In the 21st century, technology and disruption go hand in hand. Innovation is driving business change at unprecedented rates, and companies must adapt more quickly to stay relevant. Digital transformation is key.
Earlier this year, Orange surveyed the large multinational enterprises that make up its Americas Solution Advisory Board and found that all of them are at various stages of digital maturity as they continue to transform.
Why are these companies embracing digital transformation? Large multinational companies recognize that digital transformation is a competitive necessity, not an option. We’ve already seen digital disruption in established industries, for example:
Taxicabs: Mobile ridesharing firm Uber and its ilk are gutting the taxicab industry. Some of the largest, most established taxi firms are shutting down and the price of taxicab licenses has halved. Now, there are signs that the mobile brokering model will disrupt the freight business as well.
News: Digital delivery has irrevocably changed the news industry. By 2012 print newspaper ad revenues were less than a third of their 2000 levels. Today, more than 60% of Americans get their news from social media; almost one in five does so frequently.
Photography: Sometimes companies try to accommodate the effects of technology within their existing businesses, opting for a form of digital expansion rather than true transformation. Instead of embracing new digital opportunities, Kodak tried to shore up its existing business by persuading people to print their digital photos. It didn’t work.
Disruption in every industry
So, the largest taxi company owns no cars. Facebook, the most popular media company in the world, doesn’t create any content. AirBnB, the world’s largest provider of accommodation, doesn’t own any property. And online retailer Alibaba, which sold $17.8bn in a single day, owns no stock. If anyone needed more proof that technology is disrupting entire industries, it’s right there.
For large global enterprises, digital transformation must include executive sponsorship, an in-depth appraisal of current maturity levels and a bold vision. In their Digital Transformation of Industries report, the World Economic Forum and Accenture define digital transformation as a profound change in business models to cope with digital innovation, and an adaptation of operating models to meet the challenges of the digital era. Part of this transformation includes finding the right skills to support it, and measuring its outcome in real time, using new sets of digital metrics.
This transformation must be a top-to-bottom process, ranging from the company’s internal processes to the products and services it creates, and the way that it engages its stakeholders. It all boils down to one thing: transforming a company from entrenched, analog incumbent to agile, digital native.
Four levels of maturity
For our Solution Advisory Board members, Orange looked at four broad stages of maturity in digital transformation:
These companies have digital ambitions but lack an overarching strategy to get there. Legacy systems, emphasis on near-term profits, resistance to disrupting profitable business models, and risk-averse cultures inhibit progress. Consequently, these companies often use ad-hoc digital initiatives to drive marginal efficiencies.
These companies are in the early stages of digital transformation with measurable progress on both the IT and business sides but are they are not yet tightly coupled. Digital programs have limited levels of senior sponsorship. They are beginning to look at digital technology as a potential revenue generator rather than simply a cost center.
Well on their way to achieving their vision for digital transformation, digital investors view the process strategically, and have tied business and IT together to enable it. Senior executives sponsor and investing in the strategy, taking an active role in its execution. These companies have launched major change programs within the last year, and digital cultural change is starting to empower employees in all areas of the company.
For digital leaders, the investments made by senior executives over a year ago have paid off, producing tangible competitive advantage. With CEO sponsorship and a chief digital officer in place, these companies have digital products, cultures, business models, operating systems and talent. They continuously strive to enable new and leaner approaches through digital initiatives.
Orange’s advisory board survey found some positive news when it came to digital maturity. Most of our respondents (56%) have reached digital investor level, indicating a high level of maturity as they embraced technology in their business models, operations and culture. A few (11%) have moved beyond even this advanced stage to become leaders in this space, having transformed themselves entirely to meet the challenges of a disruptive digital business environment.
This leaves a third of our respondents at earlier stages in the digital transformation process. One tenth of the respondents (11%) are still digital novices at the beginning of the digital transformation process, with roughly one in five (22%) now taking the first steps into transformation to reach the digital beginner level.
It is encouraging to see such a high proportion of companies having made significant progress in their digital transformation. Even as they take these steps, technology continues to evolve and disrupt.
There is still much to do, but as the World Economic Forum and Accenture point out in their report, there is still time to do it. The key is to look at digital transformation not as a burden, but as an opportunity to reinvent key aspects of the business, revitalising everything from product and service innovation through to customer experiences. Companies grasping this opportunity need a digital vision - and a roadmap to achieve it.
Published with thanks to Karl Heinzelmann who chaired the 2016 Solutions Advisory Board and led this maturity model approach