Brian Solis is a good sport. As Principal Analyst with Altimeter Group, he periodically approaches me with fresh research – or book projects – on buzzphrases I tend to be cynical about, like customer experience – or in this case, digital transformation.
Solis and Altimeter Group recently issued their 2017 State of Digital Transformation Report (free with sign up). Now in its third year, the report brought some surprises – as well as some concerning stats on investment in digital transformation.
Or, are companies smart to avoid getting their knees scraped spending on hype cycles? And what patterns, if any, have emerged over three years of data? Those are the central questions I explored with Solis during our back-and-forth Q/A. Solis raises a critical point: maybe it’s business-as-usual that’s overhyped.
Why digital transformation is overhyped – but disruption isn’t
To compile “The 2017 State of Digital Transformation,” Altimeter surveyed more than 500 executives and digital strategists. The goal? “Understand the current challenges and opportunities they are facing as they undergo a digital transformation.”
One of the big/surprising findings from this year’s report is:
- “Companies largely don’t see disruption as a threat. Only 37% of businesses view digital transformation as an investment in the fight against market disruption.”
So I asked Solis: Do you think that is a fair assessment on the respondents’ part? In other words, are the respondents correct that digital transformation is overhyped? Or are some respondents underestimating the impact?
Surely, “digital transformation” is over hyped.
So why do vendors overhype it? For the obvious marketing reason:
It makes for a more interesting conversation.
Solis makes a key distinction here. He does not believe disruption itself is overhyped:
Disruption is not overhyped. In fact, digital transformation as a business mandate is woefully underappreciated. Times, tastes, and trends are evolving. Most organizations are not.
Digital isn’t the first antidote to organizational stagnation to come along. But this time, Solis sees a difference:
“Digital” is just the latest flavor of creative destruction. But it is the first in a long while to completely challenge the conventions of executive mindsets and traditional business models.
Those who deny this are attempting to buy time through misdirection:
It’s blatantly apparent to those with open minds, experience and/or data that digital is affecting customer and employee behaviors, mindsets, values and aspirations. At this point, it’s not even a non-argument, it’s a distraction from the more important conversation of change and relevance. It’s like the misdirection or deflection we see in the news today. THIS IS HAPPENING…but, look over here! It’s buying time for an agenda, but it’s finite and usually not in the best interest of stakeholders and shareholders in the long run.
The real danger, then, is the overhype – or overattachment – to business-as-usual. No minced words here:
On the other hand, what’s overhyped is…business as usual. Why is this still a thing? Executives and managers are holding on to it for dear life. It’s not unlike what we see in the coal industry. Many coal workers, for example, are being offered an opportunity for retraining but they are waiting for the coal jobs to come back as promised. Yet, the world continues to evolve. There’s a sense of entitlement involved. We did these things; we earned these things, and therefore we deserve x,y,z just because we worked hard like everyone else. But the world is changing, and what happens next is a choice.
There is a digital transformation readiness gap
Solis does cut companies some slack, however, for the struggle to find the right skills and resources:
The fact that only 37% of companies are doing something about it is not promising. At the same time, 31.4% of companies say that the top challenge to digital transformation is low digital literacy or expertise among employees and leadership. We also learned that 31% of companies view digital transformation as a cost center.
So, I don’t see digital disruption as being overhyped. I see that there are very human challenges that get in the way of seeing disruption as a threat. Ignorance is bliss – until it’s not.
From the report, Figure 4, Key drivers of digital transformation, caught my eye:
This is a partial view of Figure 4 from the Altimeter Group’s 2017 State of Digital Transformation report. To see the full figure, download the report.
The 64.6% that are prioritizing “evolving customer behaviors and preferences” as a key driver for digital transformation is up from 55% in 2016. But there’s a catch: customer experience is the top driver for digital transformation, but fewer than half Altimeter surveyed invest in understanding digital customers (42%). That’s a problematic gap. What is Solis’ take on that discrepancy?
There is no holistic view of the customer because there is no holistic business model to approach customer experience. The 42% attempting to understand digital customers is a start – but it’s not enough. At the same time, only 34.8% have mapped out the customer journey in the last year.
That leads to a big disconnect:
Most companies are investing in digital transformation with an emphasis on customer experience without having access to real customer insights. This is a trend year over year unfortunately.
One encouraging trend: enterprises are investing more in skills modernization. According to Altimeter Group, companies are doing this in two ways: internal training programs (62%), and investing in new digital talent (50 percent).
So when it comes to internal training programs, are we starting to see approaches that work? Answer: it’s complicated. But companies are starting to see the imperative of (better) employee experience:
This is the first year that employee experience is included in the “State of Digital Transformation” research. We did so because in complementary research projects, it’s clear that digital isn’t just affecting customers, it’s also affecting employees and prospects in the same way. Everything from culture to training to day-to-day work to incentives, aspirations and happiness needs to evolve or completely transform.
My take – for change to happen, industry focus is needed
Solis sees another promising sign in this year’s report: digital transformation is moving from small swat teams to a broader initiative.
After three years of conducting this survey, I am encouraged by the level of which companies are diversifying their efforts in digital transformation. While it’s still debated among CIOs and CMOs as to who owns digital transformation, among the more progressive companies, digital transformation is owned by a cross-functional steering committee where ownership is shared and enterprise-wide.
Altimeter Group found that 59.1% of companies surveyed in 2017 rely on a steering committee or workgroup with cross-functional representation. However, executive sponsorship isn’t always where it should be:
While this number is noteworthy, these groups lack formal executive sponsorship.
The avoidance of digital change is giving early adopters a head start. Solis calls these companies “digital mavericks,” and they are investing in digital transformation as a competitive advantage. For these mavericks, digital has that all-important executive buy-in:
Among digital mavericks, innovation is becoming an executive-level mandate, with organizations sparking innovation through “innovation tours” (38%), in-house labs (56%), and encouraging a culture of innovation (53%).
Companies should be worried about the gap that gets exposed here as the so-called mavericks advance – not through financial investment, but good old trial-and-error. Digital is very much a learn-by-doing pursuit. When the gap becomes a chasm, you have a problem.
I like that Solis emphasizes the culture and human impediments to digital change. I largely agree with Solis that digital is a culture and economic force rather than a marketing invention. However, change agents don’t have much protection in many organizations. The unsexy truth is that being a change agent is hard.
To me, the next steps in this research are two-fold. One is documenting the practices of the mavericks and early adopters, and learning from their wins and struggles. The next is focusing these learnings on verticals and micro-verticals. Obviously, both of these are core pre-occupations here at diginomica, and we’ll keep pushing for more (let us know when you run into a company doing remarkable things, those use cases are essential).
Altimeter Group doesn’t delve into vertical variations in this particular report, so that’s a necessary conversation for another time. But if Solis wants assistance debunking the comfort of business-as-usual, he can count me in.
Image credit - Change, Same Green Road Sign Over Clouds © Andy Dean - Fotolia.com