Over a quarter of executives from around the world believe digital transformation is already a critical factor for their companies long-term survival, according to a new survey.
The research, from MIT Sloan Management Reviewand Capgemini Consulting, also indicated that an additional 51% of business leaders believe digital transformation will become critical to implement digital transformation this year (18%) or within the next 2 years (33%).
For the purposes of the study, researchers define digital transformation as “the use of new digital technologies (social media, mobile, analytics or embedded devices) to enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models.)”
In total, the study – involving over 1,500 executives in 106 countries –shows that 78% of respondents feel that digital transformation will be critical to their organization within the next two years.
Key points from the study are:
• Engaging the organization. Competing priorities and lack of digital skills were the top two challenges in execution.
• Getting leadership aligned and committed to Digital Transformation. Lack of urgency or no “burning platform” was the number one most cited organizational barrier. In addition, only 36% of leaders have shared a vision for Digital Transformation with their employees (but within the third that have shared a vision, 93% of employees are behind it).
• Making the case for Digital Transformation. Only about half of organizations create business cases for digital investments.
• Putting the right governance structures in place. 40% said they had no formal governance practices around Digital Transformation and only 26% are using KPIs to track progress.
For 63% of respondents, the pace of digital transformation isn’t happening quickly enough. Significanlty, respondents higher on the organizational ladder are more likely than those on the bottom rungs to be satisfied with the pace of change.
Barriers to adoption
Still, asked to select up to 3 of the most significant organizational barriers to digital transformation, a leading 39% of respondents indicated the lack of a “burning platform,” citing no sense of urgency.
Not enough funding (33%) and limitations of IT systems (30%) were the next-most common organizational barriers. Notably, issues surrounding culture (19%) and leadership skills (16%) appear to be less of a problem.
Only 36% of respondents indicated that senior leaders in their organizations had shared a vision for digital transformation. It seems that some of the reason for that is lack of alignment on a specific road map for moving forward: while the vast majority of respondents believe that leadership is aligned when it comes to the importance of digital transformation, only a minority think that leadership is completely aligned on a road map.
Didier Bonnet, Senior Vice-President and head of global practices for Capgemini Consulting, said: “There is a clear call to action here for business leaders. The C-suite plays a critical role in making Digital Transformation happen as only it is in a position to overcome some of the major hurdles, such as developing and communicating a vision, and governing the change across functional silos. The opportunities to improve company performance through Digital
Transformation are clear, the execution is difficult. But, the only wrong move when it comes to Digital Transformation is not to make any move at all.”
Case study- How Starbucks adapted to digital
The report highlights Starbucks as a company that has made a strong move. It created a vice president of digital ventures role, hiring Adam Brotman to fill it.
His first move was to offer free Wi-Fi in Starbucks shops, along with a digital landing page with a variety of digital media choices, including free content from publications like the Economist.
Brotman is now chief digital officer at Starbucks, where he and Curt Garner, Starbucks’ chief information officer, have formed a close working relationship, and have restructured their teams so that they collaborate from the very start of projects.
Last year, they cut 10 seconds from every card or mobile phone transaction, reducing customers’ time-in-line by 900,000 hours. Starbucks is adding mobile payment processing to its stores, and is processing 3 million mobile payments a week.
Soon customers will order directly from their mobile phone. Starbucks has shown how digital can transform the customer experience.
“Digital transformation needs to come from the top,” said David Kiron, executive editor of MIT Sloan Management Review‘sBig Ideas initiatives. “Companies should designate a specific executive or executive committee to spearhead efforts and can take small steps, via pilot projects, so they can invest in the ones that work to advance their transformation goals.”
About the study
As part of a joint research collaboration into digital transformation, MIT Sloan Management Review and Capgemini Consulting conducted a broad-based online survey of executives and managers across a wide range of industries at companies and organizations around the world. It was completed by more than 1500 people in 106 countries (this included: United States, 37%; India, 11%; Canada, 5%; United Kingdom, 4%; Australia, Brazil and Mexico, 3% each). They represent companies and organizations across the business spectrum — nearly half (47%) work at companies with less than $250 million in revenues, 10% work at mid-sized companies with between $250 million and $500 million in revenues, 9% at companies with $500 million to $1 billion in sales, and 33% work at organizations with more than $1 billion in revenues, including 11% at companies with more than $20 billion in sales.
This study is the latest element in Capgemini Consulting’s ongoing research programme into Digital Transformation. Capgemini Consulting is also partnering with the MIT Center for Digital Business on a three-year joint research collaboration. The last report – “The Digital Advantage: How digital leaders outperform their peers in every industry“ – involved 469 senior executive-level interviews in 391 companies in 30 countries. It follows on from the 2011 report, ‘Digital Transformation: a roadmap for billion-dollar organisations,’ which was ranked among the top 5 thought leadership publications of the last decade by Source – a leading market analyst firm for the consulting industry – following a thorough analysis of some 22,000 consulting reports globally.