As organizations continue to navigate a global pandemic, digital transformation strategy remains at the forefront. In the face of global disruption, large numbers of companies struggled to survive. Many businesses could not sustain operations and failed. Some leading organizations, however, didn’t simply survive—they thrived off of the disruption. After absorbing the initial blows of the pandemic, these companies focused on building resiliency and flexibility into their business. Their digital transformation timelines collapsed from months or years down to weeks or even days.
Leading organizations capitalize on flexible technology architectures to expand their competitive advantage amid the disruption. But the road to transformation is rarely a straight line. Two out of five organizations say digital transformation initiatives often fail to achieve the desired business outcomes. Leading companies aren’t allowing the notion of failure to hinder progress.
Digital leaders are accelerating their rate of technology investment and strategically applying technology to enable business transformation. In doing so, digital leaders broaden the gap between themselves and the digital laggards.
In our third annual State of Digital Transformation study, we pay special attention to how digital leaders architect and execute their digital strategy. We discovered several root characteristics that set digital leaders apart from digital laggards.
Our research examines the characteristics of digital leaders to help companies make informed decisions, adapt strategies and accelerate business transformation.
The pandemic forced digital transformation upon businesses that weren’t necessarily ready for it. For years, companies have struggled with accumulating technical debt, stalled or ineffective digital transformation projects, and siloed mindsets and behaviors. The pandemic didn’t alleviate those challenges—if anything, it magnified them. Leading companies adapted their strategies and pivoted to not only survive but also thrive in an evolving digital economy. The majority share a common denominator: recognition of resiliency. They see the need for greater resiliency and flexibility in the enterprise. Positioning them to enable future growth and strengthen their foundation to endure the next disruption.
When asked to describe the nature of the organization’s digital transformation strategy, similar to last year’s research, organizations were evenly split. Approximately half focus on optimizing processes to gain efficiency and the other half focus on transforming the organization by adding new business models and revenue streams.
Organizations that succeed in the digital economy must thoughtfully use technology to achieve specific business outcomes. Integrating platforms to orchestrate processes and gain flexibility is a crucial linchpin. There are other use cases, however, to unlock more value from your transformation.
"We’re transforming into a new era. All of our technology must be stacked appropriately. Communication, ownership and accountability are crucial as we strive to deliver on specific business outcomes."
In 2022, organizations continue to obsess about delivering exceptional customer experiences. After that, companies have a long and varied agenda. As in previous years, many companies are reducing inefficiencies and addressing legacy IT systems. They’re also aiming to transform business processes (not asked in previous years). This reflects the urgent need to gain flexibility and resiliency via digital transformation strategies.
The majority of organizations are past the early phases of their adoption journey and are either working on proof of concept or piloting limited rollouts.
Organizations have an ambitious agenda in 2022. There may not be enough resources to allocate to every priority. Business and technology leaders must clearly articulate the business outcomes and demonstrate the return on investment to sustain their agenda.
Digital transformation creates new possibilities and opportunities for business. But it also produces new challenges and new means for competitors to take market share. Digital leaders have been able to capitalize on the opportunities and widen the digital gap.
The acceleration of digital transformation projects magnified the threats and challenges companies face. Navigating complexity, siloed mindsets and competing tech priorities continue to be near the top of the list of challenges for most organizations. Interestingly, a challenge that historically hovered near the bottom shot up the list in 2022. Perhaps driven by the relentless competition to attract and retain talent, organizations identified gaps in technical talent as a major challenge to meeting their digital transformation goals. Talent and expertise are finite resources. Without the right teams and partners in place, transformation projects slow or even come to a standstill. Organizations will need an ecosystem of partnerships to tackle these demanding challenges and generate the flexibility they need to be successful.
"Our inability to connect all our data sources is a major burden. We have pockets of good digital transformation, but we need to connect teams together and share information better if we hope to deliver real value."
Investments in technology and business success are intrinsically linked. Technology is no longer a differentiator. It’s an essential element of your business strategy. But simply deploying technology, without a plan, is a recipe for disaster. Companies must determine the human-based outcomes, powered by technology, that will transform their business and defend their market position. Digital leaders have clearly defined KPIs to measure how well their technology investments drive growth, attract and retain customers, and sustain profitability.
Digital technology investments drive growth and deliver the flexibility organizations need to sustain future profitability. Digital leaders that chose to aggressively invest in technology in response to the COVID-19 pandemic have realized a 12% higher return on their investments compared to digital laggards. In addition to higher returns, digital leaders are realizing a much faster return on their investment, allowing them to further widen the digital divide.
As digital transformation projects increase in scope and investment, clearly demonstrating ROI is imperative to secure funding and support for future initiatives. Digital transformation doesn’t happen overnight. Leading organizations don’t fixate on long, drawn-out initiatives. Instead, they start small. They identify potential quick wins that prove business value.
The rapid evolution of technologies, business models and ways of working dramatically impact the cornerstone of any company—their people. When companies hit the fast-forward button on transformation, weaknesses become abundantly clear. Nine out of 10 organizations don’t currently have the talent they need to succeed with their digital transformation. Many companies indicate the skills most critical for their workforce are also where they have the biggest skills gap.
Companies face an urgent need to identify new talent pools, as well as reskill and upskill their existing workforce. The integration of AI, automation and collaboration tools drive significant change in the types of skills employees need to succeed in their jobs. Overcoming these challenges will require creative talent strategies, so companies can acquire and cultivate the skills they need to build a future-ready workforce.
Drive meaningful change with inclusive workplace practices: In some ways, building an inclusion and diversity strategy is the easy part─it is in the tactical execution of these strategies where organizations struggle.
A digital transformation strategy requires a roadmap that allows for flexibility and provides a clear understanding of the desired business outcomes. Early planning phases that include the right mix of stakeholders from IT and the business are critical for success. Having the right stakeholders will help properly establish the business problem and clearly define the expected improvements in business performance. Taking the time to create a value framework will help break down the vision into smaller, more manageable action items. Unfortunately, many organizations undervalue the importance of this phase of the process. But there are steps organizations can start today to activate true business transformation.
Hybrid by design: A hybrid workforce is a powerful model that’s here to stay. Organizations must be intentional about remote and in-person collaboration, leveraging technology that creates flexibility, agility and balance.
Organizations face more technology decisions than ever before. From smart cloud modernization, to AI and machine learning, to digital experiences and data analytics, weaving together different technology platforms can seem overwhelming. There is no one-size-fits-all approach. Digital leaders focus on the outcomes that will drive growth and create flexibility for the business. They’re seizing the opportunity to use digital technology to advance their business strategy.
A new world of opportunity is dawning. One where flexible platforms and technology architectures enable agility and activate business value. Digital leaders continually reimagine their business and create sustainable value for their customers, employees and shareholders. Companies ready to embrace new opportunities can apply the models and actions of digital leaders to activate their business transformation. And face any disruption with fortitude.
No one should go at it alone. Engage a practiced expert outside of the organization to help navigate the digital transformation journey.