December 16, 2015
Digital transformation is the reinvention of business practices to derive the maximum value from digital technologies such as social media, cloud computing, mobile technology and big data analytics, revealed by a report carried out by The Economist Intelligence Unit, sponsored by Accenture and Pegasystems.
As we approach 2016, it is clear there are companies that are ahead of the curve, and those that are behind. Companies that are ahead of the curve tend to have made greater progress in digital transformation, and as a result have seen greater returns.
Digital transformation: its drivers
Evolving customer expectations are the most common driver of digital transformation. However, companies that are identified as being ahead of the curve are driven by a wider range of forces. They are more likely to cite the pace of technological change in their industry and growing competitive pressure as drivers than those behind the curve. This shows that digital technology has become a battleground on which many companies are competing for dominance.
The ability to use real-time data features heavily among companies that are ahead of the curve. The ability to provide employees with real-time data on any device, and executives with real-time analytics, is also a common objective.
The staffing paradigm (includes contractors)
IT executives are most likely to have a primary leadership role in digital transformation, but ahead-of-the-curve companies have a more diverse leadership and a higher proportion of chief digital officers. However, the role of the CDO is viewed as transitional: digital transformation may benefit from a dedicated leader at the beginning, but the need may fade as digital capabilities are established across the entire organisation.
Companies that are ahead of the curve are more likely to have set up separate digital business units, with the most common among them being a central, strategic initiatives unit that reports to a C-suite executive. However, ahead-of-the-curve companies are more likely to have set up distinct digital business units in order to introduce digital practices without the burden of legacy processes.
Ahead-of-the-curve companies are also more likely to look outside the organisation – to the likes of contractors - to boost their digital capabilities. These companies are more likely to outsource digital processes, to invest in digital start-ups and to form a joint venture or partnership to boost their digital capabilities than those that are behind the curve. Perhaps surprisingly, they are less inclined to invest in their internal capabilities. But the fact that they are more likely to rate the digital transformation capabilities of their company’s functional departments highly suggests that they have started from a stronger position than those that are catching up.
What digital transformation should achieve
The ultimate aim of digital transformation should be the ability to adapt to any future digital innovation. Digital innovation shows no sign of abating. Just as technologies such as social media, mobile and cloud computing are being accepted as the norm, new sources of disruption appear on the scene - machine learning, virtual reality and cryptocurrencies, to name but a few. These will all have their own, as yet unpredictable, impact on organisations. The ultimate goal of any digital transformation should therefore not be any particular state, but the ability to transform constantly in response to the progress of digital technology.
Still a long way to go
Companies that are ahead of the curve are statistically more likely to have achieved 80%+ digitisation, to have integrated digital processes with their back-office infrastructure, and to have the ability to present a seamless experience throughout the customer journey.
These achievements may be attributed to the different organisational approaches these companies take to digital transformation. First, their outlook is different—ahead-of-the-curve companies see digital transformation more strategically, as a response to the acceleration of technological change and the growing pressure from competitors in addition to evolving customer expectations
Second, they are more likely to have taken specific measures in the pursuit of digital transformation, such as appointing a chief digital officer or establishing a dedicated digital business. And third, they are more likely to look outside the organisation to partners and start-ups to boost their capabilities – a trait that contractors will welcome.
Companies that are still planning their digital transformation should therefore consider all of these approaches as they prepare their first steps on this journey. But it is a journey, and even those companies that are ahead of the curve still have a long way to go.