Digital transformation not only means adopting a constellation of technologies – including cloud, data analytics and online channels – but also making fundamental changes to corporate culture. Employees up and down the ranks should have a stake in the process, and be given latitude to experiment with new approaches. However, few companies appear to be making the fundamental changes their leaders believe are necessary to achieve these goals.
That’s the takeaway from a survey of more than 3,500 organizations, released by MIT Sloan Management Review and Deloitte Digital. The study finds that 71% of digitally maturing organizations have conquered this barrier by encouraging their organizations to experiment and accept the risk of failure, compared to 29% of early stage companies. The study compares the digital transformation habits of “digitally maturing” companies versus “digitally early-stage” companies.
What are the leading components of a digital effort? Here’s what executives say is underway this year:
- Analytics 34%
- Social media (internal or external) 19%
- Mobile 14%
- Internet of things (IoT) 11%
- Cognitive technology/artificial intelligence 5%
- Robotic process automation 2%
- Additive manufacturing 1%
- Virtual reality 1%
- Manufacturing/warehouse robots 1%
- Other 5%
- Don’t know/not sure 4%
- None 2%
The study’s authors, led by Gerald Kane and Doug Palmer, state that digitally mature companies have the following common traits:
They implement systemic changes in culture. Digitally mature companies are more than four times as likely as non-digitally maturing companies to have a clear and coherent digital strategy in place than other companies (80% of digitally maturing organizations versus 19% of early-stage companies), Kane and his co-authors relate. Overall, less than half of executives (48%) agree, to any extent, that their leaders “have the vision necessary to lead our digital business efforts.” Somewhat fewer, 45%, agree that their organizations provide employees “with the resources or opportunities to develop skills and opportunities to thrive in a digital business environment.” Only 40% agree their organizations “effectively utilize the digital knowledge, skills, interest, and experience held by our employees.”
They play the long game. The strategic planning horizons of digitally mature organizations “are consistently longer than those of less digitally mature organizations, with nearly 30% looking out five years or more versus only 13% for the least digitally mature organizations,” Kane and his co-authors relate. “Their digital strategies focus on both technology and core business capabilities. We discuss how linking digital strategies to the company’s core business and focusing on organizational change and flexibility enables companies to adjust to rapidly changing digital environments.”
They scale small digital experiments into larger enterprise initiatives. As the researchers put it, at digitally mature companies, “small ‘i’ innovations or experiments typically lead to more big ‘I’ innovations than at other organizations. Digitally maturing organizations are more than twice as likely as companies at the early stages of digital development to drive both small, iterative experiments and enterprise-wide initiatives rather than mainly experiments. Digitally maturing organizations also can be shrewd and disciplined in figuring out how to fund these endeavors and keep them from languishing in the face of more immediate investment needs.”
They are talent magnets. Moving to digital makes people want to work for an organization. The MIT-Deloitte survey finds vice president-level executives without sufficient digital opportunities are 15 times more likely to want to leave within a year than are those with satisfying digital challenges. “Employees and executives are highly inclined to jump ship if they feel they don’t have opportunities to develop digital skills,” the researchers state. Seventy-seven percent of digitally maturing organizations recognize and reward collaboration and cross-functional teams as a cornerstone of how they operate, versus slightly more than 34 percent of early stage entities, the study finds. However, Kane and his co-authors add, “even the most digitally mature organizations don’t have all the needed talent.” They recommend that executives seek out those “pockets of people who want the organization to become more digital, and leadership needs to identify them and give them opportunities to develop and grow. Put these advocates to work on the experiments and initiatives called out above and let them build and advance their skills as they make contributions to the shift in becoming a digital business.”
They nurture leaders with a digital vision. Digitally mature organizations “are more likely to have articulated a compelling ambition for what their digital businesses can be and define digital initiatives as core components to achieving their business strategy. A larger percentage of digitally maturing companies are also planning to increase their digital investment compared to their less digitally mature counterparts, which threatens to widen an already large gap in the level of digital success” – about 75% of digitally mature companies versus 49% of their less-mature counterparts.