A new year brings new possibilities—especially for the tech industry. Continuing to realign and refine your organization’s strategy remains at the forefront to stay ahead, but how should you determine the best strategy? Forty-one percent of organizations say digital transformation initiatives fail to achieve the desired business outcomes; however, 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 fourth annual state of digital transformation study, we pay special attention to where companies are focusing their efforts. We discovered several root characteristics that set digital leaders apart from digital laggards. In this report, digital leaders are defined as companies with a mature digital transformation plan where digital processes and mindsets are ingrained in the DNA of the organization. Digital laggards are defined as companies with tentative plans and limited digital transformation initiatives and investments in place.
Our research examines the characteristics of digital leaders to help companies make informed decisions, adapt strategies and accelerate business transformation.
For years, companies have struggled with accumulating technical debt, stalled or ineffective digital transformation projects, and siloed mindsets and behaviors. The complexity and uncertainty have only increased with an impending recession looming over the global economy, layoffs, disruptions in the supply chain and talent challenges related to the “great resignation.”
Whether you choose to optimize your business or transform by challenging the industry standard, being cognizant of where your organization stands for each is crucial. Digital transformation is redefining how companies operate, which impacts overall spending plans. Our research shows that digital laggards are two times more likely to cut technology spending in 2023. Over the last three years, organizations have poured an incredible amount of resources into digital business transformation efforts, but those efforts haven’t always yielded the expected value. As the economic climate evolves, investment per initiative has decreased, indicating more scrutiny over spend and therefore, a more agile approach with a desire to reduce risk and increase operational efficiency.
“Digital transformation and adoption of the cloud may seem like technical projects, but at their core, both are complex change management efforts involving multiple stakeholders and partners, moving in concert to deliver business and technical change. When they move in unison, the effect on the organization is a game changer.”
–IT manager, manufacturing company
In 2023, organizations continue to focus on improving the customer experience and increasing engagement. After that, companies have a long and varied agenda.
As in previous years, many companies are reducing operational inefficiencies by addressing legacy IT systems. They’re also aiming to transform business processes and increase digital innovation. 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 working to optimize and refine their processes. For 2023, organizations are primarily focused on bolstering cybersecurity. This includes investing in the development of new technologies, as well as finding the right talent.
Additional benefits from digital transformation organizations noted include:
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 and siloed mindsets continue to be at the top of the list of challenges for most organizations. Applying change management with a light on implementation complications also remains a focus. This all connects to creating a culture of continuous learning. Upskilling or reskilling the workforce is important for the continuous flow of transforming the business successfully with fewer hiccups along the way.
"We are increasingly aware of the need to harness technology to stay competitive in a fast-moving industry. We must continue to grow and lead the market through innovation. In this economic climate, we're laser focused on how we increase the amount of effort IT invests in innovation and in the long-term reduce existing operational investments."
–Vice president, retail organization
Investments in technology and business success are intrinsically linked in a digital ecosystem. 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.
As the economic climate evolves, investment per initiative has decreased, indicating more scrutiny over spend and therefore, a more agile approach with a desire to reduce risk and increase operational efficiency. Companies are shifting their strategy from enterprise-wide, long-term initiatives to short-term, tactical projects focused on optimization and modernization of their existing infrastructure and operations. When every dollar is analyzed, the business value and expected outcomes must be clearly defined and agreed upon.
Amount of time expected for the organization to re-capture the costs from their digital investments.
The rapid evolution of technologies, business models and ways of working dramatically impacts the cornerstone of any company—their people. Transformation brings new technology, but without the proper talent to push an initiative forward, weaknesses become abundantly clear. Establishing new processes for working and collaborating with each other and external partners has become a crucial step in addition to finding new talent pools.
Identifying, quantifying and offering training and development programs focused on new behaviors and mindsets to current employees is key. When looking for new talent to fill mission-critical IT roles, such as software engineers, developers and architects, 40% of organizations say it takes six months or more to fill these positions. This can cause a slowdown with transformation processes. Integration of AI, automation and collaboration tools can alleviate some of the skill gaps, but overcoming these challenges will require creative, holistic talent strategies, so companies can acquire and cultivate the skills they need to build a future-ready workforce.
To succeed with a digital transformation strategy—one that provides a clear understanding of desired business outcomes—planning is required. Many organizations undervalue the importance of this phase of the process. But there are steps organizations can start today to activate true business transformation.
Taking the time to create a value framework will help break down the vision into smaller, more manageable action items. Digital leaders in transformation create a network of cross-functional teams with end-to-end accountability, implementing digital tools to improve accessibility across the organization.
Hybrid by design: Over the last three years, the definition of the workplace has been completely transformed. In 2023, nine out of ten organizations expect to have a remote or hybrid work model in place. But companies can’t simply issue mandates about required days in the office or loose policies that are indiscriminately followed. It’s critical that organizations collaborate with employees to shape hybrid work models, as well as build tools and set clear guidelines that support hybrid work.
Employees that work in hybrid environments leverage agile ways of working to be productive. They might work in different time zones, support multiple assignments, get assigned to multiple projects and in some cases take direction from multiple leaders or supervisors. Applying design thinking to create work models that address team alignment, performance management and multifunctional teams will help organizations embrace hybrid work models and create better employee experiences.
Organizations face more technology decisions than ever before. By going digital, business leaders are able to obtain better insights from their data. 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 technology to advance their business strategy.
As new technologies emerge and practices evolve, the opportunities are endless. Whether optimization is on the forefront of your digital strategy or you’re embarking on a journey of transformation, the strategy should go beyond technology. It includes implementing not only digital tools but also changes to management and operations, taking a closer look at your customer reach and interactions and connecting internally with relevant stakeholders from all levels of the organization. By shifting the way you drive change and understanding the business as a whole, you will be able to minimize risk and unlock new potential.
No one should go at it alone. Engage a practiced expert outside of the organization to help navigate the digital transformation journey.