Digital transformation is changing. Here’s what comes next – ZDNet
In ZDNet’s recent Tech Budgets 2022 special report, we noted how digital transformation has helped companies become more flexible and resilient in the face of worldwide recession, leaving the more digitally mature among them better placed to prosper in the post-pandemic era.
Reimagining business for the digital age is the number one priority of many of today’s top executives. ZDNet offers practical advice and examples of how to get your digital transformation right.
After years of being promoted, piloted and implemented with varying degrees of urgency and success in organisations, digital transformation enabled a rapid pivot to remote working and put the digitisation of business processes, including customer and employee experience (CX and EX), to a serious stress test.
In its IT Spending & Staffing Benchmarks 2021/22 report, market research firm Computer Economics described technology’s role in the rapid recovery from the pandemic as “nothing short of a miracle”. Digital transformation passed the test, it seems. Going forward, Computer Economics suggested that the “low-hanging fruit” in cloud migration is now picked, and that “We are now in the stage of digital transformation where we are not just replacing existing tools — we are now enhancing them.”
In this article, and the rest of ZDNet’s special report, we’ll examine where digital transformation is likely to go next.
What the analysts say
Towards the end of 2020, in the grip of the pandemic and with vaccine deployment still to come, IDC published its predictions for digital transformation (DX) for 2021 and beyond.
The headline prediction was that direct DX investment will total over $6.8 trillion between 2020 and 2023 — a compound annual growth rate (CAGR) of 15.5%. That translates into nearly two-thirds (65%) of global GDP being digitalised by 2022, IDC says. By ‘digitalised’, the analyst firm means “the inherent value that digital brings to existing products, and additional digital services that companies might offer,” explained Bob Parker, senior vice president at IDC, in an accompanying webcast. “This is why digital transformation is really a CEO priority — more so than a CIO priority,” Parker added.
Here is the complete list of IDC’s DX predictions for 2021:
- Accelerated DX Investments Create Economic Gravity The economy remains on course to its digital destiny with 65% of global GDP digitalized by 2022 and will drive over $6.8 trillion of direct DX investments from 2020 to 2023.
- Digital Organization Structures and Roadmaps Mature By 2023, 75% of organizations will have comprehensive digital transformation implementation roadmaps, up from 27% today.
- Digital Management Systems Mature By 2023, 60% of leaders in G2000 organizations will have shifted their management orientation from processes to outcomes, establishing more agile, innovative, and empathetic operating models.
- The Rise of the Digital Platform and Extended Ecosystems By 2025, driven by volatile global conditions, 75% of business leaders will leverage digital platforms and ecosystem capabilities to adapt their value chains to new markets, industries, and ecosystems.
- A Digital First Approach While “digital first” prevails in every experience, 60% of enterprises will invest heavily in digitalizing employee experience in 2021, transforming the relationship between employers and employees.
- Business Model Reinvention By 2021, at least 30% of organizations will accelerate innovation to support business and operating model reinvention, fast-tracking transformation programs to future-proof their businesses.
- Sustainability and DX By 2022, the majority of companies will realize greater value by combining digital and sustainability, giving rise to digitally-driven and sustainably-enabled projects as the standard.
- Digitally Native Cultures To thrive in digital supremacy economy, 50% of enterprises will implement the organizational culture optimized for DX in 2025, based on customer-centric and data-driven.
- Accelerating Digital Experiences By 2022, 70% of all organizations will have accelerated use of digital technologies, transforming existing business processes to drive customer engagement, employee productivity, and business resiliency.
- Business Innovation Platforms By 2023, 60% of G2000 companies will build their own business innovation platform to support innovation and growth in the new normal.
For the next instalment, tune into IDC’s 2022 DX predictions webcast on 28 October.
Let’s see how these predictions are working out in practice.
What the surveys reported
Many surveys take the temperature of digital transformation each year, covering a mix of organisation sizes, sectors and geographies. Here’s a roundup of some key reports, the most recent of which give some pointers to the post-pandemic future.
- Strengthen digital muscles to build resilience
- Reimagine the way people and technology work together
- Design seamless customer experiences that cover both online and offline
- Improve employee well-being
- Align business goals with societal goals
By ‘digital muscles’, Fujitsu Future Insights (FFI) is referring to six organisational capabilities: Leadership (digital transformation is the priority of the CEO); Ecosystem (establishing a trusted ecosystem of partners); Empowered people (ensuring people have the right skills and opportunities to grow); A culture of agility (an innovation-supporting culture with an appetite for change); Value from data (the ability to use trusted data to deliver outcomes, while keeping it secure); and Business integration (enabling technology to become the business operating system).
These capabilities, FFI says, have helped organisations respond to the pandemic effectively. Here are the top post-pandemic business priorities revealed by the FFI survey, plus a significant finding relating to business process automation:
On the face of it, the above chart simply demonstrates business leaders’ strong appetite for automation: 44% of organisations will have automated more than half of their currently non-automated processes by 2025. However, FFI sees this as evidence for radical transformation over the next four or five years:
We think organizations should reimagine a new, balanced way people and technology work together. How can organizations maximize the potential and well-being of their people, while increasing productivity through automation. Definitely, ethics and trust are becoming more important than ever before in redesigning future business processes.
- Digital possibilities must shape strategy
- Digital helps organizations thrive amid uncertainty and change
- Digital enables new ways to differentiate
- All strategy must be digital strategy
- Digital transformation is a journey that never ends
Deloitte Insights has helpfully summarised its survey results in this infographic:
Deloitte’s survey highlights the value of digital transformation very clearly. Digitally mature organisations are more likely to agree that: “Digital significantly helped us cope with the pandemic”; that “Our annual revenue growth and net profit margins are significantly above industry average”; and that “Digital transformation is the central pillar of our business strategy”.
- Mind the gaps. Technology deployed during the pandemic may not be compliant with privacy and security policies or may not be integrated with other systems.
- Secure consensus and conviction among senior leaders regarding digital transformation goals. Utilize that alignment to break down organizational silos.
- Cultivate a culture that embraces change and agility. Identifying the right metrics and making data-driven decisions are critical to digital transformation success.
- Accept and leverage differences to create growth and opportunities. Build an inclusive environment that allows your employees and your company to flourish and succeed.
- Identify the skills and expertise required to execute digital transformation efforts and determine how workforce models should be aligned to digital business.
- Implement the right technologies that will achieve the desired outcomes and think about how they can be scaled across the enterprise.
TEKsystems divided its survey population into digital leaders and digital laggards. DX leaders have “a mature digital transformation plan where digital processes and mindsets are ingrained in the DNA of the organization”, while DX laggards have “tentative plans and limited digital transformation initiatives and investments in place”. Among the characteristics of DX leaders is a greater (4X) likelihood of driving projects that enable new business models:
- CIOs have the opportunity to play a leading role in digital business acceleration
- Redirect resources: Direct more investment and people toward new business priorities
- Remodel operations: Revamp business operations to increase efficiency and supply chain resilience
- Win differently: Go where customers are
- Refocus IT leadership: Center on digital business acceleration
Regarding the top-level finding, ‘CIOs have the opportunity to play a leading role in digital business acceleration’, Gartner had this to say:
During the COVID-19 lockdown, many CIOs helped save their enterprises. They now have the attention of the CEO in a way they hadn’t before. The enterprise’s path to the future runs through IT, and boards and CEOs know it…These stronger relationships give CIOs leverage they’ll need for their next big challenge – digital business acceleration.
Gartner divided its 1,877 survey sample into top-performing (303), typical (1,373) and trailing (201) organisations, based on a combination their digital maturity, business performance and pandemic response. The analyst firm found that although tech spending will increase across the board for most IT organisations in 2021, top performers got in early during 2020, boosting their competitive position:
Organizations that have already increased their funding of digital innovation are 2.7 times more likely to be top performers than trailing performers, Gartner found.
Digitisation has proved its worth during the pandemic, with more digitally mature businesses generally proving resilient in the face of serious disruption.
Going forward, businesses will need to adapt to the post-pandemic landscape as widespread hybrid working changes the way employees and customers interact with them. And rather than reacting to events, businesses will need detailed roadmaps that set out how they will digitise their business processes to achieve current and future goals. The efficiency, resilience and sustainability of supply chains should be a key element of these plans.
It won’t all be plain sailing, of course. In a recent survey of 500 decision makers at large organisations in the UK, Citrix reported that 44% of IT leaders have had their “fingers burnt” by negative experiences with previous digital transformation programmes, while 51% cited at least one DX project that didn’t go according to plan. As a result, 85% say their past experiences have impacted their approach to current programmes, with 58% reporting ‘somewhat challenging’ experiences to date. Almost all (94%) embarked on their first DX programme with confidence in its outcome.
Still, 35% of CIOs and 41% of CTOs report ‘ideal’ experiences with digital transformation, 97% of IT leaders believe that their DX programmes are crucial to the success of their current role and future career, and 68% see major initiatives as a career-defining opportunity. IT leaders are also almost unanimous (99%) that digital transformation will be an important part of their businesses’ survival and future roadmap.
Clearly, there’s a lot to play for as digital transformation enters the post-pandemic phase.
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