What’s the role of the IT department in digital transformation? A recent report from research and analysis firm The Economist Intelligence Unit (EIU) points to new opportunities for IT executives of small and midsized businesses (SMBs) to shape digital strategy in their organizations.
The EIU recently surveyed 201 senior executives at businesses with annual revenues of US$250m to $500m to find out about the progress of digital initiatives in their organizations and their perceptions about the role of IT in digital transformation. The survey was sponsored by SAP.
Digital transformation with the customer at the center
Similar to their counterparts at large enterprises, SMB executives expressed their overwhelming support for digital transformation to drive competitiveness, with two-thirds giving it a very favorable ranking among top priorities in their organizations. In fact, 22% of respondents identified digital transformation as their highest strategic priority, while an additional 42% classified it as a relatively high strategic priority. The objectives that SMBs want to achieve with digital transformation are also very similar to those of large enterprises. The most commonly cited objectives were “improving the way our organization uses data and information” (42%) and “improving our products and services using digital technology” (41%).
SMBs face notable challenges of scale and budget that are not commonly shared by large enterprises. To their benefit, however, SMBs are typically more agile in their ability to respond to market pressures. They also benefit from having more established customer relationships when compared to nimble startups. It is therefore not surprising to see that SMBs are investing in digital technologies that enhance and amplify customer relationships.
According to the survey, in the past three years SMBs have been focused on customer-facing digital initiatives, with 64% of respondents saying that their organization had launched new customer-facing digital channels – a nine percent increase over large enterprise respondents. Sixty-three percent say they have launched new products or services made possible by digital technology. Social media initiatives topped the list as the most common area of investment, named by 73% of respondents. Mobile commerce, the fastest-growing segment of the online retail sector, is another area of focus for SMBs.
Closing the leadership gap to improve results
Despite this investment in new technologies, SMBs still risk being left behind in digital transformation. The reason is simple: Digital initiatives at SMBs are not producing optimal results. In fact, the survey uncovered a sizable gap in satisfaction with digital initiatives among SMB executives. Only 17% of respondents were able to say that their company’s initiatives are “highly effective” – compared to 27% of respondents at larger enterprises.
The reasons behind this are as varied as SMBs themselves, but some common themes appeared in the survey responses. For example, at SMBs there is often a lack of strategic oversight to guide digital projects, including the definition of a clear digital strategy. Additionally, digital initiatives at SMBs tend to be led by individual departments, rather than the IT department – as was cited in 32% of the survey responses.
The respondents were vocal in expressing their wishes to see the IT department step up to take on a more active leadership role in the organization. Here is what they said:
- 39% of SMB executives believe that the IT department should take up a more active role in improving organizational agility; however, just nine percent report that their IT department takes active leadership in this area.
- 40% believe their IT department should lead the organization in selecting, implementing, and integrating digital technology; however, only 14% report that it is doing this.
- 29% want their IT department to lead on opportunities to innovate; however, just three percent say that it does.
Based on survey results, the EIU concludes: “The most valuable contribution IT executives at SMBs could make to their company’s digital fortunes is to initiate a conversation with their peers about devising a digital transformation strategy that offers a model of cross-functional collaboration that the rest of the organization can follow.”
The EIU however is careful to state that the IT department alone cannot lead digital transformation – not without a supportive corporate culture. Before SMBs can really begin to gain value from the IT department’s experience and expertise, the entire organization will need to evolve.
To read the complete report from the EIU, see Digitising IT: Catalysts for Growth.