Companies must digitally transform to stay competitive, but face challenges getting upper management on board with innovation. Just one third of tech and marketing executives said they think the C-suite is significantly committed to digitally transforming their organizations, according to the Leapfrog Marketing Institute's CMO Digital Benchmark Study, published earlier this year.
"The challenge for the C-suite isn't so much that the transformation is digital, the challenge is that digital technologies are enabling entirely new business models and cost structures," said Michael Kanazawa, the Americas enterprise innovation leader at EY Consulting. "This can mean a tremendous shift in profitability and competitive positioning for a company. The disruptive nature of 'going digital' is what is difficult for the C-suite because it means triggering transformational shifts in the business and significant amounts of change for the entire organization."
While companies often report that they are well into their digital journeys, this is usually not the case, according to research from Altimeter principal analyst Brian Solis. "Companies, as a whole, are not as far along or entrenched in progress as they imagine," he said. "The 'digital' in digital transformation implies technology of course. But the most advanced companies are also learning how digital is affecting customer and employee behaviors, expectations and preferences."
When companies do invest in digital transformation projects, they tend to be short-term with limited budgets, rather than long-term investments for continued success, Solis said.
Professional services firm Genpact found similar results in research on artificial intelligence (AI): 32% of executives at global companies leading in AI implementations said senior management was the group that most strongly resists the technology, which is a key component of many companies' digital transformation strategies.
"A large set of the C-suite struggles with making the digital opportunity real," said Gianni Giacomelli, senior vice president and business leader for digital solutions at Genpact. "They hesitate because it is complex and a little different from other tech/management waves of the past. This time there is no one big technology like ERP, or practice like Lean Six Sigma. There are many different tech components, and many are unproven."
There is often too much hype around new technologies for the C-suite to understand what will work and what won't, Giacomelli added. And figuring out strategies has also changed: The business cases can be fuzzy if compiled in a traditional way, such as by asking, "How much do I save?"
Many CXOs don't realize that this isn't about technology only, Giacomelli said. "It is about cross-functional teams working together across silos, which is not what large companies are good at doing, especially after having slimmed down their management layers in the last two decades," he added. "There aren't that many people on the bench, and use of consultants for exploration is not simple. The net result: Many CXOs are waiting for proven practices to emerge, and for their people to learn more."
IT takes the lead
Getting the C-suite to use and experience new technologies is a great way for users to generate a deeper understanding of the convenience and benefits of digital services, Kanazawa said. For example, make sure that everyone in the C-suite has tried ordering on-demand services from their phone, or buy everyone a tablet and preload it with a digital music service and streaming video account, he suggested.
"Once they've tried it, the level of personalization, ease of use and convenience of new technology is then easier to grasp when thinking about how to apply it to your own company," Kanazawa said.
The C-suite will need to be reminded that digital transformation is not about the technology itself, Kanazawa said. "It is about creating amazing new experiences for customers, partners and employees that help drive the company's purpose. That is where the value will come from in this transformative age of digital."
Tech leaders can build better business cases, and show that they can take the lead of cross-functional groups well beyond IT, Giacomelli said. IT can also demonstrate that it can harness the human factor of change through design thinking practices, not only technology practices, as well as process and lean management practices.
Digital transformation requires more than just the IT and business sides working together, Giacomelli said. "To get true enterprise-wide impact from digital transformation, human resources and learning and development teams also have a big role to play," he added. "HR, IT, and business teams to need to partner together more closely to get the most out their employees as jobs and functions evolve."
SEE: How Sephora is leveraging AR and AI to transform retail and help customers buy cosmetics (free PDF) (TechRepublic cover story)
Change management is the driving force for digital transformation success, Giacomelli said. "Without effective change management, digital transformation is dead in the water," he added. "If companies don't implement an effective change management plan, they cannot adapt to new digital technology, as well as the human and labor components."
This means the HR team will need to consider the consequences of digital at scale, in terms of upskilling those who design and implement the changes, and also in terms of supporting those who may get displaced in the process. "The specter of mass layoffs (whether real or not) will create a lot of resistance across the organization," Giacomelli said.
"Smart CXOs recognize change management's place in digital transformation and understand the need to invest heavily in workers that can enable it," he added. "Hiring these people, and training your current team, is well worth the investment and will really push digital transformation through."
- The top 10 barriers to digital transformation (TechRepublic)
- Why CIOs must step up to lead digital transformation efforts (TechRepublic)
- Five winning plays for digital transformation (ZDNet)
- Advanced Business Skills Bundle (TechRepublic Academy)
- Ebook—IT leader's guide to achieving digital transformation (Tech Pro Research)
Alison DeNisco Rayome has nothing to disclose. She does not hold investments in the technology companies she covers.
Alison DeNisco Rayome is a Staff Writer for TechRepublic. She covers CXO, cybersecurity, and the convergence of tech and the workplace.