The vast majority of companies are unprepared for the move to digital business models, including online products, sales and services that will begin to dominate their revenue potential within the next five years, according to a recent study on the preparedness for the digital disruption expected to impact businesses by 2020.
Global leader in executive search, Odgers Berndtson, and Forrester Research surveyed close to 1,000 executives worldwide on the topic. The resulting State of Digital Business Report revealed that, while executives understand the potential that digital has to transform how businesses create and deliver value to customers, more than four out of five companies (84 percent) do not have the necessary skills and talent to execute this transformation.
The study highlights that, despite clear optimism surrounding the potential that digital has to drive revenue growth – with 46 percent of survey respondents estimating that more than half of their sales will depend on digital within five years – executives are concerned about their organization’s readiness for this digital transformation. For example, only 21 percent of respondents feel they are equipped with the right team to define their digital strategy, and only 14 percent believe they have the necessary processes in place to implement it.
People and culture are real drivers of digital transformation
“With the anticipated dramatic impact on business revenues and growth, it’s concerning that a significant number of executives have little confidence in the digital talent within their organizations," said Jay Hussey, who leads Odgers Berndtson’s Technology Practice in the United States. “While technology deployment is important, digital transformation is fundamentally about people and having the right talent acquisition and retention strategies in place. This presents a significant risk for many organizations, since the search for top talent in this field is highly competitive and the digital talent pool is limited.”
Company culture is another fundamental part of ensuring digital strategies can thrive, since the right, progressive internal cultures can help attract new talent and engage the existing team in the challenge of developing innovative digital solutions. Despite this reality, 79 percent of company leaders do not currently believe they have the right culture in place to succeed.
Strong leadership and vision crucial to enable the success of digital strategies
Noting that digital transformation depends heavily on a company’s CEO and executive team to serve as inspirational leaders who can bring a digital vision to reality, only 26 percent of survey respondents agreed that “Our CEO sets a clear vision for digital in our business.”
“The absence of digitally-skilled leadership can stifle company transformation, so it’s critical to develop recruitment strategies to identify and attract the right people to fill these senior talent gaps,” added Mr. Hussey. “What we are seeing is that leading companies are using innovative talent practices like reverse mentoring and establishing ‘digital boot camp’ training programs to develop talent internally. They are also taking a strategic approach to external hiring, seeking senior-level candidates who will be digital evangelists and change agents in their respective functional domains.”
Technology and process gaps create barrier to digital success
The survey also highlights that only 19 percent of leaders believe they have the right technology in place to execute their digital strategy. This presents an urgent need for companies to invest in new platforms including cloud, application program interfaces (APIs) and service-oriented architecture (SOA) to support the growth of digital business.
In addition, just 14 percent of executives indicated they are confident that their company has the right processes to execute the digital strategy. The report encourages these companies to redesign their business processes to maximize agility and introduce governance processes to measure customer outcomes instead of return on investment for a predefined project.
Healthcare and retail sectors to face massive business disruption within 12 months
Looking at the specific impacts of digital trends on key business sectors, the survey found that no industry will escape the impact of emerging digital business models and disruptive technologies, including business to business (B2B) industries, consumer packaged goods, wholesale sales and professional services, with Forrester estimating that the US B2B eCommerce market will reach US$1.3 trillion by 2020.
The survey also revealed that specific industries expect to be impacted by the rapid shift to digital more than others. Healthcare topped the list, with 94 percent of respondents anticipating massive disruption over the next twelve months as a result of data management challenges and the entry of traditionally non-healthcare companies like Apple, Google, and Nike into the ecosystem.
The retail industry followed with 91 percent expecting significant change as a result of online growth within the next twelve months. By 2018, Forrester expects “web-impacted retail” to account for 59 percent of all retail sales, forecasting cross-channel sales of US$1.8 trillion and online sales of US$414 billion. Digital experiences are also expected to drive 58 percent of overall sales by 2020 with 12 percent of retailers expect to be completely digital by then.
Six tactics to accelerate digital strategies
The report concluded by recommending six tactics to help companies accelerate their digital implementation strategies:
- Convince CEOs of the critical need for change across the board using reverse mentoring techniques or visits to digitally mature companies.
- Enlist the support of other digital champions including the Chief Marketing Officer, Chief People Officer, Head of Corporate Communications, or business unit leaders.
- Develop a digital talent strategy, including training existing team members in new skills, as well as a strategy to attract and retain top industry talent.
- Invest in business technology projects that will drive digital experiences to win, serve, and retain customers.
- Update your company’s technology to increase the agility of the technology management team and enable them to integrate customer-facing applications into back-end operational platforms for an enhanced user experience.
- Embrace your CMO and executives responsible for customers to establish common goals, metrics and build joint teams to use digital to create enhanced customer value.
In a world of dazzling complexity and bewildering change, the old models of leadership are less a...
Marc Mathenz was recently named Financial Technology Executive of the Year for his achievements l...