Clock is Ticking on Digital Transformation

Aug 29, 2016
8 Min Read
Clock is Ticking on Digital Transformation

Four years.

That’s how long your company has before it’s gobbled up.

If you don’t like that idea, then you better get busy figuring out a way to stop it and become the one doing the gobbling, warns new research.

By 2020, businesses that learn to master digital will become the predator, while those that make minor changes or don’t do anything at all will become digital prey, says Forrester’s Nigel Fenwick.

“To unleash the full potential of digital requires more than adding a new mobile app or website to your existing business,” he warns.

Forrester’s research looks at where companies may stand and whether they can survive the challenge of the next four years. They say companies need to think about whether they are:

  • Digital predators: These companies report 60% or more of their revenue is already influenced by digital activity. They understand how to use digital to create customer value. Their biggest challenge? Learning to scale the business without losing their competitive edge.
  • Digital transformers: By 2020, these companies predict they will shift more than 40% of their revenue to become influenced by digital, or arrive through digital channels.  Such a shift will require “significant transformation to succeed,” the report says.
  • Digital dinosaurs. Leaders in these companies see digital as having less impact on future revenue than do the transformers or predators. This group risks extinction by 2020.

Forrester researchers point out that a company like Tesla Motors is seen as a predator because it understands how to use digital to create value. For example, Tesla pulls out all the stops when it comes to helping their customers. Instead of having to make an appointment for car service updates and then going to a service dealership to have them installed, Tesla provides automatic car system software downloads for its customers.

Further, it’s also important that predators ensure they are sending a strong message to employees and customers about their strategy. For example, once GE CEO Jeff Immelt determined that GE had to make a shift to being an industrial internet leader, he clearly communicated that vision to employees through various sessions and reinforced the message in media interviews. (According to a Forrester online survey, 82% of employees in predator companies say they understand the firm’s strategy and approach to digital business. That compares to 71% in transformer companies and 57% in dinosaur organizations.)

Predators also push the entire organization to use data assets to deliver superior customer experience. In fact, it’s rated as the No. 1 factor for success. “Predators are customer-obsessed, using digital experiences to stand apart from competitors,” the report says.

In contrast, dinosaurs focus more on recruiting the right employees. “Given their lack of digital progress, this is understandable – they need digital talent to move the company off the floor,” the report says.

Why aren’t dinosaurs more compelled to make the digital transformation? The researchers say that dinosaurs may believe they are immune to the disruption or are blind to the impending cliff and so do nothing to prepare for it, despite the fact that many larger dinosaurs (those with more than 1,000 employees) are aware that disruption is coming.

Still, the researchers say it’s never too late to begin digital transformation, and urge CIOs to step up and help spearhead the vision for how digital technology will change an organization’s relationship to its customers. It’s likely that leaders don’t fully grasp the difference between digital bolt-on “and changing how your firm creates value through digital,” the report says.

[caption id="attachment_33518" align="alignright" width="230"]digital transformation race_QuickBase DT survey of 301 senior IT and Ops professionals[/caption]

While predators have a clear head start, the report says, there are ways that transformers and even dinosaurs can try to catch up, such as:

  1. Creating greater customer value. DuPont’s Pioneer agribusiness uses data analytics to provide farmers with advisory services to help them maximize their yields. Some 64% of predators understand how to create new sources of value through digital compared to 29% of transformers and 21% of dinosaurs. Consider asking outside sources such as vendors for their help.
  2. Fostering a digital culture. Netflix has a nontraditional culture that helps nurture innovation and creativity. While 60% of predators have the right culture already in place, only 24% of transformers do and just 19% of dinosaurs. Begin the change by surveying employees to get a handle on the existing culture, and start learning to embrace failure as a part of growth.
  3. Defining your digital strategy. “To be clear, you don’t need a digital strategy — you need to digitize your business strategy. However, having digitally savvy strategic thinkers define a strategy to create new sources of customer value through digital is critical,” the report says. It advises that CIOs need to work with marketing and R&D peers to collaborate on what it means to become a digital business. At the same time, the CEO must work to boost the digital skills of the leadership team.

Despite their marketplace lead, even predators need to remember that they aren’t guaranteed success, the report concludes.

“Your biggest challenge is keeping track of your customer’s evolving digital expectations,” the researchers say. “Set up an early-warning lab to monitor new digital experiences from across multiple industries and apply the lessons to your own business.”

Get the State of Citizen Development Report and learn how organizations are winning the Digital Transformation race.

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