Everyone talks about how they’re becoming digital enterprises, but if you peek behind the curtain, you will see a lot of analog going on. That’s the gist of a recent survey of 274 executives released by Capgemini Consulting, conducted in collaboration with MIT Center for Digital Business.
The study finds that few companies — only seven percent — have successfully used digital technologies to evolve their organization into truly digital businesses. Those that have achieved true digitization — that seven percent — were twice as likely to be reporting industry-leading growth, profitability and customer satisfaction than their competitors.
So how does an organization become part of that seven percent? A lot of organizations are focusing their efforts on digital capability, they note. That’s the stuff we see and hear about all the time — using digital technologies to improve customer experience, internal operations and employee engagement. However, the report’s authors observe many organizations lack digital dexterity, or the “ability to self-organize to deliver new value from digital technologies.”
What they are saying is that you can’t take all these great digital technologies and simply drop them into the organization and expect miracles to spring up. Many organizations are mired in hidebound, calcified, processes and management practices. They may preach “digital,” but are structured along the lines of traditional command-and-control hierarchies, in which line managers and employees are expected to tow the line. Ideas and opinions may get a hearing, but little beyond that. Instead, employees are subject to an oppressive 9-to-5 mentality, with little encouragement or incentive to move outside their cubicles.
That kind of organizational culture — which is still pervasive — will never be the foundation for a truly digital enterprise. An organization conducive to digital ways of doing things will encourage a great deal of innovation among employees at all levels. Everyone will have access to digital tools and methodologies. Experimentation– and failure — will be encouraged, because with digital, experimentation is incredibly cheap. The seven percent of digital leaders Capgemini identified meet this criteria on some level.
Capgemini’s Didier Bonnet, lead author of the report, compared to the proliferation of digital business to the spread of electricity — a process that will evolve over years. “During electrification, productivity surged only after firms had radically redesigned how they organized – from the physical factory layout to the introduction of the assembly line and greater job specialization. This was a radical shift that did not happen overnight. It took some 20-30 years to evolve. It will require major surgery to evolve our traditional industrial organizational models into digital ones.”
Bonnet and his co-authors provide recommendations for starting this journey, or accelerating the transformation:
Develop a “digital-first” mindset: “In our research, 80% of digital organizations said that they take advantage of digital solutions wherever possible, as against only 37% of all firms,” Bonnet and his co-authors point out.
Zero-base processes with digital: “Rethink your current practices with a digital solution at the forefront. Encourage a systematic gathering and analyzing of data to not only drive decisions, but identify improved ways of working – adapting your processes even further.”
Communicate the benefits to build engagement: “Traditional financial and competitive rationales are important but not sufficient to engage employees’ hearts and minds,” Bonner and his team write. “You need to articulate how digital transformation will improve the way people do their jobs — making their work easier, better, faster, or more fulfilling. You also need to adapt those messages for your different organizational communities. For example, explain to your finance department how digital tools will increase the visibility and accuracy of financial reporting; show your marketers how to get a more refined, data-rich view of their customer segmentation.”
Align reward structures to digital: These shouldn’t be just financial. “Intangible incentives such as status, reputation, recognition, expertise, and privileges are great managerial levers to drive employee motivation, productivity, and ultimately reach your transformation goals.”
Encourage adoption, not deployment of tools: Most technology deployments “miss the true value of their digital investments: collaboration among actively engaged users, smarter decision-making, increased sharing of best practices and, over time, sustained behavior change,” Bonnet and his co-authors state. “Encouraging employees to adopt digital tools and technologies, and doing so visibly – through role modeling, gamification, rewards, or any other methods – can have a significant impact on behaviors.
Institutionalize new work practices: “Fight against organization fragmentation and silo-based thinking,” the authors urge. “Encourage the transparency, core process standardization, and operations efficiency that digital technologies provide.” In addition, they say analytics-driven thinking needs to be introduced. “Question your intuition—ensure that your most important managerial decisions are based on the power of data and analytics.”
Empower your talent: “Digital organizations put a premium on building widespread digital skills and ensuring engagement for its people within and beyond their organization’s boundaries,” the authors state. “In our survey, 70% of digital organizations said that their enterprises have well-established, well-distributed digital skills. However, across all firms, this drops to just 14%.”
Open up data access and collaboration: “Digital organizations exhibit data capability levels that are far more advanced than their peers,” Bonner and his co-authors point out. For example, 100% of the digital leaders provide access to real-time financial information, versus 58% of all companies. Providing access to data can also empower and engage an organization’s workforce. “Ambitious employees will want to remain innovative so create opportunities for them to work on new initiatives. If they can develop new skills at your company, an offer to work elsewhere will be less appealing.”