Digital transformation works best when driven from the top: Capgemini and MIT Sloan global study

Do not let a thousand flowers bloom. Not if you want your organisation’s digital transformation to succeed. Instead, all the evidence suggests that change needs to be driven from the top and companies should designate a specific executive or executive committee to spearhead efforts.

That’s the finding of a new report released by Capgemini and MIT Sloan called Embracing Digital Technology: a new strategic imperative which follows on from a comprehensive global study late last year.

According to George Westerman, one of the contributors to the report, and a research scientist at the MIT Centre for Digital Business, “We have not seen any transformations that happen bottom up. They’re all being driven top down. The big difference between the companies that are just doing technology initiatives and the companies that are leading a technology-based transformation is how they’re putting the leadership frameworks in place.” 

The study of 1559 senior executives across a range of industries found that front line corporate employees recognize the strategic digital imperative and that almost no organization is sheltered from the competitive disruption wrought by digital technologies.

Urgency emerges as a key consideration. Almost 80 per cent of those surveyed indicated that achieving digital transformation will be a critical consideration within the next two years, however the red flag in the report is that a clear majority (63 per cent) say the pace of technological change is too slow.

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(Report authors: Michael Welch, Nina Kruschwitz, Didier Bonnet and Michael Fitzgerald. Image source: Linkedin)

These issues are also discussed in a video by Didier Bonnet that we highlighted recently.

While a lack of urgency is considered the biggest obstacle there is an interesting divergence between the perceptions of leaders and their managers.

The report says that CEOs are particularly bullish and 53 per cent think the pace is right, fast, or very fast, but only a quarter of managers agree and the staff number at  22 per cent is even worse.

That puts the onus clearly on the CEO to drive the organisation along on the journey and there is evidence that some are succeeding in this endeavour.

“Where CEOs have shared their vision for digital transformation, 93 per cent of employees feel that it is the right thing for the organization,” says the report. The problem is that only 36 per cent of CEOs have shared such a vision.”

Haves and have-nots

“Of those working at organizations where digital transformation is a permanent fixture on the executive agenda, and a core strategic consideration, 81 per cent  believe their companies will be somewhat or much more competitive in two years,” say to the authors.

“That’s in stark contrast from those at organizations where leadership is not focused on digital transformation — only 18 per cent believe their companies will increase their competitiveness, and nearly half (46 per cent) project a grim, less competitive future.”

Generally speaking, managers have a lot of faith in the ability of technology to eventually deliver transformative change to the business but they also express high levels of frustration at how hard it is to achieve.

And of course technology is just one consideration.

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(Source: Capgemini & MIT Sloan)

“Developing a road map for digital transformation presents hard challenges because digital transformation takes many forms. For instance, executives must decide what to transform first: Customer relationships? Internal operations? The business model? Any individual step requires multiple, coordinated actions. It can also require executives to reframe what they think about their business.”

Those who succeed expect to see big improvements in one or more of three areas;

  • improved customer relationships. This is the area where companies are having the most success with digital technology according to the study
  • improved operations in part from automation
  • thirdly from the opportunity to create new businesses. A quarter of respondents said digital transformation would allow them to launch new products and services

However on this final point success is so far proving elusive for many. “A mere 7 per cent of respondents said that their company’s digital initiatives were helping to launch new businesses, and only 15 per cent said new business models were  emerging thanks to digital technology.”

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(Image source: Embracing Digital Technology: a new strategic imperative)

The clear message from the report is that while those who have mastered the technology and the transformational execution are stealing a clear march on the market, for most companies these are the early dog-days of digital.

“Most companies struggle to get clear business benefits from new digital technologies,” say the authors. “They lack both the management temperament and relevant experience to know how to effectively drive transformation through technology.”

Rocks and hard places abound, and no single factor impedes digital success. Instead issues such as the lack of vision or urgency plague projects, as do organisational culture and politics.

There is even a section discussing generational issues; younger managers, it seems, think of their elders as clueless newbies who would struggle to master a Gameboy let alone know how to set up Dropbox, while executives over 55 are in full eye-rolling, face-palming mode in their despair of subordinates who can’t quite grasp that in business what goes around comes around.

A lot of these debates could be solved if companies applied a bit of measurement to their activity – something else which is sadly lacking in many cases.

“Only half of the companies surveyed said they create business cases for their digital initiatives. Merely one-fourth report having established key performance indicators to help them measure the impact of their digital transformation.”

Indeed companies are still struggling to even define how they define success, and that is compounded by lack of management skills to carry through on KPIs, and a lack of progress towards the kinds of cultural changes required to make the KPIs meaningful.

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