Moving to a fully digital business model is proving to be easier said than done, new research finds.
The study from MIT Sloan Management Review (MIT SMR) and Deloitte Digital discovered that more than one-third of businesses in the early stages of transforming their organization to a digital business say that their companies spend more time talking about digital business than acting on it.
The study's authors define digital businesses as those that conduct business in the digital age by taking advantage of emerging technologies.
Risk aversion is what's holding many businesses back. More than 70 percent of businesses that define themselves as in the early stages of becoming a digital company say they haven't overcome the barrier of encouraging their organizations to experiment and accept the risk of failure, compared to less than 30 percent of digitally mature businesses.
The study's authors define digitally mature businesses as those that implement a continuous and ongoing process of adaptation to a changing digital landscape. This includes aligning the company's strategy, workforce, culture, technology and structure to meet the digital expectations of customers, employees, and partners. [Trying to save money? Here the apps your business needs]
"Digital maturity is about adapting the organization to compete effectively in an increasingly digital environment," two of the study's authors, Doug Palmer, Deloitte Digital social business lead and principal for Deloitte Consulting LLP, and Jerry Kane, a guest editor at MIT Sloan Management Review (SMR) and associate professor at Boston College, told Business News Daily.
The research shows that the sooner an organization can become digitally mature, the better off they will be. The study revealed that more than 70 percent whose leaders have sufficient vision to lead digital efforts say their initiatives are successful.
In addition, digitally mature businesses are more likely to keep top employees from looking elsewhere for work. The research found that employees and executives are more inclined to want to find a new employer if they feel they don't have opportunities to develop digital skills. For example, vice president-level executives without sufficient digital opportunities are 15 times more likely to want to leave their organization within a year than are those with satisfying digital challenges.
"To create these innovations, companies should foster cultures that embrace risk and create environments where employees want to learn and stay," said David Kiron, one of the study's authors and the executive editor at MIT SMR, in a statement.
Digitally mature businesses also have a better grasp on creating a work environment that fosters collaboration. Nearly 80 percent of digitally maturing organizations recognize and reward collaboration and cross-functional teams as a cornerstone of how they operate, compared to 34 percent of early stage companies.
"Cross-functional working is key, yet many organizations still have their structures divided between 'digital' and 'traditional', which is a problem," Palmer said. "This has been quite the norm for a company’s structure; however, we are seeing that companies are increasingly breaking down these silos and transforming culture and talent by assessing and redesigning processes, workflows and workforce."
Based on their research, the study's authors offer organizations several tips on how they can adapt and change to compete effectively in a digital environment:
- Be proactive: Businesses have to do more than just talk about becoming more digital, they have to take actions to actually make it happen. Company leaders need to reconfigure aspects of their organizations and operations to drive digital success.
- Be flexible: Organizations need to understand that digital maturity is an ongoing process that demands a flexible mindset. Executives should create a structure that is nimble enough to react to digital trends.
- Scale up: Many companies are finding it difficult to scale successful digital experiments and bring them to the core of their business. To expand successful trials to the entire organizations, businesses need to develop a culture of transformation, which is the cornerstone of increasing the pace of experimentation.
- Find funding: Funding digital transformations is a costly expense. Businesses should understand all of the options they have, which range from capital funds to savings from operational improvements. Having a proper funding model in place provides the necessary resources to begin driving small experiments into enterprise-wide change.
Organizations also need to take a more long-term view of their digital transformations. When planning their digital strategies, nearly 30 percent of digitally mature businesses look out at least five years, compared to just 13 percent of early stage organizations.
"Their digital strategies focus on both technology and core business capabilities," the study's authors wrote.
Kane said the research shows that digitally maturing organizations understand that they have to take a short and long view.
"Businesses must craft strategies that allow for execution within the next 12 to 18 months while also keeping an eye on the horizon since the end points of digital change will never completely arrive," Kane said.
In the end, one of the biggest steps businesses need to take is to fully commit to the digital process.
"Having too many competing priorities is often the biggest barrier to achieving digital maturity," the study's authors wrote. "To surmount that challenge, a company's leaders must stress that digital maturity is of paramount importance and tie digital business to the company's core business strategy."
The study was based on surveys of more than 3,500 business executives, managers and analysts from organizations of all sizes from around the world. The research was also co-authored by Deloitte senior managers Anh Nguyen Phillips and Natasha Buckley.