Digital Transformation

Two-thirds of businesses see digital transformation looming, half say CIOs should lead it

More evidence has arrived that digital transformation is a top concern for businesses. But, a new report also shows that fragmented implementations and inability to experiment are roadblocks.

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Image: iStockphoto/stnazkul

Enterprises are looking to CIOs and CTOs for leadership as they transition into a digital business environment, which 64% say will impact their field in the next two years. However, only half of companies actually have a business-wide digital strategy, according to a new study from Harvard Business Review Analytic Services and the Genpact Research Institute.

Some 52% of companies surveyed reported that the CIOs and CTOs are responsible for creating the organization's digital vision, while 39% said it was the chief executive's job. But even companies that had a digital strategy said that it was difficult to implement the vision cohesively across departments.

"At the end of the day, it's a leadership problem," said Gianni Giacomelli, senior vice president and head of the Genpact Research Institute. "This is a different technology wave compared to what we've had in the past. The CIO can't do it alone."

SEE: 72% of CXOs committed to digital transformation, only 15% believe they can do it

Companies said they have the budget and technical skills to make the digital transition. However, several other roadblocks exist:

  • 48% of companies said they were unable to experiment quickly on digital projects
  • 41% said change management was causing problems
  • 38% cited risk aversion as a hurdle, along with departmental silos

The study collected 862 responses from companies of more than 1,000 employees across multiple business sectors, primarily in the US and Europe.

Large companies like these often struggle with experimentation compared to startups, because they feel they will lose customer trust if something goes wrong, Giacomelli said. "What most people do since they cannot experiment is go for incremental improvements," he added. "Most IT folks do not know how to do an enterprise-scale experiment."

Digital leaders vs. laggards

To further explore the issue, the study separated respondents into two groups. The leaders represent the 21% of respondents who said their organization is "achieving significant business outcomes from digital." The laggards are the 21% of respondents who said they saw "only a limited impact" from digital efforts.

Some 77% of the leaders had a digital strategy, compared to 19% of the laggards. The leaders were 17 times more likely than the laggards to report that digital initiatives have increased their earnings. They also reported faster growth.

"For the small number of companies that are able to get this done, it actually works," Giacomelli said.

However, problems persist for both groups: 55% of all respondents said their company was not supporting middle- and back-office functions that ensure positive customer experiences with digital technologies, the report found. This problem occurs when an organization lacks an enterprise-wide development strategy, the authors noted.

"There is no cohesive end-to-end solution," Giacomelli said. For example, a sleek website for a bank will not be helpful if it requires the customer to fill out dozens of pages of information that the bank already has on file, he added.

"Often companies with a good digital strategy manage to align what happens in the front office with what happens in the back," Giacomelli said. "The customer experience must be at the core of your end-to-end strategy."

Only 21% of all respondents strongly agreed that they provide experiences that meet customer expectations. Meanwhile, 36% of the digital leaders said they met customer needs, compared to 13% of the digital laggards.

Pascal Visée, an independent advisor and former chief enterprise support officer at Unilever quoted in the report, said that the challenge stems from how digital transformations typically begin at a given company. These efforts usually start as board-level discussions, with implementation pushed down to the functional and business unit levels, he said.

"Senior executives are often the missing layer," Visée said in the report. "If the organization's top executives aren't charged with the effort, there is no system in place to drive digital development and ensure that investments are targeted to areas where they will have the greatest impact."

The 3 big takeaways for TechRepublic readers

  1. A new study from Harvard Business Review Analytic Services and the Genpact Research Institute found that while more than half of companies say CIOs are responsible for the vision to build a digital strategy, only half of companies have such a strategy at all.
  2. The biggest roadblocks to the digital transition include inability to experiment quickly on digital projects, change management, risk aversion, and departmental silos.
  3. The companies considered strong digital leaders reported greater earnings and faster growth than those who lagged behind on digital initiatives.

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About Alison DeNisco

Alison DeNisco is a Staff Writer for TechRepublic. She covers CXO and the convergence of tech and the workplace.

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