By Bob Parker, Group Vice President, IDC
The concept of digital transformation has quickly become the center of gravity for discussions about the future of technology investments, markets in general, and enterprise strategies. Is it justified or is it just a mechanism of the marketing machines of big technology companies?
We believe it is the former, as an increasing number of business and government leaders put a stake in the ground that digital investment holds the promise of creating new levels of productivity, and as such, will be the most significant source of wealth creation in this century. Typical of this sentiment is a recent quote from the CEO of one of the world’s largest financial services companies: “We are no longer a bank, but a technology company in the financial services industry.”
So what is digital transformation?
Many clients make the very valid point to us that they have had a digital strategy for some time; digitizing processes through investment in Enterprise Resource Planning and the logical extensions into supply chain, customer relationship, product management, and industry-specific applications. And it is true that these investments serve as an important foundation in the next wave of digital investment. However, while the foundation serves to automate processes and provide accurate performance reporting, true transformation will happen when technology changes the customer experience and the way organizations calibrate their operations, via digital connectivity and intelligence, to that experience.
This next wave of investment is truly transformational because organizations will become, as the quote from the banking executive supports, technology companies. The transformation will be broad-based, encompassing markets such as energy, manufacturing, healthcare, retail, financial services, and government. There will be a substantial “digital dividend” as waste is eliminated and new levels of productivity are achieved. Business and public sector leaders realize that it’s critical to their future success to have a digital transformation strategy in place.
Formulating a digital transformation strategy
With this executive mandate to digitally transform in hand, it falls upon the line-of-business and information technology leadership at these organizations to formulate plans and build a roadmap for change and investment. In order to provide a framework and information to guide this transformation, IDC has identified five key dimensions of a digital transformation strategy:
- Strategic leadership. Is there an executive commitment to transformation? Are the leaders of your organization seeing technology at the core of what you do?
- Omni-experience. For your extended organization, especially your customers, how immersive is the experience of participating in your value chain? Does your digital delivery utilize all channels of contact and does it deliver on your brand promise?
- Information. Is your organization moving to one that makes decisions based on evidence? Will you be able to double the productivity of your knowledge workers over the next five years?
- Operating model. How connected are your products, processes, and assets? Are you able to take advantage of this increasing connectivity to generate new revenue and operate more productively and resiliently?
- Work sourcing. Is your company looking at alternatives to the traditional employee view of getting work done? What is your ability to take advantage of a wider network of expertise?
All of these questions are addressed specifically in a maturity model that IDC has developed, which encompasses each of these dimensions. And each dimension contains several sub-dimensions to produce a multi-level, sophisticated maturity framework. We have also conducted global surveys to establish a benchmark database that enables peer-based assessments.
The stages of maturity
The maturity model places companies along a continuum of five stages of maturity — from “digital resistors,” who have only ad hoc efforts in digital transformation, to “digital disruptors,” who have optimized their digital portfolio to the point where they are already poised to dominate their markets. Most companies in the benchmark database are between these two extremes. Nearly two-thirds are either “digital explorers” (the second stage) who have active digital projects that are largely opportunistic, or “digital players” (third stage) who have achieved repeatability, albeit unevenly, across the dimensions of their digital efforts.
Most companies are trying to get from this second or third stage to the fourth stage, where 14% of companies currently sit. These are the “digital transformers” who are managing the portfolio of digital initiatives that moves each of the dimensions in sync and positions the organization to become a disruptor. Our maturity model interactive tool helps organizations perform the important first step of evaluating where they are today and begin the process of understanding the investments, change management, and governance that will be needed to advance quickly.
Digital transformation is not an isolated initiative
Digital transformation is not a one-off project. This effort is truly transformational, requiring organizational commitment and a robust digital foundation to enable the scale and repeatability necessary to be successful. This digital foundation should enable enterprises to digitize mission-critical business processes across all operations, capture instant business insight from a single source of truth across the entire enterprise, and predict and simulate to anticipate future business outcomes. An example of such a digital foundation is SAP’s new business suite SAP S/4HANA that has been released early this year, and that the company has been positioning as a modern digital core that will help enterprises with their digital transformations.
The logical starting point is to evaluate your maturity relative to your peers. I invite you to take advantage of our interactive benchmarking tool and receive an assessment.
You will be asked to answer questions about each of the dimensions. We will compare your answers to our database of companies that have already participated and provide an analysis tailored to your company. This analysis will include an evaluation of your maturity relative to each of the dimensions and how the dimensions come together to create an entirely new information based business model with new approaches to customer engagement, a reinvention of your supply chain, and agile organizational constructs.
So follow this link and let’s get started!