Paris: A new global study by Capgemini's consulting arm and the MIT Center for Digital reveals that only one third of large companies are succeeding in reshaping their business through digital technologies.
The study draws on in-depth research into 'digital transformation' — the use of technologies to improve performance or reach of business. '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 characterises 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.
MIT's Andrew McAfee, report co-contributor, said: "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%).
Capgemini Consulting's Didier Bonnet, a co-contributor to the report, commented: "Digital technology has the potential to improve corporate performance and reach radically, but this transformation will be as much about organizational change as it is about implementing new technologies. What this research has shown us is that while many are convinced of the power of digitally-enabled business practices, success will only come with strategic vision and leadership of a cohesive program of transformation."
About the study
In a three-year joint research collaboration with the MIT Center for Digital Business, Capgemini Consulting is conducting a joint research study into digital transformation through interviews with senior executives from leading companies around the world. The findings outlined here are from the first phase of this research, involving 157 senior executive-level interviews in 50 companies in 15 countries. These companies are large firms, each having more than $1bn in annual sales. Approximately half of the interviewees were business leaders such as CEOs, business managers and COOs and the other half were with IT and technology leaders. The interviews covered a broad range of geographies and industries with participants from Europe, the USA and Canada and Asia Pacific and across industries including public sector, pharmaceutical, transport, manufacturing, retail, energy and utilities, financial services and telecoms, media and entertainment. This study is the culmination of the first year of the collaboration and further analyses will follow in 2012 and 2013.