Digital transformation enables smarter, data-driven processes and reinvents customer journeys. In an effort to measure how global businesses fared in implementing digital change, SAP in conjunction with The Economist Intelligent Unit (EIU) recently released a study looking back at the digital transformation trends from this year.
In this Q&A, I spoke with Rob Glickman, Vice President of Marketing at SAP, on the key takeaways from this comprehensive study, as well as the steps CIOs and their businesses can take to ensure that 2017 is a record-breaking year for digital transformation.
1. What were some of the biggest takeaways from this study in your eyes?
At first glance, it’s interesting to see that while digital technology is revolutionising business, the role of IT departments remains unclear. This finding, along with the view that the most effective digital initiatives are those that are coordinated strategically (93 per cent), means IT has to step into a leadership role.
IT can provide top-down management and organic growth that facilitate a more proactive focus on meeting customer expectations. This year, only one in five organisations had a cross-departmental digitisation strategy.
2. How would you define the current state of digital transformation?
The world is changing at an unprecedented pace. This dramatic shift is fueled largely by technology, shifting demographics and the speed of innovation. As a result, most organisations are gripped by the very real need to continue to transform their business to stay ahead of customer needs.
The rapid advancement of technology, coupled with the consumer demand for more connected, personalised experiences, is driving unprecedented transformation across industries that are themselves fragmented. On one hand, enterprise IT must be upgraded to support digital transformation and, on the other hand, non-IT departments are increasingly taking matters into their own hands by adopting software-as-a-service solutions without IT’s involvement. This disjointed approach plagues many organisations today.
3. Where do organisations stand to benefit in digitally transforming their businesses? How do customers benefit?
Frankly speaking, it’s a matter of survival. The boom-and-bust cycles are becoming more frequent and pronounced and companies in many industries can find their entire businesses disintermediated in a matter of a few short years. Whether it’s by telecommunications, transportation, photography or communications – organisations need to embrace digital transformation as a constant validation and renewal of their business model.
The lines of businesses and industries blur more each day and the only saving grace is for them to ensure that business and IT stay aligned around core goals – and keep these lines open and fluid with their customers. Customers are a click away from working with the competition so it’s crucial to engage with them on deeper levels to engender brand loyalty.
4. What role does the CIO play in facilitating an organisation’s digital transformation?
Even though it’s expected that 37 per cent of CIOs will own digital transformation for their company, only 22 per cent of CIOs are leading the implementation of the strategy and process currently. Since the CIO is more likely to coordinate digital strategy internally, the lack of participation shows that this process is happening in a less than effective fashion for most companies. The result is wasted resources, time and effort.
With today’s rapid pace, a critical leadership role must be taken up more quickly to ensure companies stay competitive. Organic, grassroots innovation and growth are required to transform the company, but that innovation requires focus and organisation guidance from the CIO to make sure change is made effectively. IT needs to take a more involved role in the process to revamp systems and balance legacy system maintenance with next-generation upgrades. Unfortunately, only seven per cent of executives feel that IT is leading their company’s innovation.
5. What are the keys to inspiring your workforce to embrace and champion digital transformation initiatives?
It pays to be a digital leader. Successful organisations need to do things differently to take advantage of technology that can deliver new customer and employee experiences, and business models. Continuous innovation, rapid decision-making and a commitment to diversity and inclusion are key factors for success in the digital economy.
One of the biggest opportunities with digital is that it dissolves traditional organisational boundaries. It encourages critical thinking and spurs innovation and experimentation without fear of failure. However, navigating this is more than deploying technology – it’s about creating a culture of innovation, employee engagement and mastering business agility.
Lastly, digitalisation is a catalyst for an evolved style of leadership to flourish. In fact, the recent Leaders 2020 study of more than 2,000 executives in 21 countries found that digital leaders drive stronger performance and employee engagement through strategy, speed and inclusiveness. Senior level management should take note of this.
6. How can businesses measure their digital transformation process?
Measuring change starts with establishing clear, specific goals. Once expectations are established, change can be measured in several ways, such as monitoring changes in operation efficiency, customer relationships, innovation, employee engagement and sentiment, and revenue. From a top-level, the Leaders 2020 study shows that success lies in embracing digital technology in a way that streamlines decision-making, flattens the organisation’s complexity and builds a digital workforce. Improvement in these metrics is a strong sign that your efforts are working well.
7. Based on these findings and your previous insights, in which areas did these businesses fall short of the mark in 2016?
CIOs and other senior-level management need to take a more proactive, collaborative approach in 2017, as many organisations lacked clear digital transformation plans (79 per cent). Only seven per cent of the 812 executives surveyed in the EIU study felt their IT departments were effectively leading these initiatives, with 46 per cent stating that IT played a passive supporting role.
Until now, IT departments have been recruiting staff with skills to fulfill their traditional roles and, as a result, many lack the expertise in emerging digital technologies and an understanding of how they contribute to the business. An effective way to solve this issue is for IT departments to draw on networks of expertise beyond their internal ranks to develop the insight and authority required to lead digital innovation.
8. What trends will businesses need to focus on in 2017 to ensure success?
From a technological standpoint, organisations sampled in the EIU study identified mobile technology (79 per cent), social media (67 per cent), big data analytics (57 per cent), cloud computing (52 per cent) and IoT (58 per cent) as key areas of improvement in 2016. In 2017, we will see a continuation of this enthusiasm because these technologies are vital in optimising a business to be digital-ready and remain competitive.
Beyond technology, business agility will be in high demand. The ability to iterate rapidly in development, combined with the need for peer-to-peer collaboration, means that tightly-knit cross-functional teams will be crucial in pioneering digital transformation. Iterative, collective development is a hallmark for born-in-cloud companies and traditional companies will have to emulate this approach if they want to stand a chance competitively.
However, this type of cross-functional set-up will require senior leadership, as effective digital transformation implementation calls for smaller, well-defined workstreams that help organisations keep pace with changing business landscapes.
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