Businesses failing the digital transformation test

Only 39 per cent of businesses feel they have the digital capabilities, and only 35 per cent the leadership capabilities needed to make their digital transformation journey a success.

Those are the key findings of a new study from Capgemini’s Digital Transformation Institute. The report, “Understanding Digital Mastery Today: Why companies are struggling with their digital transformations”,  reveals that while companies are making progress on evolving their customer experience, they are struggling to transform their back-end operations. Furthermore, businesses are failing to create the strong digital culture needed to bring their employees into their digital transformation agendas.

The report surveyed 1,338 business leaders in over 750 organizations with the majority reporting revenues of over $1bn. It compares digital transformation progress against Capgemini Consulting and MIT Sloan’s 2012 report, “The Digital Advantage: How Digital Peers Outperform Their Peers in Every Industry”. The new research shows that despite huge investments in digital transformation initiatives, set to exceed $2 trillion by 2021[1], organizations today feel less equipped with the right leadership capabilities than they were six years ago (45 per cent in 2012 compared to 35 per cent in 2018), while less than half still feel they have the right digital capabilities to advance their transformations (39 per cent in both 2012 and 2018.)

When it comes to digital capabilities, organizations have prioritized customer experience – making the most progress in this sphere. For example, 43 per cent of organizations today are using mobile channels to sell products and services, compared to 23 per cent in 2012. Moreover, nearly 40 per cent are improving their knowledge of markets and customers through devices embedded in products, compared to 17 per cent in 2012. These gains are not surprising, CapGemini says, given the widespread use of mobile channels and apps among consumers, and advancements in Internet of Things (IoT) technologies.

However, only 36 per cent of organizations said that operations[2] was an area they excelled in. While there were small gains from 2012 to 2018 in the percentage of organizations that design their products digitally (38 per cent to 40 per cent), only 35 per cent are monitoring operations in real-time (down from 48 per cent in 2012); only 29 per cent modify their operational processes to quickly adapt to external challenges (down from 34 per cent in 2012); and many organizations are not providing the tools and capabilities that their employees might expect. For example, only 38 per cent of organizations say that their employees can collaborate digitally with other employees and just 33 per cent of organizations agree that digital technologies improve communication between senior executives and employees (compared to 70 per cent and 62 per cent in 2012, respectively).

IT and business relationships show decline
While the relationship between the CIO and other members of the leadership team is critical in a digital age, there appears to be a disconnect here. In 2012, 65 per cent of organizations felt that the CIO and senior business executives had a shared understanding of the role of IT in their organization, but this has declined to 37 per cent in 2018.

While 59 per cent of respondents in 2012 felt that the CIO and senior business executives have a shared understanding of how IT can be used to increase productivity of the organizations operations, this has declined to 35 per cent in 2018. Six years ago, 53 per cent of respondents agreed that the CIO and senior business executives have a common view of IT investment priorities, but that has also declined in 2018 to 36 per cent. The report concludes that these reductions suggest optimization is still occurring in silos or that business leaders are impatient with the pace of IT and are spinning off shadow IT[3] to lead their initiatives.

“Speed of products, solutions and digital innovation development has greatly increased,” said Enrico Maria Bagnasco, head of technology innovation at Telecom Italia. “It is therefore important that companies keep an open dialogue with the external ecosystem and find a balance between business and technology to achieve the goals of digital transformation projects.”

Low digital culture stalls progress
In addition to the leadership challenges, the report also reveals that organizations have not been able to create the right digital culture for transformation success. Only 36 per cent of companies said that there are possibilities for everyone in the firm to take part in the conversation around digital initiatives – a decline from 49 per cent in 2012 – and just 38 per cent said they have a formal program in place for the digital reskilling of existing employees. Additionally, senior business leaders need to engage their workforce in the digital transformation vision, but currently only 36 per cent of organizations believe senior executives and managers share a common vision for transformation.

According to Cyril Garcia, head of digital services at Capgemini: “Today’s technology landscape is much more complex than in 2012. New technologies such as artificial intelligence, machine learning, automation and the Internet of Things are providing businesses with opportunities they have never had before, but critical to their success is the ability to adapt and embed these technologies into their organizations. To take full advantage of the new technology landscape, it’s vital that business leaders not only invest in new technology but work together with their employees to advance the digital transformation agenda, putting just as much emphasis on change management as they do in understanding of the technology.”

You can download the report here.