned him a place as one of the world’s wealthiest and most influential figures.

One of Buffett’s most famous quotes is, “Risk comes from not knowing what you’re doing.” He uttered this statement during his 1993 speech at Columbia University’s Business School, wherein he discussed evaluating investments and risk. This statement is particularly relevant today in the era of digital transformation (DX).

Companies embarking on DX projects take a risk whenever their team does not possess the right mix of knowledge and skills. The likelihood of failure is drastically increased, and the company could end up wasting a significant amount of time and money on a project. Additionally, the chances are high that the transformation will not be successful in achieving its desired objectives.

Your team may be highly skilled, but assuming their skillset is what you need to complete a digital transformation can be a costly mistake. This article examines this risk in greater detail, explores the potential pitfalls and suggests a safer, more predictable approach.

Risk Factors in Digital Transformation

Assumption of DX Expertise

Having a strong internal team is important for any digital transformation. That said, assuming your team has the expertise to create and implement a complex enterprise-wide solution is risky. As technology and the software market evolve over time, there may be gaps in their knowledge that could lead to issues with the project. A comprehensive understanding of the risks and dependencies involved with DX projects is vital to strategic and successful preparation.

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Furthermore, lacking the necessary skill sets can put the safety of the company’s data and systems at risk. To succeed, it is essential that your company has a strong delivery team that can both understand and keep up with emerging technologies and industry trends.

Lack of End-to-End DX Capabilities

Ideally, businesses typically undertake complex digital transformation (DX) initiatives, such as implementing a new ERP system, every 7-10 years. As a result, most employees at the company may have limited to no experience with large-scale DX projects. Undertaking a DX initiative with employees who have a limited understanding of the transformation process poses significant risks. Digital transformation is often misunderstood as solely a technology issue, when in reality it encompasses various aspects, including business strategy, IT, and personnel. Without a team that comprehensively understands the entire transformation process, the success of the DX initiative may be at risk of failure.

Siloed DX Projects

Successful digital transformation requires seamless integration of different systems, where the whole is greater than the sum of its parts. For this reason, project portfolio management is a key component of a successful transformation. For instance, a business process like customer onboarding may involve moving across functions in both ERP and CRM systems. If project teams are not aligned and working together, the integrative synergy can break down. Such a lack of coordination virtually guarantees the failure of the DX initiative.

The Significance of DX Subject Matter Experts (SME)

SMEs Can Apply the Right Technology to the Right Problem

Understanding the modern technologies available is important for keeping up to date with the most efficient and effective solutions for your business. But applying the right technology to the problem at hand is a challenge. A subject matter expert will know which technologies to use for various tasks to help you get the most out of your digital transformation. They have a better understanding of the tools available and how your business can benefit.

With a comprehensive understanding of the necessary technologies, an SME can help you anticipate future needs and be better prepared for them. Their understanding of the technologies needed for a project can enable you to make strategic decisions, set realistic goals, and improve your business operations.

SMEs Pre-empt Potential Pitfalls

You may not be able to see potential pitfalls, but an SME can identify them ahead of time and have plans in place to mitigate them. Potential pitfalls could include security risks, lack of technical expertise or resources, improper data validation and integration, or difficulties in managing legacy systems. Having an SME to identify your potential pitfalls early on can go a long way in ensuring a successful transformation and preventing costly mistakes down the line. Eliminating pitfalls in advance can also help you leverage your project as an opportunity to gain competitive advantages.

SMEs Guide Proper Budgeting

Proper budgeting is an essential part of any initiative. Developing a budget allows you to identify the monetary resources necessary to execute your desired plans and strategies. But the primary consideration when budgeting for expenses and resource allocation for a digital transformation project should be your anticipated ROI.

Getting it right the first time is more cost-effective than guessing or taking a seat of your pants approach. For instance, if your car breaks down, you could buy the tools and parts and spend the time learning how to do it yourself, but it would be more cost effective to pay for a certified mechanic to fix it in half the time and with less mistakes. The same is true when investing in hiring an SME to guide your digital transformation project to success.

Avoiding the Risks of Digital Transformation

Seeking expert guidance can provide essential insights and practical help through the development of an actionable DX roadmap, as well as a proven process and hands-on help during projects. This can enable your team to identify which technical systems should be invested in, and how to align your transformation with the organization’s long-term vision and strategy. It can also help ensure that your team has the necessary skills and knowledge to successfully execute the project.

Successful transformations require a combination of technical ability, business savvy, team management, and expert guidance. Failing to get this combination right can lead to costly mistakes, so it is important to recognize the value of getting the right advice and support.

Buffett’s quote is a reminder that companies must seek out and consult the right experts who possess the knowledge and experience to conduct their projects effectively. By knowing what you are doing and making informed decisions, you can invest wisely, avoid the risks associated with digital transformation, and make change positive.

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