The DX Ultimatum: You Need a Transformation Strategy
Over the past decade so, it has become abundantly clear that information technology itself has become a driving force of change in the business world. This hasn’t always been true. From the 1980s through the early 2000s, computer hardware and software largely replicated and, to some degree, automated transactions once carried out on paper or in person. Complex back-office suites and assembly-line solutions often just recreated established processes. And while websites could be striking to look at and offer a few ecommerce options, for the most part they were glorified brochures or product catalogs (with a few exceptions, such as Amazon).
Then advances in processing power, analytics, cloud delivery, platform creation (especially social platforms), and mobile devices ushered in the current era of business transformation. Add in emerging technologies related to the Internet of Things (IoT), 3D printing, AI and predictive analytics, smart robots, and augmented reality — and no old-school process or business model is safe. It is a slow revolution, but one that is impossible to ignore. In Central and Eastern Europe (CEE), IDC’s extensive network of decision makers have indicated that they are largely aware of what is happening and what needs to be done.
The strategy legacy
And yet, despite the high level of awareness, far fewer CEE IT and business leaders than one would expect have strategies in place for handling the situation. As we reported in a prior post, in a survey we conducted in August and September of IT and LoB leaders, nearly three-fourths of respondents reported that company leaders are fully aware of how tech will change their industry. Nevertheless, only around 40% of enterprises actually have a strategy. The number varies across the five countries surveyed (the Czech Republic, Hungary, Poland, Romania, and Russia). In Russia it goes up to 43% and in the Czech Republic down to 33%. It also varies considerably by vertical. Excluding Russia, just over half of the healthcare organizations and just over 40% of the financial institutions surveyed have strategies in place. By contrast, only 30% of government firms and 26% of professional services firms have taken the time to develop strategies.
Do you have a digital transformation strategy?
N=311; includes Czech Republic, Hungary, Poland, and Romania
One reason given by respondents for not having a strategy on digital transformation is that it is not needed. Even though IT (or a dedicated cross-functional team heavily influenced by IT) lead digital transformation in CEE, the real issue is change management, so the argument goes, which is better handled by operations, HR, or the CEO. Another reason is that having an IT strategy is enough. Yes, technology is developing rapidly, but this is accounted for within a two-year or five-year plan for integrating systems, moving to the cloud, and creating a foundation upon which lines of business can innovate.
Both arguments are true to some degree. New methods and models require new skills and org structures, which usually fall outside the CIO’s or CTO’s bailiwick. (And this partially explains why in Western Europe, CEOs are far more likely to be driving digital transformation than they are in Central and Eastern Europe.) It is technology, however, that is driving the change, which means tech leaders need to be actively engaged or even leading the transformation, as they are often the ones with the best helicopter view on where, how, and when new tech needs to be introduced and its potential impact on systems, processes, governance, and goals.
The strategy imperative
A digital transformation strategy is an essential tool for asserting that leadership. And it makes a big difference. According to our survey, firms with DX strategies in place were 27% more likely to say their overall progress on digital transformation was rather developed or nearly complete. Perhaps more telling, firms with a digital transformation strategy in place were 29% more likely to report confidence in their leaders’ ability to transform their organization into a digital leader (a statistically significant number with a confidence level of p<0.0005). And in terms of underdevelopment, firms without a digital transformation strategy are 80% more likely to be in the earliest stages for transformation.
Firms at the highest level of DX maturity – with and without a DX strategy
N=311; includes Czech Republic, Hungary, Poland, and Romania
The cause and effect remains undefined. It could be that forward-looking leaders proactively develop strategies and work to drive those strategies to their necessary conclusion. It could also be that half-committed leaders put a strategy in place because the board (or someone else) told them to, and that gives them the direction they need to keep things moving. Either way, the communication of a strategy projects forethought, evinces a senior team aiming to set the terms of emerging trends rather than react to them, and gives staff a clear set of goals to provide meaning and work towards.
The strategy supremacy
Creating a digital transformation strategy is hard, and there is no single right way. When done correctly, it is a complex undertaking that involves intense cross-functional cooperation, fearless self-examination, a thorough IT inventory, and a willingness to put aside ego and territorial disputes, as well as a redefining of KPIs, organizational structure, processes, and governance models. In developing a strategy, it is also important to remember Nicholas Carr’s cautionary note that off-the-shelf IT is like the electricity of the 20th Century. Having electricity on its own does not convey competitive advantage. It is rather what electricity enables that conveys competitive advantage and makes it a game-changer. Finally, a strategy is never final. Rather it is a working document continually modified through various feedback loops during implementation, a process with its own collection of challenges.
It is this complexity that makes having a strategy essential. While there will always be enterprises capable of muddling through the transformation journey, most require a clear map of where they are headed. And based on the evidence, having the map can really pay off.
IDC’s CEE Digital Transformation Survey was conducted in August and early September in five Central and Eastern European countries: the Czech Republic, Hungary, Poland, Romania, and Russia. (Numbers in this article do not include Russia.) It benchmarks digital transformation in five key areas (leadership, omni experience, worksource, operating model, and information), and assesses drivers, inhibitors, and priorities, leadership approach, and how budgeting works in relation to digital transformation, with regional data broken down by country and key verticals.
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