Why organisations struggle with their digital transformation

Despite making progress on evolving their customer experience, most organisations lack the digital and leadership capabilities to make digital transformation a success. Only the minority of businesses feel they have the digital (39%) and leadership (35%) capabilities needed to make their digital transformation journey a success, according to a new study from Capgemini’s Digital Transformation Institute.

The report reveals that while companies are making progress on evolving their customer experience, they are struggling to transform their back-end operations. Furthermore, businesses are failing to create the strong digital culture needed to bring their employees into their digital transformation agendas.

The study compares digital transformation progress against a 2012 report from Capgemini Consulting and MIT Sloan’s.

The new research shows that despite huge investments in digital transformation initiatives, set to exceed 2 trillion dollar by 2021 (IDC, December 2017), organisations today feel less equipped with the right leadership capabilities than they were six years ago (45% in 2012 compared to 35% in 2018), while less than half still feel they have the right digital capabilities to advance their transformations (39% in both 2012 and 2018.)

CX is improving, excellence in operations is still lacking

When it comes to digital capabilities, organisations have prioritised customer experience – making the most progress in this sphere. For example, 43 percent of organisations today are using mobile channels to sell products and services, compared to 23 percent in 2012.

Moreover, nearly 40 percent are improving their knowledge of markets and customers through devices embedded in products, compared to 17 percent in 2012. These gains are not surprising given the widespread use of mobile channels and apps among consumers, and advancements in IoT technologies.

However, only 36 percent of organisations said that operations was an area they excelled in. Operations comprise aspects such as digital design of products and services, the ability to adapt operational processes quickly, real-time monitoring, and the ability of employees to share knowledge, collaborate digitally and perform their work from any location.

While there were small gains from 2012 to 2018 in the percentage of organisations that design their products digitally (38% to 40%), only 35 percent are monitoring operations in real-time (48% in 2012), only 29 percent modify their operational processes to quickly adapt to external challenges (34% in 2012), and many organisations are not providing the tools and capabilities that their employees might expect.

For example, only 38 percent of organisations say that their employees can collaborate digitally with other employees and just 33 percent of organisations agree that digital technologies improve communication between senior executives and employees (compared to 70% and 62% in 2012, respectively).

IT and business relationships show decline

While the relationship between the CIO and other members of the leadership team is critical in a digital age, there appears to be a disconnect here. In 2012, 65 percent of organisations felt that the CIO and senior business executives had a shared understanding of the role of IT in their organisation, but this has declined to 37 percent in 2018.

While 59 percent of respondents in 2012 felt that the CIO and senior business executives have a shared understanding of how IT can be used to increase productivity of the organisation’s operations, this has declined to 35 percent in 2018.

Six years ago, 53 percent of respondents agreed that the CIO and senior business executives have a common view of IT investment priorities, but that has also declined in 2018 to 36 percent. The report concludes that these reductions suggest optimisation is still occurring in silos or that business leaders are impatient with the pace of IT and are spinning off shadow IT to lead their initiatives.

“Speed of products, solutions and digital innovation development has greatly increased,” said Enrico Maria Bagnasco, Head of Technology Innovation at Telecom Italia. “It is therefore important that companies keep an open dialogue with the external ecosystem and find a balance between business and technology to achieve the goals of digital transformation projects.”

Lack of digital culture stalls progress

In addition to the leadership challenges, the report also reveals that organisations have not been able to create the right digital culture for transformation success. Only 36 percent of companies said that there are possibilities for everyone in the firm to take part in the conversation around digital initiatives – a decline from 49 percent in 2012 – and just 38 percent say they have a formal program in place for digital reskilling of existing employees.

Additionally, senior business leaders need to engage their workforce in the digital transformation vision, but currently only 36 percent of organisations believe senior executives and managers share a common vision for transformation.

“Today’s technology landscape is much more complex than in 2012. New technologies such as artificial intelligence, machine learning, automation and the IoT are providing businesses with opportunities they have never had before, but critical to their success is the ability to adapt and embed these technologies into their organisations,” says Cyril Garcia, head of Digital Services at Capgemini.

“To take full advantage of the new technology landscape, it’s vital that business leaders not only invest in new technology but work together with their employees to advance the digital transformation agenda, putting just as much emphasis on change management as they do in understanding of the technology.”

How to sustain digital transformation journeys

Today, many organisations face the realities of the complexities of their journeys and realise just how challenging successfully transforming can be. Organisations have not moved forward fast enough, states the report.

Talent and culture is also a major challenge that stands in the way of success. The report recommends that a renewed focus on the key dimensions for success in digital transformation, such as operations and governance and in particular, talent and culture, will help organisations revitalise their digital transformations.

About the research

Capgemini’s Digital Transformation Institute surveyed more than 1,300 business leaders in over 750 organisations with the majority (71%) reporting revenues of over 1 billion dollar.