Digital. Digital. Digital. For the past few years, organizations have been told there is only one road to success: Digital.
But with 40% of organizations now reporting they’re at scale for digital endeavors, it’s time for leaders to focus on a new word: Uncertainty.
How an organization deals — or is prepared to deal — with “turns” and disruption will dictate how that organization succeeds in the future. These turns can take the form of acquisitions, cost pressures, shifts in consumer demand or other challenges, but the reality is that unprepared organizations will sustain permanent damage.
The goal of all organizations should be to lean into uncertainty and come out stronger and more successful on the other side
Given that much of the reported digitalization involves optimizing existing business models and not actual digital transformation, even digital organizations are vulnerable to turns.
“Turns disrupt. Enterprises that came out behind or far behind where they were before a turn were robbed of their ability to respond by the turn,” said Andy Rowsell-Jones, Distinguished Vice President Analyst, at Gartner IT Symposium/Xpo 2019™ in Orlando, Florida. “Unless enterprises are fit, turns deaden their ability to flex as the environment changes.”
Lean into uncertainity
The Gartner 2020 CIO Agenda surveyed 1,070 CIOs and senior IT leaders to find out what distinguishes organizations that get stronger after turns from those that falter.
Consider the path of a speed skater. The turns on the track can be a dangerous place — momentum shifts, visibility is poor and the outcome uncertain — but they can also be where strategic skaters gain an advantage. Skaters who brake late and accelerate out of the turn pull ahead, leaving behind their more risk-averse competitors. These winning skaters take calculated risks and trust their established core capabilities.
“Fit” organizations — those that came out of a turn stronger — outperformed “fragile” organizations in key areas
In a business context, a turn is just a shift from the straightaway of momentum. Turns change the dynamics and force a reaction. The question is whether an organization will hit the brakes to avoid risk (slashing costs or pulling back on initiatives) or accelerate smoothly into and out of the challenge (banking on established key capabilities).
The effects of a turn on a fragile organization can be detrimental to revenue and profit during the turn, but also long into the future. These organizations struggle to attract talent, launch initiatives more slowly and have less money to invest. Their IT budgets are also set to grow 0.9% on average in 2020, compared with 2.8%, the average IT budget growth for all organizations.
What fit organizations do differently
The goal of all organizations should be to lean into uncertainty and come out stronger and more successful on the other side. A subset of organizations successfully navigates these turns to come out ahead.
“Fit” organizations — those that came out of a turn stronger — outperformed “fragile” organizations in key areas. This enables fit organizations to invest and maintain profit margins, while fragile organizations shrank. Further, fit enterprises increased their revenue at a compound annual growth rate of 5% over the past three years, compared with 3.5% for fragile enterprises.
Only about 25% of organizations proved to be “fit,” but all of them had 10 key capabilities that set them apart:
- Providing clear and effective leadership
- Making disciplined IT investment decisions
- Articulating a clear and consistent vision to employees, consumers and partners
- Having a clear and consistent overall business strategy
- Forging a strong CIO and CEO relationship
- Using IT to gain competitive advantage
- Anticipating opportunities and threats to keep themselves ahead of change
- Being willing to take on risks for long-term growth, even If that could decrease current year profits
- Enabling the enterprise to navigate change
- Fostering and changing the culture in IT
Download complimentary report: 2020 CIO Agenda: Winning in the Turns