The exponential digital social world

The exponential digital social world

Tech-savvy start-ups with natively digital business models regard this point in time as the best time in the history of the world to invent something. The world is buzzing with technology-driven opportunities leveraging the solid platform provided over the past 30 years, birthed from

  • the Internet,
  • then mobility,
  • social
  • and now the massive scale of cloud computing and the Internet of Things (IoT).

For the start-up community, this is a

  • platform for invention,
  • coupled with lowered / disrupted barriers,
  • access to venture capital,
  • better risk / benefit ratios
  • and higher returns through organisational agility.

Kevin Kelly, co-founder of Wired magazine believes we are poised to create truly great things and that what’s coming is exponentially different, beyond what we envisage today – ‘Today truly is a wide open frontier. We are all becoming. It is the best time ever in human history to begin’ (June 2016). Throughout history, there have been major economic and societal shifts and the revolutionary nature of these is only apparent retrospectively – at the time the changes were experienced as linear and evolutionary. But now is different. Information access is globalised and is seen as a democratic right for first world citizens and a human right for the less advantaged.

The genesis was the Internet and the scale is now exponential because cloud-based platforms embed connections between data, people and things into the very fabric of business and daily life. Economies are information and services-based and knowledge is a valued currency. This plays out at a global, regional, community and household level. Pro-active leaders of governments, businesses and communities addressing these trends stress the need for innovation and transformative change (vs incremental) to shape future economies and societies across the next few years. In a far reaching example of transformative vision and action, Japan is undertaking ‘Society 5.0’, a full national transformation strategy including policy, national digitisation projects and deep cultural changes. Society 5.0 sits atop a model of five waves of societal evolution to a ‘super smart society’. The ultimate state (5.0) is achieved through applying technological advancements to enrich the opportunities, knowledge and quality of life for people of all ages and abilities.

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The Society 5.0 collaboration goes further than the digitisation of individual businesses and the economy, it includes all levels of the Japanese society, and the transformation of society itself. Society 5.0 is a framework to tackle several macro challenges that are amplified in Japan, such as an ageing population – today, 26.3% of the Japanese population is over 65, for the rest of the world, 20% of people will be over 60 by 2020. Japan is responding through the digitisation of healthcare systems and solutions. The increased mobility and flexibility of work to keep people engaged in meaningful employment, and the digitisation of social infrastructure across communities and into homes. This journey is paved with important technology-enabled advances, such as

  • IoT,
  • robotics,
  • artificial intelligence,
  • virtual and augmented reality,
  • big data analytics
  • and the integration of cyber and physical systems.

Japan’s transformation approach is about more than embracing digital, it navigates the perfect storm of technology change and profound changes in culture, society and business models. Globally, we are all facing four convergent forces that are shaping the fabric of 21st century life.

  • It’s the digital social world – engaging meaningfully with people matters, not merely transacting
  • Generational tipping point – millennials now have the numbers as consumers and workers, their value systems and ways of doing and being are profoundly different
  • Business models – your value chain is no longer linear, you are becoming either an ecosystem platform or a player / supplier into that ecosystem
  • Digital is ubiquitous – like particles in the atmosphere, digital is all around us, connecting people, data and things – it’s the essence of 21st century endeavours

How do leaders of our iconic, successful industrial era businesses view this landscape? Leaders across organisations, governments and communities are alert to the opportunities and threats from an always on economy. Not all leaders are confident they have a cohesive strategy and the right resources to execute a transformative plan for success in this new economy of knowledge, digital systems and the associated intangible assets – the digital social era. RocketSpace, a global ecosystem providing a network of campuses for start-up acceleration, estimate that 10 years from now, in 2027, 75% of today’s S&P 500 will be replaced by digital start-ups (RocketSpace Disruption Brief, March 2017). Even accounting for some potential skew in this estimate, we are in the midst of unprecedented change.

What is change about?

What are the strategic assets and capabilities that an organisation needs to have when bridging from the analogue to the digital world? Key to succeeding in this is taking the culture and business models behind successful start-ups and imbuing them into the mature enterprise. Organisations need to employ outside-in, stakeholder-centric design-thinking and adopt leveraged business models that create

  • scaled resources,
  • agility,
  • diversity of ideas

and headspace to

  • explore,
  • experiment,
  • fail and try again.

The need to protect existing assets and sources of value creation remains important. However, what drives value is changing, so a revaluation of portfolios is needed against a new balance sheet, the digital social balance sheet.

The Dimension Data Digital Social Balance Sheet evolved from analysing transformational activities with our global clients from the S&P500, the government sector, education and public health sectors and not-for-profits. We also learnt from collaborations with tech start-ups and our parent company, Nippon Telegraph and Telephone Group’s (NTT) R&D investment activities, where they create collaborative ecosystems referred to as B2B2X. The balance sheet represents the seven top level strategic capabilities driving business value creation in the digital social era. This holds across all industries, though it may be expressed differently and have different relative emphasis for various sectors – for example, stakeholders may include employees, partners, e-lance collaborators, customers, patients, shareholders or a congregation.

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Across each capability we have defined five levels of maturity and this extends the balance sheet into the Dimension Data Digital Enterprise Capability Maturity Model. This is an holistic, globally standardised framework. From this innovative tool, organisations can

  • assess themselves today,
  • specify their target state,
  • conduct competitive benchmarking,
  • and map out a clear pathway of transitions for their business and stakeholders.

The framework can also be applied to construct your digital balance sheet reporting – values and measures can be monitored against organisational objectives.

Where does your organisation sit? Thinking about your best and worst experiences with a business or government organisation this year, what is revealed about their capabilities? Across each of the pillars of this model, technology is a foundation and an enabler of progressive maturity. For example, effective data architecture and data management platforming underpins the information value capability of responsiveness. A meaningful capability will be enabled by the virtual integration of hybrid data sources (internal systems, external systems, machines, sensors, social) for enhanced perception, discovery, insight and action by both knowledge workers and AI agents. Uber is a leading innovator in this, and is also applying deep learning, to predict demand and direct supply, not just in time, but just before time. In this, they are exploring beyond today’s proven and mainstream capabilities to generate unique business value.

Below is a high level assessment of three leading digitals at this point in their business evolution – Uber, Alibaba and the Estonian government. We infer their capabilities from our research of their organisational journeys and milestones, using published material such as articles and case studies, as well as our personal experiences engaging with their platforms. Note that each of these businesses’ capabilities are roughly in alignment across the seven pillars – this is key to sustainable value creation. For example, an updated online presence aimed at improving user experience delivers limited value if not integrated in real time across all channels, with information leveraged to learn and deepen engagement and processes designed around user context, able to adapt to fulfil the point in time need.

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Innovation horizons

In the model below, key technology trends are shown. We have set out a view of their progression to exponential breakthrough (x axis) and the points at which these technologies will reach the peak of the adoption curve, flipping from early to late adopters (y axis). Relating this to the Digital Enterprise Capability Maturity Model, level 1 and 2 capabilities derive from what are now mature foundations (past). Level 3 aligns with what is different and has already achieved the exponential breakthrough point. Progressing to level 4 requires a preparedness to innovate and experiment with what is different and beyond. Level 5 entails an appetite to be a first mover, experimenting with technologies that will not be commercial for five to ten years, but potentially provide significant first mover advantage. This is where innovators such as Elon Musk’s horizons are set with Tesla and SpaceX.

An example of all of this coming together at level 3 of digital capability maturity and the different horizon – involving cloud, mobility, big data, analytics, IoT and cybersecurity – to enable a business to transform, is Amoury Sport Organisation (A.S.O.) and their running of the Tour de France. The Tour was conceived in 1903 as an event to promote and sell A.S.O.’s publications and is today the most watched annual sporting event in the world. Spectators, athletes and coaches are hungry for details and insights into the race and the athletes. Starting from the 2015 Tour, A.S.O. has leapt forward as a digital business. Data collected from sensors connected to the cyclist’s bike is aggregated on a secure, cloud-based, big data platform, analysed in real time and turned into entertaining insights and valuable performance statistics for followers and stakeholders of the Tour. This has opened up new avenues of monetisation for A.S.O. Dimension Data is the technology services partner enabling this IoT-based business platform.

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If your organisation is not yet on the technology transformation path, consider starting now. For business to prosper from the digital economy, you must be platformed to enable success – ready and capable to seamlessly connect humans, machines and data and to assure secure ecosystem flows. The settings of our homes, cars, schools and learning institutions, health and fitness establishments, offices, cities, retail outlets, factories, defence forces, emergency services, logistics providers and other services are all becoming forever different in this digital atmosphere.

Where is your innovation horizon set? The majority of our co-innovation agendas with our clients are focused on the beyond horizons. In relation to this, we see four pairs of interlinked technologies being most impactful

  • artificial intelligence and robotics;
  • virtual/ augmented reality and the human machine interface;
  • nano-technology and 3D/4D printing,
  • and cybersecurity and the blockchain.

Artificial intelligence and robotics

Artificial intelligence (AI) is both a science and set of technologies inspired by the way humans sense, perceive, learn, reason, and act.

We are rapidly consuming AI and embedding it into our daily living, taking it for granted. Think about how we rely upon GPS and location services, use Google for knowledge, expect Facebook to identify and tag faces, ask Amazon to recommend a good read and Spotify to generate a personalised music list, not so long ago, these technologies were awe-inspiring.

Now, and into the next 15 years, there is an AI revolution underway, a constellation of different technologies coming together to propel AI forward as a central force in society. Our relationships with machines will become more nuanced and personalised. There’s a lot to contemplate here. We really are at a juncture where discussion is needed at all levels about the ways that we will and won’t deploy AI to promote democracy and prosperity and equitably share the wealth created from it.

The areas in which this will have the fastest impact are transportation, traditional employment and workplaces, the home, healthcare, education, public safety and security and entertainment. Let’s look at examples from some of these settings:

Transportation – Autonomous vehicles encapsulate IoT, all forms of machine learning, computer vision and also robotics. This will soon break through the exponential point, once the physical hardware systems are robust enough.

Healthcare – there is significant potential for use of AI in pure and applied research and healthcare service delivery, as well as aged and disability related services. The collection of data from clinical equipment e.g. MRI scanners and surgical robots, clinical electronic health records, facility-based room sensors, personal monitoring devices, and mobile apps is allowing for more complete digital health records to be compiled. Analysis of these records will evolve clinical understandings. For example, NTT Data provides a Unified Clinical Archive Service for radiologists, providing machine learning interpretation of MRI brain imagery. The service provides digital translations of MRI brain scans and contains complete data sets of normal brain functions (gathered from John Hopkins University in the US). Radiologists are able to quantitatively evaluate their patient results with the normal population to improve diagnostics. Each new dataset adds to the ecosystem of knowledge.

Education – AI promises to enhance education at all levels, particularly in providing personalisation at scale for all learners. Interactive machine tutors are now being matched to students. Learning analytics can detect how a student is feeling, how they will perform and what the best likely interventions to improve learning outcomes are. Online learning has also enabled great teachers to boost their class numbers to worldwide audiences, while at the same time, student’s individual learning needs can be augmented through analysis of their response to the global mentor. Postgraduate and professional learning is set to become more modular and flexible, with AI used to assess current skills and work related projects and match learning modules of most immediate career value – an assemble your own degree approach. Virtual reality along with AI, is also changing learning content and pathways to mastery, and so will be highly impactful. AI will never replace good teaching, and so the meaningful integration of AI with face-to-face teaching will be key.

Public safety and securityCybersecurity is a key area for applied AI. Machine learning from AI against the datasets from ubiquitously placed cameras and drones for surveillance is a key area. In areas of tax, financial services, insurance and international policing, algorithms are improving the conduct of fraud investigations. A significant driver for advances in deep learning, particularly in video and audio processing has come off the back of anti-terrorist analytics. All of these things are now coming together in emergency response planning and orchestration and in the emerging field of predictive policing.

Virtual reality/augmented reality and the human machine interface

The lines between the physical and digital worlds are merging, along the ‘virtuality’ continuum of augmented and virtual reality. Augmented reality (AR) technologies overlay digital information on the ‘real world’, the digital information is delivered via a mechanism, such as a heads-up display, smart glass wall or wrist display. Virtual reality (VR) immerses a person in an artificial environment where they interact with data, their visual senses (and others) controlled by the VR system. Augmented virtuality blends AR and VR. As virtuality becomes part of our daily lives, the way we will interact with each other, learn, work, and transact are being re-shaped.

At the 2017 NTT R&D Fair in Tokyo, the use of VR in sports coaching and the spectator experience was showcased, with participants able to experience playing against elite tennis and baseball players and riding in the Tour de France. A VR spectator experience also enabled the direct experience the rider’s view and the sensation of the rider’s heart rate and fatigue levels. These applications of VR and AI are being rapidly incorporated into sports analytics and coaching.

Other enterprise VR use cases include

  • teaching peacekeeping skills to troops in conflict zones,
  • the creation of travel adventures,
  • immersion in snowy climate terrain to reduce pain for burn victims,
  • teaching autistic teenagers to drive,
  • and 3D visualisations of organs prior to conducting surgery.

It isn’t hard to imagine the impact on educational and therapeutic services, government service delivery, a shopping experience, on social and cultural immersion for remote communities and on future business process design and product engineering.

Your transformation journey

Every business is becoming a digital business. Some businesses are being caught off guard by the pace and nature of change. They are finding themselves reactive, pulled into the digital social world by the forces of disruption and the new rules of engagement set by clients, consumers, partners, workers and competitors. Getting on the front foot is important in order to control your destiny and assure future success. The disruptive forces upon us present opportunities to create a new future and value for your organisation and stakeholders. There are also risks, but the risk management approach of doing nothing is not viable in these times.

Perhaps your boardroom and executive discussions need to step back from thinking about the evolution of the current business and think in an unconstrained ‘the art of possible’ manner as to the impact of the global digital disruption and sources of value creation into the future. What are the opportunities, threats and risks that these provide? What is in the best interests of the shareholders? How will you retain and improve your sector competitiveness and use digital to diversify?

Is a new industry play now possible? Is your transformed digital business creating the ecosystem (acting as a platform business) or operating within another? How will it drive the business outcomes and value you expect and some that you haven’t envisaged at this point?

The digital balance sheet and seven pillars of digital enterprise capability could be used as the paving blocks for your pathway from analogue to digital. The framework can also guide and measure your progressive journey.

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Our experiences with our clients globally show us that the transformation journey is most effective when executed across three horizons of change. Effective three step horizon planning follows a pattern for course charting, with a general flow of:

  1. Establish – laying out the digital fabric to create the core building blocks for the business and executing the must do/no regret changes that will uplift and even out capability maturity to a minimum of level 2.
  2. Extend – creating an agile, cross-functional and collaborative capability across the business and executing a range of innovation experiments that create options, in parallel with the key transformative moves.
  3. Enhance – embedding the digital social balance sheet into ‘business as usual’, and particularly imbuing innovation to continuously monitor, renew and grow the organisation’s assets.

In this, there are complexities and nuances of the change, including:

  • Re-balancing of the risk vs opportunity appetite from the board
  • Acceptable ROI models
  • The ability of the organisation to absorb change
  • Dependencies across and within the balance sheet pillars
  • Maintaining transitional balance across the pillars
  • Managing finite resources – achieving operational cost savings to enable the innovation investment required to achieve the target state

The horizon plans also need to have flex – so that pace and fidelity can be dialled up or down to respond to ongoing disruption and the dynamic operational context of your organisation.

Don’t turn away from analogue wisdom, this is an advantage. Born-digital enterprises don’t have established physical channels and presence, have not experienced economic cycles and lack longitudinal wisdom. By valuing analogue experience and also embracing the essence of outside-in thinking and the new digital social business models, the executive can confidently execute.

A key learning is that the journey is also the destination – by

  • mobilising cross functional teams,
  • drawing on diverse skills and perspectives,

empowered to act using quality information that is meaningful to them – this uplifts your organisational capabilities and in itself will become one of your most valuable assets.

Click here to access Dimension Data’s detailed study

Four elements that top performers include in their digital-strategy operating model

For many companies, the process of building and executing strategy in the digital age seems to generate more questions than answers. Despite digital’s dramatic effects on global business—the disruptions that have upended industries and the radically increasing speed at which business is done—the latest McKinsey Global Survey on the topic suggests that companies are making little progress in their efforts to digitalize the business model. Respondents who participated in this year’s and last year’s surveys report a roughly equal degree of digitalization as they did one year ago, suggesting that companies are getting stuck in their efforts to digitally transform their business.

The need for an agile digital strategy is clear, yet it eludes many—and there are plenty of pitfalls that we know result in failure. McKinsey has looked at how some companies are reinventing themselves in response to digital, not only to avoid failure but also to thrive.

In this survey, McKinsey explored which specific practices organizations must have in place to shape a winning strategy for digital—in essence, what the operating model looks like for a successful digital strategy of reinvention. Based on the responses, there are four areas of marked difference in how companies with the best economic performance approach digital strategy, compared with all others :

  • The best performers have increased the agility of their digital-strategy practices, which enables firstmover opportunities.

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  • They have taken advantage of digital platforms to access broader ecosystems and to innovate new digital products and business models.

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  • They have used M&A to build new digital capabilities and digital businesses.

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  • They have invested ahead of their peers in digital talent.

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Click here to access McKinsey’s survey results

Organizing and Orchestrating Digital Transformation

Organizing for a Digital World

What makes the shift to more robust digital offerings, channels and operations so tricky is the stress it puts on old-line companies’ operating models. Many new activities and capabilities—ranging from advanced analytics and rapid prototyping to cybersecurity and external partnership management—will need to be developed and located somewhere in the organization.

  • Who takes ownership for these activities
  • Who decides investment levels for each
  • And how they will work

are all major operating model questions.

In addressing these choices, companies usually start to realize that their legacy processes don’t move fast enough to keep up with changing customer demands and behavior, which are shaped by digital interactions in other parts of their lives. Decision speed also may be too slow, because it’s tied to budget cycles. Companies may find digital innovations hard to scale up beyond small projects. And certain kinds of digital talent have become very tough to source and hire. As a result, digital transformations are significantly harder to pull off than conventional change programs. Bain & Company recently surveyed 1,000 companies around the world to gauge their level of digital readiness. After comparing financial results for five categories of companies based on their degree of digital sophistication, we found that revenues for the digital leaders grew 14% over the past three years, more than doubling the performance of the digital laggards in their industries. Profitability followed a similar pattern. Yet while the payoff from digital transformation can be impressively high, the success rate is regrettably low. In our survey, just 5% of those companies involved in digital transformation efforts reported that they had achieved or exceeded the expectations they had set for themselves (versus a success rate of 12% for conventional transformations found in an earlier survey). A full 71% of these companies settled for dilution of value and mediocre performance.

Leading companies realize that making the transition to digital 2.0 or 3.0 requires systematically examining and adjusting each element of their operating model— the blueprint for how resources are organized and operated to get critical work done. The operating model encompasses decisions around the shape and size of the business, where to draw the boundaries for each line of business and function, how people work together within and across these boundaries, how the corporate center will add value to the business units, and what norms and behaviors should be encouraged. It entails choices in five areas:

  • Structure involves drawing appropriate boundaries for lines of business and functions, and defining centers of expertise and other coordinating units.
  • Accountabilities describe the roles and responsibilities of the main organizational entities, including ownership for profit and loss statements and a clear, value-adding role for the corporate center.
  • Governance refers to executive forums and management processes that yield high-quality decisions on strategic priorities, as well as budgets and incentives to align behavior.
  • Capabilities refer to how the company combines people, process and technology in a repeatable way to deliver desired outcomes.
  • Ways of working describe the expected cultural norms for how people collaborate, especially across the boundaries between functions or teams.

Executives should consider how each area will change in turn as the organization’s digital intensity rises.

Bain DigOrg

Click here to access BAIN_BRIEF_Organizing_for_a_Digital_World

 

Orchestrating a Successful Digital Transformation

Among the five categories of companies in the research, the most advanced digitally achieved the best balance between the inner and outer games. Those just embarking on digital transformations typically start from a set of isolated initiatives targeting their most acute pain points (the outer game), but they struggle to translate these prototypes into products and capabilities that can have a meaningful impact on the company’s economics. More advanced businesses do a good job of clustering digital initiatives around a common strategic ambition and start to focus on improving select enabling capabilities, particularly IT. But these initiatives also tend to plateau somewhere short of broad organizational impact or end up creating “two-speed” organizations that are responsive in limited respects but still held back by legacy systems.

The true digital leaders pull away from the competition by linking a bold strategic ambition to the specific inner game capabilities and behaviors that they will need to achieve it. First they translate their strategy into a clear set of digital initiatives that point the organization toward a clear vision of full potential. Then they invest heavily in the fundamental changes to their ways of working and culture that allow them to develop those initiatives rapidly and execute them at scale.

Bain DigOrchestration

Click here to access BAIN_BRIEF_Orchestrating_a_Successful_Digital_Transformation

 

How digital reinventors are pulling away from the pack

Digitization is a long way from running out of steam, since the bulk of company revenues in most industries still come from traditional sources. Yet the results from McKinsey’s latest survey on digital strategy suggest that a digital divide is already taking shape. Companies competing in traditional ways (that is, without applying digital technologies and strategies in their businesses) have seen lower rates of revenue and earnings growth than have companies competing in digital ways—and those rates are tightly correlated with the level of digitalization, or digitization, in their respective sectors. But other players are seeing tremendous growth as digitization advances. The companies making digital moves—digital natives, industry incumbents competing in new and digital ways, and incumbents moving into new sectors—are out-performing their traditional-incumbent counterparts.

We call these companies digital reinventors. While most respondents say that their companies are making at least marginal investments in digital, we found last year that few had achieved top-quartile growth and high returns—not surprising, given the lukewarm response to digitization the average respondent reports in this year’s survey. Digital reinventors, in contrast, are embracing digital with both their investments and their strategic decision making. Our results indicate that companies in this group are not only investing more in digital but also investing and executing differently. The reinventors are investing at scale in

  • technology,
  • analytics,
  • and digital talent

—not just playing on the margins—and investing much more aggressively in business-model innovations or entirely new business models. They make more digital-related acquisitions and divestitures than traditional incumbents do; they are likelier to accelerate changes in their own businesses; and they are using more advanced, innovative technologies. The results indicate that their efforts are paying off: the reinventors are seeing larger gains in revenues and earnings than are traditional incumbents that have yet to embrace digitization.

Growing pressure on incumbents

As digitization continues to progress, its expected effects on revenues seem pronounced. When respondents were asked how much of their companies’ revenues would be at risk in the next three years if those companies took no further action to address digital pressures, they estimated that almost one-third could be lost or cannibalized. Consistent with our earlier research showing that increased levels of digitization produce shrinking profit and revenue pools at the industry level, the revenues at risk are even greater in the industries (high tech, as well as media and entertainment) experiencing the highest levels of digitization.

But the level of digitization is only part of the industry picture. Despite a common belief that digital natives are the greatest threat to an industry’s existing market share, the results indicate that incumbents competing in digital ways pose just as great a threat to other companies, if not a greater one.

The correlation between the market share owned by digital natives and revenues at risk is on par with that of incumbents playing digitally. This finding is consistent with other work suggesting that incumbents can have a strong effect on the market and on the pace of digital disruption in a given industry, and this effect is only magnified by the more powerful positioning of these incumbents. Since those competing in digital ways already own a larger market share than digital natives do, on average, they can also make larger shifts in the economics of their respective markets.

To date, the loss of revenues as digitization has expanded is already clear. Nearly 20 percent of all respondents report negative revenue growth in the past three years. But some companies can thrive in a more digitized landscape: specifically, those trying to reinvent themselves by embedding digital technologies in the core of their business models and by launching new digital businesses. Respondents at incumbents playing digitally are twice as likely as traditional incumbents to report exceptional financial growth (that is, an average compound annual growth rate of more than 25 percent) during this same period.

Digital Reinventors

Click here to access McKinsey’s detailed survey analysis

 

 

Digitizing IT

Digital transformation is the new strategic imperative—no longer just a handy source of competitive differentiation but a must-do for every company, in every industry, and across every geography.

The challenges involved, however, are testing leadership teams to their limits: how can they best

  • wrap digital services around existing products and services,
  • launch new ones that capture customers’ hearts and wallets,
  • and find innovative ways to interact digitally, both internally and externally?

And how can they achieve their goals against a backdrop of stretched budgets and competing priorities ?

In the eye of the storm sit the chief information officer (CIO) and the IT team.

As digital technology becomes embedded in almost every aspect of doing business, IT is increasingly called upon to advise the C-suite

  • on the feasibility of new approaches and to deliver new applications and services,
  • while continuing to perform the day-to-day tasks that keep existing systems up and running.

This report explores both the challenges and the opportunities facing IT in an era of digital transformation. Written by The Economist Intelligence Unit (EIU) and sponsored by SAP, it is based on a survey of more than 800 business and IT leaders across Europe, North America, Latin America and Asia-Pacific, along with desk research and interviews with C-level executives at major international organisations.

The key findings are as follows:

  • Digital transformation lacks strategic co-ordination. Digital transformation is firmly on the agenda for the majority of companies, and they are busy with a variety of digital initiatives. They are investing in a range of technologies and pursuing a wide array of objectives, most commonly improving products and services and boosting the customer experience. But only a minority of organisations have devised and implemented a digital transformation strategy to direct these initiatives. Those that have done so are substantially more likely to see their digital initiatives as being effective (93%) than those that have not (63%).
  • The way in which digital transformation is implemented varies considerably between firms—and even between departments. The CIO is the most likely executive to take ownership of digital transformation (37%), but CEOs (20%) and chief operating officers (15%) are also likely owners—and 16% say that digital transformation is not owned by one individual member of the C-suite. Meanwhile, 29% report that digital initiatives are led by individual business units, 24% say they are led by a dedicated digital unit, and 22% say they are led by IT. Interestingly, respondents from IT are more likely to believe their digital initiatives are centrally coordinated than those in other functions, revealing a distinct lack of “joined-up thinking” on the matter.
  • Both IT and non-IT executives believe that the IT department should take a more active role in digital transformation. Executives both inside and outside the IT function consistently report that IT should ideally play a more active role in key capabilities that support digital transformation than is currently the case. The biggest discrepancy concerns innovation—just 7% of executives say that IT leads their organisation’s attempts to identify opportunities to innovate, while 35% believe that it should. The fact that IT executives agree shows that it is not for want of ambition that they do not currently lead these capabilities. Instead, the data suggest that they are constrained by the obligations of their current role.
  • Digital transformation is a test of the IT department’s ability to collaborate. Digital products and processes require input from multiple departments. As a result, digital transformation is a test of an organisation’s ability to work across departmental lines. The majority of executives of all stripes agree that collaboration between IT and non-IT management will provide the greatest opportunity for success in digital business initiatives. “Everyone has to succeed together,” as one digital executive puts it.
  • IT departments are evolving for the era of digital transformation, but there is much more to be done. IT departments have begun to adapt their working practices to meet the needs of digital transformation—and their peers in other functions are noticing. Almost half (45%) of non-IT executives say the IT department has changed the way it works “completely” or “significantly” to support digital transformation, while 40% report “limited” changes. However, IT executives themselves report limited adoption of key methodologies associated with digital delivery, such as Agile software development (17%) or DevOps (15%). These new ways of working are by no means easy to adopt, but this implies a degree of inertia that few companies can afford.

Digitize IT

Click here to access the Economists Intelligence Unit’s detailed report

Achieving Digital Maturity Adapting Your Company to a Changing World

Adapting to increasingly digital market environments and taking advantage of digital technologies to improve operations are important goals for nearly every contemporary business. Yet, few companies appear to be making the fundamental changes their leaders believe are necessary to achieve these goals.

Based on a global survey of more than 3,500 managers and executives and 15 interviews with executives and thought leaders, MIT Sloan Management Review and Deloitte’s third annual study of digital business reveals five key practices of companies that are developing into more mature digital organizations. Their approaches, which may offer valuable lessons for companies that want to improve their own digital efforts, include:

  1. Implementing systemic changes in how they organize and develop workforces, spur workplace innovation, and cultivate digitally minded cultures and experiences. For example, more than 70% of respondents from digitally maturing companies say their organizations are increasingly organized around cross-functional teams versus only 28% of companies at early stages of digital development. We discuss how this fundamental shift in the way work gets done has significant implications for
    • organizational behavior,
    • corporate culture,
    • talent recruitment,
    • and leadership tactics.
  2. Playing the long game. Their strategic planning horizons 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. 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.
  3. Scaling small digital experiments into enterprise-wide initiatives that have business impact. At digitally maturing entities, 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.
  4. Becoming talent magnets. Employees and executives are highly inclined to jump ship if they feel they don’t have opportunities to develop digital skills. For example, 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. Digitally maturing organizations typically understand the need for and place a premium on attracting and developing digital talent. Their development efforts often go far beyond traditional training. These businesses create compelling environments for achieving career growth ambitions while acquiring digital skills and experience, which make employees want to stay.
  5. Securing leaders with the vision necessary to lead a digital strategy, and a willingness to commit resources to achieve this vision. These leaders 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.

DigitalMaturity

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