Digital transformation requires business evolution not revolution - study

21st Nov 2011

Human factors are to blame for the fact that two thirds of global enterprises are failing to evolve into digital enterprises, new research has found.

A new study into ‘digital transformation’ by Capgemini Consulting and the MIT Center for Digital Business, found that despite the pervasive influence of digital technology, the majority of organisations are still not taking advantage of its transformative potential and therefore risk falling behind more forward-thinking companies.
The study, ‘Digital Transformation: A Roadmap for Billion-Dollar Organisations,’ found that only one third of companies globally have an effective digital transformation program in place.
Based on interviews with over 157 senior executive-level respondents from across 15 countries at global companies with more than $1bn in annual sales, the study highlights the external factors that are driving digital transformation. Pressure from competitors (72%) and customers (70%) were the biggest drivers of change, as companies strive to find new ways of ensuring competitive advantage and meet changing customer expectations.
Meanwhile, the main internal barriers to achieving digital transformation were revealed as missing skills (77%), culture issues (55%) and ineffective IT (50%).
MIT’s George Westerman, Research Scientist and a co-contributor to the report, said: “These two elements are at the heart of the alchemy of digital transformation. Firms that are mature on both these dimensions can drive powerful digital transformation that yields significant business value. These mature few have mastered not only the style of digital transformation but also the substance.”
Very mature exponents of digital transformation have a sophisticated grasp of both the what and the how, but overall the study characterises 4 levels of maturity: from Digital Beginners (companies that are doing very little with advanced digital capabilities through to the Digirati, who truly understand how to drive value from digital transformation.
MIT’s Andrew McAfee, report co-contributor, said that despite the hype around innovative new technologies such as social media or mobile, most companies still have a long way to go on their digital transformation journeys.
“Whether using new or traditional technology, the key to digital transformation is changing how the company operates and that is a management and people challenge, as much as a technology one,” McAfee said.
Capgemini Consulting’s Didier Bonnet, a co-contributor to the report added that digital transformation was as much about organisational change as it is about implementing new technologies. “What this research has shown us is that while many are convinced of the power of digitally-enabled business practices, success will only come with strategic vision and leadership of a cohesive program of transformation.”
David Lavenda, Vice President for Marketing and Product Strategy at commented: “Expecting workers, managers, and organisations to make significant changes in the way they work is a big risk, because people are reluctant to change,” he explained.  “In the history of innovation, the ‘revolutionary’ approach often fails, because it doesn’t take the human factor into account.”

”Building on people’s familiar’s tools is a great way of easing them into new technologies. Change is hard because people don’t like to change the way they work - they love the status quo. And this is where the `baby steps’ approach comes in – people need to learn to walk in the digital world before they can run,” Lavenda added.

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