Capgemini Consulting in partnership with the MIT Center for Digital Business, announced the findings of its in-depth research into ‘digital transformation’ – the use of technologies to improve performance or reach of business. The study, ‘Digital Transformation: A Roadmap for Billion-Dollar Organizations,’ examines how digital technologies are changing the business of some of the world’s leading firms but reveals that only one third of companies globally have an effective digital transformation program in place. Despite the pervasive influence of digital technology in everything from delivering enhanced productivity and efficiency to improving customer experience and the way people interact and collaborate within an organization, the majority are still not taking advantage of its transformative potential and, therefore, risk falling behind more forward-thinking organizations.
Interviewing over 157 senior executive-level respondents from across 15 countries at global companies with more than $1bn in annual sales, the study highlights the fluctuating pace at which digital transformation is taking place and the varying levels of success experienced. The research assesses the maturity of organizations in terms of their digital transformation, with maturity made up of two dimensions characterised as the ‘what’ and the ‘how’. The what is the specific digital transformation elements being implemented by the organization, made up of their specific investments in customer experience, operational processes and worker enablement. The how is the way organizations are driving the transformation, made up of aspects such as project governance, workforce engagement, and measurement mechanisms.
For MIT’s George Westerman, Research Scientist and a co-contributor to the report: “These two elements are at the heart of the alchemy of digital transformation. Firms that are mature on both these dimensions can drive powerful digital transformation that yields significant business value. These mature few have mastered not only the style of digital transformation but also the substance.”
Very mature exponents of digital transformation have a sophisticated grasp of both the what and the how, but overall the study characterizes 4 levels of maturity:
Digital Beginners: These companies are doing very little with advanced digital capabilities, although they have more traditional digital capabilities such as internet, e-mail or ERP. Companies may be in this category by choice but many are either unaware of the possibilities of new digital technologies or are starting to invest here without effective transformation management in place.
Digital Fashionistas: These companies have implemented digital tools, some of which may be creating value, but some may not. These companies are motivated to bring on digitally-powered change, but their digital transformation strategy is not founded on real knowledge of how to proceed. Many of these companies believe they must move fast to keep up with demand for digital capabilities, but do not necessarily have a clear vision of how the elements will collectively create value.
Digital Conservatives: These companies understand the need for a strong unifying vision and for governance and internal engagement activities to ensure prudent investment management. They understand where the company should be going and how to master digital challenges, but they can’t always build organizational momentum to carry out an ambitious program. As a result, though aiming to spend wisely, their careful approach may cause them to miss out on valuable opportunities.
Digirati: These companies truly understand how to drive value from digital transformation. They combine a strong shared vision for transformation, careful governance and engagement with sufficient investment in new opportunities. They have developed a digital culture that can envision further changes and have the ability to implement them wisely for competitive advantage.
For MIT’s Andrew McAfee, report co-contributor: “Despite the hype around innovative new technologies such as social media or mobile, most companies still have a long way to go on their digital transformation journeys. Whether using new or traditional technology, the key to digital transformation is changing how the company operates and that is a management and people challenge, as much as a technology one.”
The study highlights the external factors that are driving digital transformation. Pressure from competitors (72%) and customers (70%) were the biggest drivers of change, as companies strive to find new ways of ensuring competitive advantage and meet changing customer expectations. It also highlights the main internal barriers to achieving digital transformation: missing skills (77%), culture issues (55%), ineffective IT (50%).
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