When it comes to digital transformation, the gap between those ahead on this winding, evolving journey and those falling behind is wide. Organizations that are well along the path have been focused on people and human insights, gaining new customers, increasing customer satisfaction, retaining valuable employees, and achieving greater profitability thanks to digital initiatives. The companies that are not keeping up at the speed of business, on the other hand, risk losing ground to their competitors.
According to a recent survey of more than 500 high-level executives, Crossing theEnterprise Digital Divide conducted by Forbes Insight in partnership with KPMG, most organizations have only begun to explore the possibilities that digital has to offer, and they have yet to adopt coherent strategies to leverage these capabilities. Currently, only one in four reports that their digital efforts have been tightly integrated with their overall corporate go-to-market strategies.
KPMG Managing Director Dave Wolf points out that it’s important to recognize that digital transformation is not simply about implementing new technologies, but about being able to take advantage of the fundamental shifts happening in business today. For example, new technologies are emerging at a feverish, unceasing pace. People are creating and innovating new business models more quickly. Customer and partner expectations have risen steeply.
“Organizations have to react to these shifts and be able to pivot successfully in order to compete,” says Wolf. “Success is determined by whether a company can take advantage of the digital technologies that enable and empower these essential shifts — that is a big part of what causes the gap between the haves and the have-nots.”
IT organizations that jump ahead on the digital transformation journey tend to be very good at four fundamental capabilities, which organize as a funnel, Wolf explains:
1. They solve problems through design thinking. At the beginning of the funnel, high-performing organizations use approaches like design thinking — a problem-solving approach that goes beyond business requirements to seek better understanding — to identify the core issues and to help them figure out how to solve problems, says Wolf.
2. They tend to focus on human-centered design. Those ahead in terms of digital transformation tend to be very human-centered in the way they approach and design solutions for problems says Wolf: “It’s about designing solutions with empathy for people and their expectations, rather than just about the business.”
3. They use Agile approaches. In order to deliver products and services at the speed of the market and take advantage of new opportunities, successful IT organizations implement Agile methods, says Wolf — that is, a continuous delivery framework that focuses on incremental, iterative collaboration.
4. They continually improve. It’s one thing to implement new business models but high-performing IT organizations continue measuring, says Wolf. “To be as adaptive as the market expects you to be, you have to analyze how you are performing as you continue to release products and services,” he says.
Signs of digital transformation maturity
Those companies that reach the maturity stage of digital transformation are clearly mastering the four capabilities mentioned above — although, more typically, companies may thrive in one area but still struggle in another. “Addressing those gaps is the first place to start,” says Wolf, adding that each of the four capabilities may have 8-10 individual best practices that organizations can work to check off. “There are a series of metrics underneath all of these that you can begin to measure against,” he says. “For example, if you say you use Agile approaches, do you organize your team and infrastructure in an agile, collaborative way? Do you take advantage of devops and other automation, integrations and business processes to deliver at velocity?”
According to the Enterprise Digital Divide study, most executives consider their organizations to be somewhere in the middle of the journey when it comes to digital implementations. At this time, one in five see their enterprises as “high-performing” in digital, meaning their initiatives are bearing substantial results to the business.
Organizations tend to struggle most with the beginning of the digital transformation funnel — that is, developing a human-centered, design thinking approach. “It’s not traditionally how organizations solve problems,” Wolf says. “It’s not a capability that most have, but it is becoming more and more paramount.”
Without the foundation of an innovation approach that starts with people, agile and continuous improvement efforts tend to be less valuable, he explains. “Many IT organizations really embrace Agile approaches, but without proof that you have the right solutions to the problem, its value tends to be decreased,” he says.
To thrive in the digital world, CIOs need to do three things, says Wolf: They need to think big, start small and act quickly. “The IT organization needs to be ready to brainstorm and come up with new ideas, but then in the end it may mean delivering a smaller version of that idea in order to try it out and see how it works,” he says. “Then, the organization needs to take advantage of approaches to deliver quickly beyond Agile — that is, making sure you can overcome governance models that delay efforts to push new releases out, as well as develop automated options that still take security and auditability into account.”
Fundamental digital shifts are here to stay
The fundamental shifts of digital transformation are here to stay, says Wolf, such as the dizzying pace of technological change and rising customer expectations. The companies that can take advantage of these technologies are able to create and pivot business models faster than ever, says Wolf, allowing them to solve problems, adapt and change quickly — which leads to breaking away from the pack and leaving competitors in the dust.
“The bottom line is, companies that don’t bridge this digital gap, won’t thrive in a world with these new expectations,” he explains. “Staying on the right side of the digital divide will help you be an adaptive business where you can react to changing market dynamics. That’s the value — it allows you to continue to delight users.”