To understand this post, you may need a quick refresher on the four types of digital maturity: fashionistas, digerati, beginners and conservatives.
The diagram below and this post will help.
In this post, we look at how companies can build digital maturity, and what it takes to have a company with a digital DNA.
The report made a strong case that leading firms perform well in both the digital intensity and transformational management intensity axis of digital maturity outperform their peers.
Firms that excel in the digital intensity sector do so because they can afford to spend significant amounts of money on new technologies.
To truly be a digital performer, firms must also excel in the transformational management intensity space.
The latter trait is much harder to execute. You cannot just throw money alone at a transformation of the scale required to be a leader in this space.
The report suggests that there are 4 areas which need to be addressed to succeed in the transformation into a truly digital business:
1. Transformative vision
A strong vision helps to frame in people’s minds a picture of how the company will be different in the future. It also helps people understand what former assumptions may no longer be valid. Without a vision, you can’t possibly hope to be a digital business.
2. Digital governance
Effective investment rules and coordination mechanisms improve efficiency and ensure digital efforts are moving in the right direction. When Spanish media conglomerate Prisa launched its digital transformation program, one of the first initiatives was to create a central digital unit to coordinate and assist in building digital businesses. Appointing a Group-level Chief Digital Officer, reporting directly to the CEO, was a major signal. We can expect to see more CDO’s appointed.
In fact in New York in February, there will be a Chief Digital Officer Summit – a sign that this role is becoming important. The summit features CDO’s from NBC, Newscorp, Obama 2012, Disney, MIT, Clear Channel, and Universal Music Group to name a few.
When employees are engaged in a shared vision they help to make the vision a reality. They offer less resistance to change and often identify new opportunities that were not previously envisioned. This is probably one area where money cannot simply be thrown at the problem. If employees are not engaged in the whole process – and contribute actively to need to change, then it will most likely fail.
4. IT-Business relationships
Digital transformation is about re-defining big parts of the business, and IT is essential in doing it. In some companies, the CIO is the perfect person to suggest and even drive digital initiatives; in other cases the digital agenda will be driven by business or joint IT-business teams. In any case, shared understanding between IT and business executives is critical to success.
By definition, both Conservatives and Digerati perform well on the four components of transformation management intensity. What separates Digirati, however, is Vision.
Where Conservatives focus on control and alignment, Digirati have also developed a strong transformative vision that energizes employees to make change happen.
This last point is key. Unless your workforce is willing to be involved in the sometimes radical changes needed to move to a strong digital footing, then the whole exercise is moot.
Where do digerati invest?
The digerati also are successful because the make strategic choices on where to excel digitally (see below – click to enlarge).
The report also looked at the 391 companies in great detail, and mapped how companies link their customer facing processes to operational processes.
Where are the most common linkages between domains of excellence?
The report poses the question: Why not use this model to build a digital vision and decide what you want to be famous for?
According to Burberry CEO Angela Ahrendts, “we began to develop our five-year strategy, asking: What do we have that our peers don’t?… And we did have a number of key differentiators in the luxury sector we could exploit.”
Building on these strengths, Burberry decided to transform its customer experience, both in-store and online, including advanced customer interactions in social media.
Internally, Burberry rolled out a large ERP program to improve data integration and find ways to excel in operational processes.
According to Ahrendts: “we wanted to be as admired and respected for the back end of our business as for the front end.”
Ahrendts also made mention of the value she places on big data. For the report she was quoted as saying:
“Consumer data will be the biggest differentiator in the next 2 – 3 years. Whoever unlocks the reams of data & uses it strategically will win.”
Other firms start at different points
Indian paint manufacturer Asian Paints started with process excellence and moved leftward. Manish Choksi, CIO and Head of Strategy, explained: “in the early 2000s, our focus was on internal efficiencies. We implemented a traditional enterprise-wide ERP and advanced supply chain. This was the basis for further improvements in sales and customer processes.”
Transforming business models
Changing customer experience or operational process – two key elements of digital intensity is difficult. Changing a business model or globalizing a company is even more difficult.
The figure below shows the extent to which companies in each quadrant are able to execute these changes. Digirati are far better than other types of firms at changing their business models. They are able to link their implementation capabilities and leadership capabilities to fundamentally transform how the company operates.
Companies in other quadrants are less able to do so.
How do you start your own digital transformation?
Here are 4 checklist items from the report to start you off.
1. Understand threats
2. Audit the firm’s digital maturity
3. Develop the transformative digital vision
4. Senior team agree on the vision
Importantly, you need to have a focus on the investment, cut back unproductive areas and ramp up investment where it needs to occur.
The report findings prove that Digerati differentiate themselves by excelling in a few areas – customer experience, social media, mobile, customer analytics, process digitization or internal collaboration – but rarely in all.
Executives must identify where the company should excel now, based on its existing capabilities and strategic assets. Then, as capabilities improve, they can refocus toward new areas of excellence.
Next time we will look at how you adapt your business model to go digital.
Why not download the report yourself, it is a great read.