A digital transformation status report - encouraging progress (unless you're in HR), according to Valoir's global study

Profile picture for user slauchlan By Stuart Lauchlan September 27, 2021 Audio mode
Summary:
Digital transformation got a boost from the COVID crisis, but can it continue to happen at the pace of the past 18 months? A new global study from Valoir is encouraging, unless you work in HR

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One of the most frequently heard claims made by both vendors and end users alike is that the past 18 months of the COVID crisis have accelerated digital transformation by 5x/10x/20x/hype-as-applicable rates. Decisions are being made faster, implementations are rolled out quicker, ROI is coming back in a shorter period of time etc etc.

There is undoubtedly a good deal of truth behind these claims. With a lot of the initial activity was inspired by a basic survival instinct, whereby the situation was so grave that the normal playbook just had to be torn up, what is interesting to contemplate is what, if anything, the 'standard speed' will be as the Vaccine Economy takes shape? Will the beneficial lessons of operating in ‘unprecedented circumstances (© every tech vendor in creation) be retained and organizations will remember that they can make decisions quickly. Or will we all slip back in to the bad habits of the ‘old normal’.

I was interested to hear from Salesforce’s Chief Revenue Officer Gavin Patterson last week at Dreamforce that his sense was that the ‘survival instinct’ phase was relatively short-lived:

I think the survival thing lasted maybe a quarter, no more, and then companies quickly pivoted into, 'OK, there's a new game here, a new environment, potentially a new competitive set. We need to move quickly into a growth mindset to make sure we're well positioned’.

With that in mind, I was interested to see a new study from analyst house Valoir, headed up by founder Rebecca Wettemann, someone whose views and commentary I’ve had a lot of time for over the past couple of decades I’ve known her.

Valoir polled 1400+ companies around the world for the views for The State of Digital Transformation, a snapshot of where organizations across multiple business sectors really area in the transformation journeys and one with some interesting conclusions to be drawn.

Speed test

Before drilling down into some of those, I asked Wettemann for her thoughts on the general topic of the speed of digital transformation under pandemic conditions. Can the pace be maintained? Her view is:

Digital transformation was already underway at a lot of companies, and clearly necessity accelerated its progress. Those that had already invested in cloud solutions - particularly in areas like contact center operations and supply chain - were already better equipped to handle a changing and unpredictable business environment. Those that hadn't were required to put their foot on the gas just to stay in business.

The toothpaste is out of the tube, particularly in areas like digital work and low-code adoption because it's put power into the hands of employees that will be hard to legitimately take back.

She adds:

In areas like Customer Experience and and supply chain, although projects and decision processes may slow a bit as tech teams take a breather from the rapid pace of the past 18 months, transformation will still continue at a faster pace than pre-pandemic, because management has realized what is possible and because competitive pressure on the top line (revenues) and the bottom line (margins) will continue to push them forward.

Journey underway

When asked on a scale of one to 10, with one being “we haven’t started” and 10 being “our digital transformation is complete,” the average score among those organizations polled by Valoir was seven. Healthcare and financial services firms lead the pack, with the tech sector itself also high up the scale (as you might hope! Physician, heal thyself!). At the other end of the scale, government is the laggard, while utilities companies and consumer goods firms are towards the bottom of the industry rankings.

That said, no-one believed that their firms hadn’t started on a digital transformation journey. Asked why they were doing so, the two top priorities cited were improving market share and increasing customer retention levels. 

Of some concern, improving employee retention comes in as among the lowest priorities for organizations when they consider drivers for change, something that may yet come back to haunt many in the coming early years of the Vaccine Economy.

In fact, overall, one of the more surprising/disappointing findings from Valoir’s data is the lack of transformation found in HR teams, with fewer than 20% of those polled adopting digital tech in areas such as reskilling, coaching, mentoring, real-time analytics, and training.

Given the current and, most likely, long-term ongoing need to support remote and hybrid workforces and meeting the changing challenges of Employee Experience Management, that  comes across as short-sighted. Wettemann comments:

Digital transformation in the area of Employee Experience has been the slowest and one where cultural inertia has been the hardest to shift. However, companies that slow down the process of making Employee Experience more digital, data-driven, equitable, and inclusive will find it harder to attract and retain employees as The Great Resignation continues.

And that’s going to be a big problem for many organizations as another of the top-line findings is confirmation of an ongoing maxim - the two biggest hurdles to digital transformation are not resources or budget, but ‘people problems’, such as internal politics and lack of leadership. (Budgets and lack of collaboration are also seen as barriers). The study notes:

This is not surprising as true digital transformation is not just about adopting advanced technologies, but about changing work processes and business models – which require leadership, change management strategies, and identifying and implementing incentives for individual employees to change their behaviors.

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The Valoir report picks out three key factors that are causing HR to lag behind. The first is money, as functions such as customer experience and supply chain were determined to be a higher priority and therefore first to the budget pot. 

Secondly, there's an inherent hesitancy to disrupt a working status quo in the key areas such as payroll, as well as a cultural resistance to change on the past of HR departments.

Finally, lack of tech options, with Valoir arguing:

With a few exceptions, Human Capital Management (HCM) and Workforce Management (WFM) technology vendors were relatively slow to move to the cloud compared with their counterparts in other technology areas (such as CX). Without cloud applications that could be rapidly deployed and flexibly changed to support reimagined HR processes and practices HR leaders were challenged to drive effective digital transformation.

Of course, the ‘glass half full’ reading here is that that leaves lots of room for improvement and  market opportunity for those vendors that are able to deliver the right sort of tech.

My take

An interesting status report on a topic that should be top of the agenda for every organization in every business sector. It’s well worth a download and a read. You can find the full study here.