The following is the first of a series that discusses our experience in transforming organizations to be more adaptable and competitive in the evolving technology landscape. We appreciate your comments and suggestions. Let us know what you think.
Are we behind on Digital Transformation? We get asked that question a lot. The reason for this question is that over 70% of organizations have a new technology transformation strategy in place or are currently working on one according to Forbes. And the other 30% are probably thinking through what they can do to stay current with the known trends. Either way, most organizations want to understand their relative position.
This desire to be technically relevant results in a total annual spend exceeding $1 trillion dollars on technology change efforts. Most organizations feel the pressure to “do something” to enhance their digital footprint. This pressure is the result of increased competition generated by industry participants that has transformed the customer delivery using technology, the fear of missed growth opportunities by not being capable (or sufficiently flexible) to capitalize on consumer trends or the need to comply with ever increasing new regulations. This pressure is also enhanced by the belief (77% of organizations) that their relationship with existing internal technology is only average or better.
Our answer to this question is usually—“It depends”. We answer this way for three distinct reasons:
- 1. The phrase Digital Transformation can mean many things within a vast array of organizations.
- 2. The word Transformation causes headaches for people that have participated in a change effort.
- 3. The word Digital has several meanings that may or may not communicate your original intent to your audience.
We believe a better answer to the question of “Are We Behind Digital Transformation (or keeping pace with changing technology)?” is….It depends.
We believe it depends on your current level of technology employed throughout your organization which is measured by technological breadth. Plus, it depends on how vital your current technology is to your business model and providing a competitive advantage in your industry which is technological depth. We combine the technology breadth and depth to measure your Technology Embrace. This is one measure of your position against your competitors and within your industry.
An additional reason we tell our clients “It depends” is due to culture.
Your culture will inform you what the customers expect from your technology presence in comparison to your competitors. Culture will also measure how fast stakeholders within your company will adopt and effectively implement transformative technological change. We combine these factors to measure your level of Cultural Embrace.
We add Technology Embrace and Cultural Embrace to answer the question of our clients ability to keep pace with Technological Change. A little more detail about these measures is explained below.
The level of digital transformation is defined as the integration of technology into all areas of a business that fundamentally changes how you operate and deliver value to customers. That is the technical definition. The level of deployment can be measured quantitatively by how many business processes are fully automated. But this measurement must also be weighted by how close the business process is to the vital central business functions. It is only by measuring the breadth (how many business processes) and depth (how vital is the process to the business performance) that we can calculate Embrace. By combining an absolute total for processes and the relative weight an organization can effectively measure their progress in their technological enhancement. We call this Digital Embrace
There is also a personal view of digital transformation that we have defined as Cultural Embrace. The key question to measuring your culture is the following. Does your cultural mindset allow your organization to continually challenge the technical status quo, experiment with new options, and be comfortable with failure? We measure the level of change with the investment of time and effort to determine Cultural Embrace. We call this Cultural Embrace because this measures an organization’s acceptance of their future digital strategy. This is vital because it is estimated that over 70% of digital transformations do not achieve original goals due to resistance from employees. Some diagnostic questions are:
- Can the culture embrace their strategy with sufficiently strong belief that comfortable old technology can be replaced with new systems that will produce greater results but also change what people do, how they do it, where and when they do it?
- Can the culture accept aspirational goals that fundamentally change how a function operates and have that attempt fail?
Can the culture look at failure as a step forward to making lasting significant improvement?
- Are there learning systems in place to capture insights from transformation attempts to build future initiatives?
A culture that possesses these qualities is better prepared to adapt to the future. But that is easier said than done. Studies show that companies with less than 100 employees are nearly three times more likely to say their digital transformation was a success than employees at organizations with more than 50,000 employees. There are several factors that influence the inability for large organizations to embrace change (like multiple levels of approval, broad buy-in required for change and the general lack of alignment) but the collective Cultural Embrace for smaller organizations is compelling.
How Others are Embracing Technological Change
The good news for people that are worried their organization is behind is that only 7% of organizations have fully transformed to a digital-first business strategy. Plus 39% of executives believe that their companies will not capture the greatest benefit for another three to five years. As many as 45% of executives don’t believe their organization has the right technology to even attempt a digital-first strategy. Plus some reports conservatively estimate that many digital transformation efforts often change goals and outcomes to achieve a lower (but marginally acceptable) level of success. Overall, there is still some room to gain on competitors
But for services and healthcare, the time for change is now and these industries are leading the way to adopt a digital-first strategy. Our clients in these verticals are looking to increase their Technical Embrace by implementing a digital-first approach throughout operations to drive out cost and make their operations more agile.
Clients have made great progress by automating everything from decision protocols that rely on machine learning and artificial intelligence to reconfiguring databases and search protocols to make access to data more immediate. The focus is on achieving frictionless data utilization across several processes to increase information immediacy and increase data relevance for users. We measure each of these results as exponentially increasing their Technical Embrace.
In services and healthcare customers are now conditioned to expect that organizations can understand their expectations and anticipate their needs. Service organizations have a great incentive to improve their overall customer experience and eventual customer satisfaction using AI and other connected technology. Cloud based applications are driving improved customer interactions and as reputations are enhanced based on successive positive experiences. Their Cultural Embrace is the natural result of enhanced customer experience expectations and this trends drives internal adoption of new technologies by stakeholders.
Although the measures of Technical Embrace and Cultural Embrace and not absolute measures they do display as a relative measure of progress and can serve as a motivator for organizations running the technology race for today.