For the CIOs’ Perspectives on Digital Transformation study, IT leaders from a wide range of industries and organization sizes were asked about the nature of their ongoing digital transformations, progress along their journeys, challenges, and more. Based on their responses and our experience with clients, we have drawn the following conclusions about the state of digital transformations in 2018.
Digital transformations are made up of series of smaller internal initiatives.
A firm’s digital transformation is an internal effort. The majority (90%) of CIOs reported their organization’s digital initiatives fall into the broad category of “improving internal efficiency.” This finding is not very flashy. The reality is that organizations do not become completely digital in one leap. It takes multiple small initiatives and continuous improvement cycles to get there.
Digital transformations support existing business strategies.
Like any IT initiative, a digital transformation only makes sense if it supports your organization’s overall strategy. There is no need to reinvent your business model (unless your business model no longer serves your organization’s strategy). All study participants reported their digital transformations were in alignment with overall business strategies.
Digital transformations should NOT wait for an industry disruptor.
In many industries, disruptive new entrants are making waves and forcing incumbents to react. The Ubers and Airbnbs of the world are compelling their industry mainstays to undergo massive lobbying efforts or hefty mergers to hang on to a changing marketplace. However, organizations can insulate themselves from disruptors by selecting an appropriate digital focus. And going even further, efforts toward insulation can position a company as a disruptor itself.
If you look at major industry disruptors and their obsolete counterparts, you might mistakenly think that strong tech was the reason once-loyal customers abandoned their favored companies. But Netflix’s algorithms didn’t kill Blockbuster – late fees and inconvenience did. And Uber didn’t dismantle the taxi business – limited access and fare control did.
Digital transformations can fill the gaps within the customer experience to create a more customer-centric business model. Based on our read of the study, there is a huge opportunity for organizations to orient themselves more around their customers’ experience than the mechanics of their operations. None of the CIO participants reported taking on a digital initiative due to the threat of an industry disruptor. But the lack of an imminent disruption in your industry can create a false sense of security.
Industries without disruptors provide an equal opportunity for any firm to take on a digital approach early and become an industry leader. Disrupt or be disrupted!
Most digital transformation journeys have a long way to go.
Most (78%) of organizations are in the early stages of their transformations. However, industries that are data intensive (e.g. finance, medicine, insurance) or experiencing rapid changes due to non-traditional entrants (e.g. transportation, hospitality) are further along. The urgency found in these industries is due to the dire consequences of getting left behind.
It’s in every CIO’s best interest to get the jump on digital transformation. Inactivity will set you up to exist on the left side of the Advancement-Capabilities Matrix:
If you’re lucky, your industry will be slow to move, and you’ll reside in the relative safety of Idleness. But if a competitor has a great idea and executes upon it, your firm will become an industry Laggard. A proactive CIO has an opportunity to outdo their industry peers and become Emergent: while competitors attempt to get moving, you will be ahead of the game. Or, if you are setting the pace in an industry that is also digitally advancing, you will be in a Front-Runner position, leading firms within and outside of your industry.
Too many CIOs are still on the sidelines.
The 80% of CIOs that reported seeing themselves as an “advisor” to the business have the potential to play a much greater role. Playing a participant role as opposed to a leadership role in an organization reinforces a cost-center mentality of IT and limits what it could offer as a force for innovation with immense strategic impact.
Here comes the tough love…
Cut the excuses.
CIOs reported facing a number of obstacles on their digital transformation journeys: cost of resources, skills gaps, and fear of uncertainty. There are also homework-eating dogs, and the price of tea in China!
Don’t procrastinate for any reason. The fact is, once your industry is disrupted, you will find the resources and the skills you need to play catch-up or else you’ll get left behind. Playing it safe looks good only until your industry undergoes disruption. CIOs can get ahead by creating a sense of urgency before they’re forced to do so.
Speak the language of the business now.
Many (60%) of CIOs said that increased business expertise was a major challenge, yet alignment to business strategy was cited as already realized. There seems to be a mismatch here. An aligned IT department should have the business proficiency to execute customer-centric initiatives that grow the business. If that’s not happening, CIOs need to take a deeper look at what obstacles they really need to overcome.
In the digital era, IT has to be more than a help desk. IT leaders need to speak up about the data they have and seek out the specific people or departments who they believe could benefit from it. Every CIO should know what the customers care about, and what’s going on in sales and marketing. Traditionally, CIOs have been ticket-takers without a seat at the table. To get a seat at the table, align with the business.
Successful digital transformations require expertise and cooperation across multiple departments, such as C-suite leadership, PMO, marketing, IT, legal, and sales. The synergy among these groups can be a determining success factor. It’s critical to bridge departmental silos by creating cross-functional teams to execute digital initiatives. Cross-functional teams with strong upper-management support are proven to work together more effectively and produce better outcomes faster.
The digital transformation market study is an enlightening read. If you haven’t downloaded it yet, you can do so here. Our biggest takeaways are that Transformative CIOs are laser-focused on the business strategy and the customer. The organizations that will come out on top are not waiting for industry disruption before initiating internal change, and they are implementing their digital vision through a series of smaller, iterative initiatives.
What conclusions did you draw about digital transformations after reading the report?
Co-authored by Deirdre Martyn.