What defines a digital transformation leader?
The digital mindset
Four traits set the top 100 companies apart from the rest of the pack:
They are focused on true transformation.
They avoid episodic, piecemeal changes and instead embrace a cross-organizational approach designed to enable constant change. They consider transformation an opportunity to reinvent business models, and they prioritize that over comparing themselves to their competition.
They transform customer-facing functions first.
Leaders view the customer experience as the gateway to a successful digital transformation. They are 58% more likely to cite customer empowerment as a key global trend. The leaders have also successfully connected their customer-facing efforts to business processes across the enterprise and extended them to partners and suppliers.
They invest in next-generation technology using a bimodal architecture.
Leaders report a high level of investment in cloud computing and enterprise mobility, double- digit growth in Big Data, analytics, and the Internet of Things (IoT), and hypergrowth in machine learning and artificial intelligence. Using a bimodal architecture allows them to run their business efficiently while rapidly integrating these new technologies to remain ahead of the competition.
They are talent driven.
With skills that drive digital transformation in high demand, leaders are investing heavily in recruiting and training and in tearing down frustrating process roadblocks. It’s all designed to improve employee engagement and ensure they’re prepared to meet the demand for new technologies and new ways of working.
Making changes transformational, not incremental
What sets the leaders apart is that they have internalized the need to transform how they think as well as what they do – to create a digital mindset across the organization. This is the difference between saying “We need a mobile app” and “We need new ways to serve customers in the ways they want to be served.”
A Hong Kong-based global supply chain management company that is still in the process of digital transformation exemplifies this shift in mindset. As it experiments with new technologies, it is also educating senior managers about transformation so they can champion it across the organization, says the company’s CTO. “The biggest organizational change is … cascading that message from the top down through the organization to make sure everyone buys in and understands both the initiatives and the need for them,” he says.
Global competition was a top priority for most companies we spoke to. The leaders, however, told us that their highest priority is adapting to the digital economy and the technology changes that come with this evolution – which inherently improves their competitive stance.
They are creating a unified digital corporate culture to avoid getting trapped in a siloed approach to change. Instead of making piecemeal adjustments as resources, culture, and organizational politics permit, they make changes across the entire enterprise, and do so repeatedly over time as necessary (see Figure 1).
However, being on the forefront of digital transformation is not without difficulties, even for leaders. While most companies said their greatest challenge in digital transformation initiatives was lack of leadership, the top 100 companies cited lack of change management expertise. Their struggle has been exacerbated by their attempts to make changes across areas and functions using cross-organizational processes and technologies, such as multifunctional digital platforms. Seventy percent of leaders said implementing such a platform is a current priority, and 76% plan to do so by 2018.
“We’ve extended the network platforms in all our plants,” says the CIO of one of the leaders, an American packaged-food manufacturer. “A lot of the processes we’re putting in place rely on the network in the manufacturing space to interconnect machines and other devices. There’s still a lot of conversation about devices and data, but that’s the easy part. The hard part is connecting all this data to allow the business to gain rapid insights so it’s as actionable in as close to real time as possible.”
Start with the customer
Previous strategic technology shifts, like the introduction of enterprise resource planning (ERP) software, were generally inward facing and involved little contact with the customer. By comparison, digital transformation leaders are beginning their efforts by looking outward, with the desire to deliver something of value to the customer in a different way.
That mindset then cascades across the organization and acts as a catalyst for changing all the processes involved in delivering new forms of value, whether directly or indirectly through employees, partners, or influencers.
Indeed, leaders consider customer empowerment a necessary component of transformation rather than an end result or goal. Some 39% believe customer empowerment initiatives (such as involving customers more fully in product and service design) will be the most important trend of the next two years.
They appear to be onto something. Seventy percent of leaders say that digital transformation is already delivering increased customer satisfaction (see Figure 2).