Digital maturity reached a tipping point in 2018 as digital initiatives rose to the top of CEO agendas and organizations scaled their digital capabilities. Every organizational function is being challenged by the disruption, but Gartner market insights from across research and advisory show many organizations are finding ways to realign or reinvent their activities to respond — at the requisite speed.
“ 67% of business leaders say their company will no longer be competitive if it can’t be significantly more digital by 2020”
All eyes are on the opportunities and the competitive risk of failing to keep up. Gartner surveys show digitalization is a high priority for both private- and public-sector organizations — and is in many cases is a do-or-die imperative — making business model change inevitable:
- 87% of senior business leaders say digitalization is a company priority
- 67% of business leaders say their company will no longer be competitive if it can’t be significantly more digital by 2020
- 66% of CEOs expect their company to change its business model in the next three years
- 49% of CIOs report business model change is already underway
- 62% of CEOs say they have a management initiative or transformation program underway to make their business more digital
- 41% of CEOs, an all-time high, see their company as an innovation pioneer
Gartner market insights also show every organizational function can and should be engaged in positioning the enterprise to achieve its digital ambitions.
Many organizations struggle with digital transformation
The stakes are high, but organizations frequently struggle with transformation. Digitalization in particular often fails to deliver hoped-for results and reveals enterprise weaknesses:
- Two out of three organizational transformations are unsuccessful
- 72% of strategists say their company’s digital efforts are missing revenue expectations
- 67% of companies have missed expectations of profit growth from digital initiatives
- Only 20% of corporate strategists are clear on how business model change will enable their company to win
- Only 18% of research and development (R&D) leaders trust the models they currently use to evaluate transformational projects
- R&D investment in transformational investments has actually declined — by 23% between 2013 and 2017
- 70% of employees say they lack mastery over the skills they need to do their job
It all starts with business model change
Why are companies seeing a gap between expectation and results in digital business? Gartner research shows that a company’s ability to gain strategic clarity on its path to business model transformation is crucial to its success.
Some organizations see digital business as an opportunity to totally reinvent themselves and their business models. Other enterprises and their functions are looking to leverage technology to optimize and augment existing operations.
Whatever the extent of an organization’s digital ambition, most corporate strategists tend to play it safe, favoring incremental investments. But in some companies, strategists are bolder. They test entirely new business models while also finding ways to reduce the associated risks. These progressive strategists take specific steps to identify future differentiators and engage the whole organization in a better, faster way to clarify their path to business model transformation.
“ Every functional leader has a role to play in translating digital ambition into commercial success”
In everyday strategic planning, corporate strategists must ensure the organization is aligned around the enterprise mission. This clarity of direction is absolutely critical for digital initiatives. Without it, organizational functions can’t prioritize their own transformations.
Clarify organizational culture and assess capabilities
Just as corporate strategists need to adopt a new paradigm for digital business models, all organizational functions need to reassess how they operate when organization-wide disruption shifts stakeholder relationships, culture and capabilities.
Emerging skills are in high demand, and existing skills are evolving and expiring. Employees are concerned about their skills becoming irrelevant: better upskilling is their top concern. Strategic workforce planning and talent management and reskilling initiatives are already top of mind for HR and other functional leaders. But on a macro level, there is near-universal demand for digital dexterity — a set of beliefs, mindsets, and behaviors that help employees deliver faster and more valuable outcomes from digital initiatives.
Just as digital technology is now fully within the purview of all organizational leaders, so is the question of digital-ready talent.
But disruption also breeds cultural tensions — as the digital ambitions of the enterprise conflict with longtime operating objectives and create competing priorities that employees don’t know how to balance. Especially without strategic clarity, employees are unsure if they should focus on speed or quality, efficiency or innovation, for example. The more tension employees feel, the more stressed they are and the worse their performance becomes.
In progressive companies, business leaders work proactively to surface these tensions, acknowledge tough trade-offs, and help leaders set and articulate priorities. The result is more effective culture-informed judgment by employees — and better performance.
Customer-centricity at the forefront
Digitalization is also characterized by transformative shifts in customer needs, which are compounded in today’s buoyant global economic conditions. In this environment, every functional leader has a role to play in translating digital ambition into commercial success.
Leading supply chain organizations, for example, are embedding agility and responsiveness into their DNA to catalyze the digital supply chain into action.
On the sales and service fronts, leaders are increasingly focused on positioning employees to be more effective and productive in the new paradigms they face.
“ Marketing organizations have developed a more agile style of working to keep their brands competitive”
In B2B sales, reps are confronted with buyers who spend more time researching in digital channels and exchanging information within buyer groups than they do engaging directly with sales reps. Progressive sales leaders position reps to help buyer groups navigate this complex purchase process via the “buyer enablement” approach.
Proactive service leaders have turned their attention to improving the experience of their reps at work — which, in turn, benefits customers — rather than simply arming service reps with more and more tools meant to directly improve service.
High-performing marketing organizations have developed a more agile style of working to keep their brands competitive amid rapid marketplace shifts. Their leaders are building a diverse, adaptable range of team capabilities — allocating people and resources based on the work that needs to be done, regardless of where resources sit in the organizational structure.
Drive digitalization — or at least don’t be a drag
The digital era also demands that consumers and organizations be secure. In most organizations, the CIO remains accountable for cybersecurity, but information and technology (I&T) top performers are more likely to report that their boards are ultimately accountable for cybersecurity. All CIOs need to educate their boards and the C-suite on how to think about and take more responsibility for cybersecurity risk.
This new operating reality of multiple stakeholders and rewired accountabilities is playing out in all enterprise functions, challenging them to meet their core responsibilities and manage new risks at the speed of digital business as evolving business models change the value proposition, customer base, profit model and/or business capabilities.
Progressive procurement departments deliver a feeling of certitude to business partners that lessens their anxiety, uncertainty, and exasperation during purchasing and thus alleviates the kind of pressure that can force procurement to make bad and costly trade-offs just to speed up buys.
In functions where governance is a key responsibility — from risk and audit to finance and legal and compliance — leaders are identifying effective ways to inject their expertise and guardrails into business strategy and operations even when decision making is highly distributed.