Digital transformation is coming of age. In a recent survey commissioned by IFS covering 750 professionals across a range of industries, 80 percent saw themselves as enabled, enhanced or optimized to leverage digital transformation. Even more impressively, 89 percent said they had advantageous or adequate funding in place for digital projects — a clear acknowledgment that the time of disruptive technologies is here and that the vast majority of companies are realizing that they need to invest. But why are businesses investing? Where do they see the big profits, and how successfully are they selling digital change throughout their organizations?
The survey found that more than a quarter (27 percent) of companies say digital transformation makes them more competitive, giving them a vital differentiating edge. Twenty-nine percent see the main benefit as accelerating innovation and growth opportunities in new markets. All these are inspiring. Companies using digital transformation to ask far-reaching strategic questions are making the most of the long-term opportunities of the technology. They’re sensing how it can transform even seemingly small tactical decisions into key differentiators.
Unfortunately, these companies are in the minority. The largest group in the survey (47 percent) still see the main benefits of digital transformation as improving internal process efficiencies, which makes me wonder whether organizations understand the full potential of what disruptive technologies can achieve. Innovation can make or break a company, and study after study foregrounds it as a C-level priority. So why doesn’t it appear to be a driver for digital transformation? Considering technology investments, this could mean that the majority of funds are invested in making internal processes more effective and thereby fail to enable innovation. Seeing improved internal efficiency as the key reason to explore digital transformation is too short-sighted in my view. It fails to exploit the strategic benefits and makes it more difficult to win the understanding and commitment of the staff.
Despite plenty of good news, the survey still reveals that 42 percent of respondents view aversion to change as the main barrier to digital transformation. Companies need to think carefully about how they position the Internet of Things and other disruptive technologies, how they tell the story of why they are using them, and how they communicate the benefits to their entire workforce — transforming staff from dataphobes to data fans.
The most successful technology shifts are embraced from the bottom up as well as the top down. They’re driven by people. The buy-in from staff is mission-critical. The opportunities for growth and improvement for all need to be communicated clearly and openly. Imagine a service engineer hearing that predictive maintenance is to be deployed. "That’s going to put me out of a job" would be a common reaction. In this scenario, stressing the big-picture, long-term strategy (more competitive, accelerated innovation, growth opportunities in new markets, etc.) would be more inspiring than the short-term tactical benefits (improving internal efficiencies).
Digital transformation is like many other big change projects. It’s all about winning the hearts and minds of the people who will actually enter the data or use the system. It needs to be managed on a human scale. We all understand that no amount of short-term savings will make our jobs or businesses more secure if the organization isn’t staying competitive in the long term. It is vital to paint the big picture, positioning digital change as strategic, not tactical, and as inspiring, not invasive.
One in three companies in the survey were unprepared to deal with the digital skills gap. Smart businesses are already spotting potential data candidates, like the service engineer above, who have the appetite and skills to expand their role. How can companies bridge the skills gap affordably, sustainably and creatively?
Consider how your organizational structure needs to be developed to foster digital transformation. For large companies, there is the option of creating new departments dedicated to digital initiatives — hot-housing analytic skills and nurturing them in-house.
Conduct a digital competence inventory. There may be a need to train staff in managing and analyzing data. This must be met for the organization to succeed with digital initiatives. Establish what technology in your company is key for development. As part of this digital inventory, start earmarking individual staff members who have the drive to upskill.
Developing skills properly is paramount. Human resources teams must decide what current roles need to be developed and where new talent is required. Bring in external trainers to provide new perspectives.
Work together with local universities, both to attract talent and to influence schools to focus their education programs in the right areas. Placement schemes offer undergraduates real-life programming experience, growing the organization and the student. Apprenticeship schemes discover local talent and give them support and a place to grow.
There are three pillars to succeed with digital transformation — technology, investment and people. The technology aspect is often mastered effectively, as it is driven by experts with clearly dedicated areas of responsibility. The main question is whether you are focusing on the right technology to drive transformation at the right time. Do you want to be the pioneer taking risks or jumping on the bandwagon when the technology is more mature?
Regarding investments, companies generally think they are investing enough in digital transformation, but are they concentrating on the right areas? The survey results indicate a heavy emphasis on process efficiencies, so there could be a need to steer the focus toward more innovation-related investments.
Finally, the people factor is most often forgotten in the digital transformation process. This is important from both a talent and communications perspective. If more than 40 percent view aversion to change as the main barrier, employee communications should be of the utmost importance to ensure your staff knows the purpose of the change and how they will be affected.
If you will focus on building these three pillars, you can greatly improve the chances of success in your digital transformation.
Antony Bourne is the vice president of global industry solutions at IFS.