Forrester argues piecemeal digital transformation won't work

Profile picture for user slauchlan By Stuart Lauchlan March 10, 2014
Summary:
Organizations need to think in terms of dynamic ecosystems of value if they are to compete as effective digital enterprises, cautions Forrester Research.

all or nothing
Organizations need to think in terms of dynamic ecosystems of value if they are to compete as effective digital enterprises.

That’s one of the top line conclusions of a new report from Forrester - The Future of Business is Digital- which offers up some uncomfortable findings based on interviews with  end user organizations:

  • 74% of business executives say their company has a digital strategy.
  • 93% believe digital will disrupt their business in the next 12 months.
  • But only 16% believe that their company has the skills and capabilities to execute on their digital strategy.
  • A mere 21% believe that the right people are setting the strategy in the first place.
  • A similar number has faith in their CEO’s vision for digital
  • 68% of business-unit leaders believe the functional teams in their companies act as barriers to effective coordination.
  • Only 19% of respondents think their organization has the right technology in place to support a digital strategy.
  • 26% of IT budget decision-makers globally use some type of digital channel as their primary source to research and evaluate technologies and services to purchase.

Forrester advises:

Your business needs a reset. You need to look at digital holistically. You need to transform your business by applying digital thinking across everything you do — how you win, serve, and retain customers; how you operate your internal processes; and how you source business services. In short, you must become a digital business.

On his blog, one of the report’s authors Nigel Fenwick notes that there is a need to rethink the approach to digital:

For the past few years, companies have been bolting “digital” onto their existing business like teens paint go-fast stripes onto their cars. “Look, we’re digital” is the message CEOs want to send to investors. But the piecemeal strategy of bolting digital channels or methods onto the business is no longer sufficient.

Instead, you must think of your company as part of a dynamic ecosystem of value that connects digital resources inside and outside the company to create value for customers. To do this, you must fully harness digital technologies, both to deliver a superior customer experience and to drive the agility and operational efficiency you need to stay competitive.

The research highlights two critical aspects of digital strategies:

Digital businesses must master digital customer experience and digital operational excellence. Forrester advises:

It’s easy to think of digital as your website and apps — and absolutely that’s part of it. But to reap the benefits of being a digital business, you must think about two sides of the equation — both how you enhance your customer experience and how you enhance your operational efficiency and agility using digital technology.

Secondly, digital businesses thrive within dynamic ecosystems of value as Forrester observes:

The key characteristic of successful digital businesses is their ability to position themselves as ecosystem players. They acknowledge that they can’t do everything themselves, so they turn to dynamic ecosystems of partners to extend their internal capabilities. And likewise, they understand that their customers see them as just one supplier in an ecosystem of firms they turn to. This drives a different approach to designing products and services in the digitally networked world.

Screen Shot 2014-03-11 at 14.12.12

Forrester also cautions firms to be realistic about their digital ambitions, the length of the journey to achieve them and to be honest about the starting point from which they’re operating, citing four categories of companies:

  • Digital Dinosaurs - who need help to begin their transformation.
  • Digital Connectors - who understand digital customers, but don’t operate digitally.
  • Digital Operators - who create digital efficiency but don’t focus on customer experience.
  • Digital Masters - who excel at digital thinking.

Among these four, Digital Dinosaurs will become acquisition targets for Digital Masters while Digital Connectors and Digital Operators will merge.

Ultimately there are a number of clear steps that can be taken to drive forward digital transformation, suggests Forrester:

  • Establish clear digital leadership, ideally with the CMO and CIO working together and CEO ensuring funding for innovation.
  • Link outside-in and inside-out thinking to define value networks and think like eco-systems players.
  • Establish a digital-first culture and involve HR to fuel the digital mindset with training and education.
  • Create a dynamic, customer-centric organizational model and re-organize around the customer life cycle.
  • Empower technology management to focus on systems of engagement with the CIO championing a business technology agenda that curtails the business bypassing IT in favor of SaaS options.
  • Protect your customer’s trust.

Verdict

'“Look, we’re digital” is the message CEOs want to send to investors.'

Hard to argue against that.

And the caution against a piecemeal approach to digital is well-timed.

Dabbling with digital isn't the route to success.

Graphic: Forrester Research