Tuesday, May 03, 2016

The Impact of Digital Transformation

Digital transformation is a revenue growth engine according to fifty futurists we surveyed.  Many companies are already experiencing significant benefits and gaining competitive advantages. The futurists predicted the top five impacts of digital transformation on businesses by the year 2020 will be:
  1. Speed to market
  2. Competitive positioning
  3. Revenue growth
  4. Productivity
  5. New distribution channels 
Given the importance of these top-five on revenue growth and the future success of a business, who would not want to digitally transform their enterprise?  Non-believers that's who.  Non-believers, aka laggards, in our study of 2,000 executives don't believe in significant digital transformation now, or in the future.  They don't demonstrate a sense of urgency or a recognition of the massive changes happening around them today.  They seem blind to the fact companies are witnessing an increase in revenue already from their digital transformation investments.
Digital transformation-believers aka digital leaders, however, are investing significantly more now, and receiving positive ROIs on their investments already.  As a result, they plan to invest greater amounts in the future, and predict higher ROIs in the future relative to non-believers.
Based on our survey data, believers and non-believers are seeing alternative realities.  Non-believers, if they don't quickly become converts, are going to face increasing challenges staying competitive and relevant against digitally transformed competitors.
When we asked mid-level managers to list the top 10 mistakes companies are making regarding digital transformation today, they listed the following in order of rank:
  1. Moving too slowly
  2. Lack of clear digital strategy
  3. Company has the wrong leadership for digital transformation
  4. Investing too little in new technology
  5. Not focusing enough on cyber-security
  6. Culture that discourages innovation
  7. Lack organizational structures to drive digital transformation
  8. Ignoring fresh thinking from external sources
  9. Not educating the entire organization on digital transformation
  10. Neglecting to hire the right digital talent
This list describes the actions or non-actions we are seeing from non-believing companies.
Let's pull all our findings together and review once again:
  • Futurists see digital transformation as a revenue growth engine
  • Believers are already reporting positive ROIs, and as a result, plan even higher levels of investment and revenues in the future.
  • Non-believers are investing little today, seeing little ROI, and are planning relatively little investment in digital transformation in the future.
  • Mid-level managers report the biggest challenges are moving too slowly, a lack of a clear strategy, wrong leadership and too little investment in new technologies.
  • The revenue gap between what believers and non-believers predict in the future as a result of digital transformation is significant across all industries.  Survey participants believe the bulk of the revenue gains will be achieved by the year 2020, with incremental gains continuing thereafter.  That is only 3.5 years from now. Yikes! That reflects a view that more revenue is available now for fast movers.  It also suggests a realization that a lot of work needs done quickly.  Non-believers, because of inaction and/or a lack of investment, seem likely to miss out on these early revenue gains and will suffer competitively.
Businesses must invest the time and effort now to understand the impact of digital transformation on their industry, market and company.  Once there is situational awareness achieved and a clear vision articulated, a digital transformation doctrine needs to be developed and socialized so strategies can be developed to achieve the vision set forth in the doctrine.  What technologies should believers invest in over the next 3.5 years to achieve digital transformation?  In the opinions of over 2,000 survey participants the largest business impacts will come from the following technologies:
  1. Big data/business analytics
  2. Cyber-security
  3. Cloud
  4. Collaboration technologies
  5. Mobile technologies
  6. IoT/sensors
  7. Artificial intelligence
  8. Digital currency
  9. Sharing economy
  10. Social Media 
When asked for year 2025 predictions, survey participates anticipate a similar list, but with even higher business impacts from each.
It is interesting that core systems like ERPs, CRMs, HCMs and SCMs were not identified as driving high business impact.  I am wondering if companies still view digital transformation as "add-on" technology?  In my view, a business' ability to convert from "human-time" to "digital-time" and operate at a real-time operational tempo requires digital transformation across the entire ILS (information logistics system).  The ILS is the master or umbrella system that manages and processes data across the entire organization to optimize business performance and customer interactions.  This ILS system includes all the core systems that today, often involve legacy systems incapable of supporting the new world of digital-time.  It is my analysis that many companies will ultimately be required to replace legacy core systems in order to accomplish true digital transformation.
If you find yourself sitting in IT and business meetings every week listening to how existing legacy IT systems will not permit new business processes, new business services, new business models and new innovations required to compete and win, then you should recognize those are red flags and things can get ugly, quickly.
When the New Year's ball drops at midnight and year 2020 comes around, will you be found among the believers?  Stay tuned for my new report on digital transformation technologies and strategies.
Read more on digital transformation strategies here:
  1. Forces Driving the Digital Transformation Era
  2. Digital Transformation Requires Agility and Energy Measurement
  3. A Doctrine for Digital Transformation is Required
  4. The Advantages of Advantage in Digital Transformation
  5. Digital Transformation and Its Role in Mobility and Competition
  6. Digital Transformation - A Revolution in Precision Through IoT, Analytics and Mobility
  7. Competing in Digital Transformation and Mobility
  8. Ambiguity and Digital Transformation
  9. Digital Transformation and Mobility - Macro-Forces and Timing
  10. Mobile and IoT Technologies are Inside the Curve of Human Time

Kevin Benedict
Senior Analyst, Center for the Future of Work, Cognizant Writer, Speaker and World Traveler
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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and digital transformation analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.