by Sarah K. White

Businesses lack a streamlined approach to digital transformation

May 24, 2016
IT GovernanceIT LeadershipIT Strategy

Most business executives understand the importance of digital transformation, but they aren't prepared for how quickly they need to adapt, according to research from Gartner.

data transformation
Credit: Thinkstock

Technology is transforming the business world, but for many companies, it’s happening faster than they can keep up. Gartner released a report on the state of digital business transformation in 2016, polling 396 leaders of large companies in over 30 countries. The research showed that CEOs are generally optimistic about the future of digital transformation. Three quarters of CEOs reported an understanding about the future of digital transformation and that there needs to be a shift in how it’s approached — but just because they understand the implications doesn’t mean they’ve made any moves towards going digital.

A study from YouGov, commissioned by Appian, surveyed 422 business executives identified as senior executives at companies with $1 billion in revenue or more, and found that businesses aren’t catching up to digital transformation fast enough. Business leaders are certainly aware of the need for digital transformation, but only 14 percent report having “fully migrated to all intended areas of their digital business transformation plans,” according to the report. Meanwhile, 48 percent report that they have migrated in some areas, but not all intended areas.

[ Related story: How to succeed at digital transformation ]

“Transforming a business is complex and highly involved. It requires considerable time and executive buy-in to execute well. Additionally, as the survey points out, there are quite a few obstacles standing in the way of even the most forward-thinking leaders. So we don’t believe CIO’s have just woken up to this. They have been thinking about it, and are now realizing how they need a new approach if they are going to be successful,” says Michael Beckley, co-founder, CTO and chief customer officer at Appian.

A shift in leadership

The Gartner study points out that leaders have started to realize the importance of digital transformation in mapping out the future success of their businesses, and that leading this change will require a top down approach, starting with the c-suite.

“In order to fully embrace digital transformation and realize these benefits, the decision must stem from the very highest levels of the business. From there, businesses need technology tools that are powerful, simple to implement, manage and use, and allow positive change to happen fast,” says Beckley.

However, businesses have also realized that digital transformation requires a different type of leadership. For some companies that might mean defining a new C-Suite role, or leveraging the CIO or CTO into a position to lead this change, according to Gartner.

When asked in the Gartner study, “Which member of your executive leadership team has primary responsibility for leading digital strategic changes to your business,” the results revealed that, for the most part, businesses aren’t using the CIO or CTO for digital transformation. Rather, 16 percent of businesses said the CEO is leading digital transformation, but as Gartner points out, the CEO typically isn’t the person with the technology background or experience in the necessary software and hardware. After the CEO, 15 percent said that the CIO was in charge of digital transformation, with another 5 percent stating IT managers were heading the shift.

Beyond that, results were highly varied, citing roles such as CFO, CTO, business unit leaders, COO and president or owner. Such a range of titles implies that businesses haven’t figured out a streamlined way to lead when it comes to business transformation, often putting the responsibility on people who may not be the most qualified. Gartner suggests that this is due to the fact that CEOs are stuck in a 20th century management theory, which was developed during a time when businesses were more invested in manufacturing and physical assets than digital technology.

A custom approach

Appian found that 69 percent of business executives think that custom software is the future of digital transformation, but leaders also report roadblocks holding back the process. Of those surveyed, 38 percent cited “constantly evolving business requirements” as a major impediment to digital transformation. In addition to changing business requirements, 37 percent also reported “integration across data sources” as an issue and 35 percent cited “long development cycles.” Additionally, business executives had concerns around the overall investment, with nearly half of respondents concerned about performance, customer experience and the flexibility of technological infrastructure.

“There are a number of elements that stand as obstacles to businesses’ digital transformation goals, including constantly evolving business requirements, and complex custom software that can make a big impact but can often take a long time to develop and implement. The key is finding solutions that eliminate as many obstacles as possible,” says Beckley.

[ Related story: Digital transformation will shape 2016 ]

And those solutions might not be found in vendors, at least that’s what the study from Appian suggests. The results showed that 58 percent of business executives reported “pre-packaged vendor application software has limited benefits.” More than half also said they believed third party applications were “too rigid for their company’s business needs.” Ultimately, it seems businesses might need to consider a custom approach if they want to successfully transition to a fully digital business within the next five years — however building a custom approach can take extra time and money.

A digital overhaul

The idea of digital transformation is more than incorporating more software and hardware into day to day operations; CEOs envision something far more complex, according to Gartner. The study found that half of CEOs said they expected the digital transformation to render their industries unrecognizable in the next five years. And Gartner agrees, pointing to industries that have recently experienced a digital upheaval from technology like self-driving cars, the Internet of Things, blockchain banking and even e-cigarettes.

Executives also have questions around what constitutes digital transformation, according to Gartner. For instance, 51 percent of respondents said that cybersecurity was an issue for business management, while 49 percent cited it was a responsibility for technology management. But Gartner takes a firm stance, stating that cybersecurity is not something that should be relegated to technology departments, instead it should be a concern for the entire company — especially as digital transformation takes hold. Defining what should be included in digital transformation is vital to digital adaptation to ensure nothing gets left behind in the transition.

That means, executives need to understand that digital transformation doesn’t start and end with the technology housed in IT. It’s something that every department needs to consider — just like cybersecurity, according to Gartner. Products that are client- or customer-facing should be approached with respect for the end-user, ensuring their digital experience is as user-friendly as possible, and that might mean involving departments like marketing and product development. In fact, Gartner goes as far as to recommend reallocating resources to digital transformation from other areas if possible, just to ensure that the customer and client experience are top notch.

A lot of what businesses do is often boiled down to the ROI on an initiative, and CEOs are seeing the value in digital transformation, according to Garter. Of the respondents, 46 percent cited that they expected the biggest value from their products would come from digital transformation by the year 2019. The Appian survey found similar, with 75 percent of business executives citing that a custom approach would create a personalized customer experience, which 19 percent say will increase ROI. In addition to ROI, 31 percent feel a custom solution will help meet compliance regulations and 19 percent feel it will help with customer retention, which can also be tied to ROI.

And defining the ROI on digital transformation might mean all the difference, “In this era of doing more with less, CIOs shouldn’t expect that their business leaders will feel obligated to dedicate their businesses to a digital transformation without a clear and significant impact on the bottom line, and perhaps more importantly to their employee and customer experience,” says Beckley.

Related Video