No Hiding From Digital Disruption, Act In Lockstep

Digital disruption is impacting all sectors, irrespective of size or location. 

Research results from the  2021 Digital Vortex Report, reveals that digital disruption is in full swing across 14 industries* that the Global Center for Digital Business Transformation (DBT Center) at IMD Business School has been tracking since 2015.  The media and entertainment sector continues to experience the most disruption spreading across print, social media, music, TV and movies.  Other industries revealing heightened vulnerability to digital disruption are retail, education and healthcare/pharmaceuticals.  While digital disruption was already occurring within these three industries, the COVID-19 pandemic helped to accelerate digitalization of these sectors with e-commerce, virtual learning and technology-mediated solutions for diagnostics and treatment services.

Mind the Gap

Even boards are onboard with 86% of board directors deeming digital as having a transformational role in addressing strategic business priorities, according to a recent Gartner study. According to this same Gartner study, almost all board directors expect functional leaders to collaborate with one another.  However, it’s not as easy as it seems.

While companies are embracing digital strategies, the Digital Vortex report shows that there is a big disconnect when it comes to formulating a cohesive, company-wide plan.  The percentage of respondents who reported having a fragmented digital strategy rose from 53% in 2019 to 61% in 2021.  Professor Michael Wade explains, “this is a strong indicator that while companies are pursuing digital projects, they are struggling with the execution, and are most likely not getting all the benefits they hoped from their digital investments.”

Digital transformation programs can lead to high levels of confusion and uncertainty. The lack of a clear vision and a shared narrative to describe a company’s transformation hinders execution efforts.  Having all stakeholders, from executive leadership to business partners and employees, on the same page is crucial to develop a foundation on which change can occur.  Unfortunately, a stark perception gap exists between senior leaders and the people who report to them in terms of their company’s digital transformation efforts.  

While awareness of a strategy fragmentation problem exists across companies, those in more senior levels believe the fragmentation challenge is less acute than those in lower levels. In addition, senior level executives were much more likely to conclude that they were actively responding to disruption, while those lower down in the organization were more likely to say that the response was absent, inappropriate, or merely a copy of the competition. This result might speak to the possibility that the digital strategy set by executive boards is not filtering down the ranks in a cohesive manner.

Acting in Lockstep Across the Organization

These findings are consistent with previous studies that suggest how difficult digital transformation implementation can be. 87% of digital transformation programs fail to meet their objectives. Another survey identified the number one challenge facing digital transformation as an “unspoken disagreement among top managers about goals.”

Aligning digital transformation objectives is hard work, and organizations need to reach a consensus on why they are doing it.  Remember to examine the “why” behind initiating digital transformation initiatives.

Collective commitment to digital transformation will only happen through clear communications and constructive debate. Ensure clear communications across the organizations, and make sure that different voices are engaged so that the process is fair and transparent.

Transformations require a systematic approach to change. Working in silos is frequently cited as an obstacle to digital success.  Make efforts to develop a truly collaborative culture with a shared sense of unity and ambition. Creating a shared sense of ownership surrounding digital transformation is a good start.

Getting digital governance right is key to digital transformation success. Choose a governance model that works best, according to the situation at hand. Try to find the right balance-to provide enough separation to kickstart digital momentum, while also providing enough integration to facilitate the transfer of successful initiatives to the entire organization.

*The 2021 Digital Vortex Report is the fourth in a series of biennial studies launched in 2015 by the Global Center for Digital Business Transformation (DBT Center) at the IMD Business School. The study tracks 14 industries: Media & Entertainment, Retail, Telecommunications, Technology Products & Services, Financial Services, Education, Professional Services, Healthcare & Pharmaceuticals, Consumer Packaging Goods, Hospitality & Tourism, Transportation & Logistics, Real Estate & Construction, Manufacturing and Energy & Utilities.

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