Companies that view digital transformation as simply upgrading technology to keep up with the times will be in a perpetual state of catching up according to a new report from Altimeter, the research and advisory arm of global consultancy Prophet. Companies that are achieving success with digital transformation have strategies rooted in purpose such as business growth, innovation or reinvention, rather than just improving operational efficiencies.
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The 2021 State of Digital Transformation Report identifies the key differences between the businesses that succeeded at digital transformation, and those that are still struggling. It surveyed 587 executives from the U.S., Europe and China, across a range of industries, to highlight not only their current digital capabilities, but the key investments and choices they made that got them to where they are.
Fifty-seven percent of high performers cited core business growth as their top digital transformation goal. Only 32% of average performers said the same thing. Companies less successful at digital transformation were far more focused on reducing operating costs (59%) and updating technology (53%).
“For too long, technology alone was the focal point of digital transformation. But digital transformation is not about having the latest solutions, it’s using digital tools and knowledge to grow your business faster and more effectively,” said Chan Suh, senior partner and chief digital officer at Prophet. “Before even thinking about technology upgrades, an enterprise has to decide what it wants to accomplish and how their customers and employees will experience the end product. How will these improvements help the business grow? Will they enable the company to be at the forefront of innovation and growth in their sector? Having this type of intentional and comprehensive plan requires coordination across multiple teams and functions. The time for enterprise-wide transformation, powered by digital, is now.”
Employee Experience and Innovative Culture Top Priorities for Digital Transformation Top Performers
Top digital transformation performers are investing in technology to improve the experiences of their employees. Forty percent of top performing companies stated that employee engagement was a top strategic objective, while only 11% of average performing companies cited this as a key priority.
Best performers also understand that successful digital transformation programs need a culture that supports innovation and has the backing of senior leaders. Thirty-seven percent of top performers have cultures that give employees more freedom to test and learn new practices even giving them permission to fail along the way as they try new approaches to serving customers. Average performers’ cultures have been slower to respond – 50% said their culture understands the need for change and has taken initial steps to be more responsive.
Digital transformation strategies of successful transformation companies are led from the top with 34% saying their CEO officially owns or sponsors the digital transformation initiative. Average performers were more likely to have their programs led by CIOs/CTOs (34%).
Companies Behind in Utilizing Predictive Analytics
For several years there has been rampant discussion about companies needing to harness the power of data and utilize predictive analytics to create better experiences. But despite the talk, action still has been slow. Only 35% of top digital transformation performers and 12% of average performers are using AI to analyze their data to generate predictive analytics to design real-time customer experiences. Less than a quarter of both top performers and average performers are utilizing digital data for personalized messages and content creation for customers.
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COVID-19 Cut Budgets but Still Accelerated Transformation
While COVID-19 required companies to accelerate their digital transformation timelines, it also posed a significant challenge to their plans. Both top performers (44%) and average performers (40%) listed COVID-19 as the most difficult challenge their organization came up against when implementing digital transformation strategies. The pandemic created other business priorities that required them to shift their attention or cut their budgets.
Average performers acted cautiously with 34% saying they continued their digital transformation initiatives as planned but will revise their strategy in the next six months. But top performers (39%) accelerated their digital transformation efforts to take advantage of opportunities in the marketplace.
Omar Akhtar, research director and senior analyst at Altimeter concluded, “By looking at what top performers are prioritizing, we can get a glimpse into what the next phase of digital transformation will look like. Key initiatives will include improving the employee experience, better data storage and access and product innovation. For companies lagging behind, before they try to once again catch up, they should reevaluate their approach and determine what larger purpose these transformations are serving. Once they figure out their broader business objective beyond just technology upgrades, they can implement digital transformation strategies that will enable them to gain ground and get ahead.”