Digital transformation isn’t just another buzzword — it’s happening, it’s accelerating and if you fall behind in the race, you'll have a hard time catching up.
No business should prioritize digital transformation because it’s trendy, it's a priority because it impacts the bottom line. Digital pioneers are more likely than others to achieve revenue growth that exceeds 10 percent and enjoy profit margins that consistently beat industry averages.
A January PwC survey reported that 77 percent of the more than 1,400 CEOs surveyed believed technological advances will number among the top three global trends affecting customer, partner and employee expectations over the next five years. This was across a wide range of industries.
No other single trend, including demographic shifts (61 percent) and global economic power dynamics (58 percent) came as close as digital did in capturing CEO's attention. And unlike those other issues, digital transformation is within executives’ control.
Yet most companies aren’t even close to where they need to be with their digital strategies.
The Trouble with 'Things'
Although nearly nine in 10 organizations see digital transformation as a competitive opportunity, an almost identical percentage admit to not having the necessary skills to compete. In spite of that awareness, fewer than half are investing in their workforce’s technical skills to rectify the disparity.
This comes at a time when our already well-connected world is about to get a whole lot more connected. The Internet of Things (IoT) is finally here and, like the tribbles of Star Trek fame, it’s growing out of control.
According to Gartner, 6.4 billion smart devices will be online by the end of this year. By 2020, that number will jump to nearly 21 billion.
The Coming Age of Microservices
Given the explosion of IoT and its inherently disparate nature across so many machines and applications, it is sounding the death knell for the monolithic application era. However, some forward thinking companies are already entering the next age: microservices.
Microservices are individual components and apps that can leverage the data from those IoT sensors, objects and devices throughout both the employee journey and the customer lifecycle. They are typically components or APIs — or both — that provide a specific functionality: to “do one thing and do it well.”
For example, several microservices might work together to support an employee’s daily workflows and collaboration across teams, or to provide a customer’s shopping experience on a vendor website. For the customer, they offer seamless (and invisible) efficiency across all of the touchpoints in the purchasing process. For the company, the failure of a single microservice won’t bring the entire system crashing down for every customer.
According to Forrester, microservices are “emerging as an important part of solution architecture for rapid and scalable response to business and technology change.”
Digital Transformation Barriers
With so much at stake, why are so few leaders leveraging new technologies to reinvent their organizations and industries?
According to the CEOs of companies advanced in their transformations, the biggest obstacles to change are organizational silos and legacy systems. Those lagging point to a lack of digital leadership as the biggest barrier. The CEOs in the middle of the pack suggest it’s cultural resistance and a lack of innovative thinking.
Overcoming Transformation Obstacles
If embarking on a digital transformation strategy seems daunting, that’s because it is. But in the words of the famous humorist, Will Rogers, “Chaotic action is preferable to orderly inaction.”
While it won’t be easy to get up to speed with digital — especially if you’re just getting started — there are ways to temper the chaos according to consulting firm, Capgemini. Success depends on building collaborative, resilient organizational cultures. The experts recommend the following:
- Establish a common set of values and shared beliefs to break down organizational silos
- Give more autonomy to employees, while maintaining a strong central framework
- Develop the ability to continually reallocate resources and reorganize rapidly
- Look for opportunities outside of industry boundaries
Where Should You Be With Your Digital Transformation?
So, where should you be with your digital transformation? Further along than you are.
Despite the advantages of getting out in front, a recent Harvard Business Review survey of 436 executives found that only 19 percent rated their companies as strong in both digital leadership and digital management — that is, the ability to both communicate their vision and put in place the people, processes and technology to execute their digital strategy.
More than a third of those surveyed rated their businesses as weak in both areas.
Even if you’re ahead of the pack now, new technologies are always right around the corner.
Digital pioneers have recognized that technology offers organizations more opportunities than ever before to scale, to improve their KPIs and to elevate their brands. To replicate and extend this kind of success, companies need to incorporate a variety of organizational and technical strategies to meet challenges head on.
By meeting new challenges head on, you’ll not only gain a competitive edge, you’ll create value for both customers and employees. Even though the time to invest in the systems, people and training for your digital transformation was yesterday, this is no time to get nostalgic. It’s time to get busy — if you’re like most businesses, you probably have a lot of catching up to do.
Title image Gabriel Sanchez